JanCo FS 2, LLC v. ISS Facility Services, Inc. ( 2024 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
JANCO FS 2, LLC AND JANCO FS 3, )
LLC, )
) C.A. No. N23C-03-005 MAA CCLD
Plaintiffs, )
v. )
)
ISS FACILITY SERVICES, INC.; ISS )
C&S BUILDING MAINTENANCE )
CORPORATION; ISS TMC )
SERVICES, INC.; and ISS FACILITY )
SERVICES CALIFORNIA, INC, )
)
Defendants. )
______________________________ )
)
ISS FACILITY SERVICES, INC.; ISS ) C.A. No. N23C-07-036-MAA CCLD
C&S BUILDING MAINTENANCE ) Transferred from:
CORPORATION; ISS TMC ) C.A. No. 2022-1197-SG
SERVICES, INC.; and ISS FACILITY )
SERVICES CALIFORNIA, INC., )
)
Plaintiffs, )
v. )
)
JANCO FS 2, LLC; and JANCO FS )
3, LLC )
)
Defendants. )
Submitted: May 23, 2024
Decided: August 30, 2024
ISS’s Motion for Partial Summary Judgment:
GRANTED in part, DENIED in part.
JanCo’s Motion for Summary Judgment:
GRANTED in part, DENIED in part.
1
MEMORANDUM OPINION
Catherine G. Dearlove, Esquire, and Nicholas F. Mastria, Esquire of RICHARDS,
LAYTON & FINGER, P.A., Wilmington, Delaware, and Jason J. Carter, Esquire
(Argued), and Megan Cambre, Esquire (Argued), of BONDURANT MIXSON &
ELMORE, LLP, Atlanta, Georgia, Attorneys for JanCo FS 2, LLC and JanCo FS 3,
LLC.
David J. Teklits, Esquire, Rachel R. Tunney, Esquire, and Louis F. Masi, Esquire,
of MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware, and
Mark T. Oakes, Esquire (Argued), and Ryan E. Meltzer, Esquire, of NORTON
ROSE FULBRIGHT US, LLP, Austin, Texas, Attorneys for Defendants ISS Facility
Services, Inc., ISS C&S Building Maintenance Corporation, ISS TMC Services, Inc.,
and ISS Facility Services California, Inc.
Adams, J.
2
Two entities entered into an asset purchase agreement wherein the buyers
purchased a cleaning division from the sellers. That agreement included several
covenants, including a covenant not to compete or solicit, and employment
agreements pertaining to certain key employees. The agreement also required the
sellers to assist the transition by obtaining consents from key accounts, reassigning
the service contracts to the buyers. The entities agreed if the consents for the key
accounts were obtained within a certain time period, the sellers would be entitled to
additional amounts, corresponding to each consent obtained. Obtaining the consents
for some accounts took longer than anticipated. The parties subsequently amended
the agreement, extending certain timelines and reinforcing the parties’ obligations to
obtain the consents. The parties also agreed to offset certain costs based on a net
working capital calculation the parties would complete after closing the transaction.
The parties ran into several disputes along the way, implicating many of their
contractual obligations. Both sides now seek damages for the other side’s alleged
breach of the agreements. This memorandum opinion addresses the parties’ motions
for partial summary judgment. For the reasons that follow, both motions are
GRANTED, in part, and DENIED, in part.
3
I. RELEVANT FACTS1
A. The Parties and Other Relevant Persons2
JanCo FS 2, LLC and JanCo FS 3, LLC (collectively “JanCo”) both use the
trade name “Velociti Services” and are Delaware limited liability companies.3
JanCo is owned by the Argenbright Group of companies (“Argenbright”), which
have been operating since 1978 and provide workforce solutions in human-capital
intensive industries.4
ISS Facility Services, Inc. is a Delaware corporation5 whose parent company
is ISS A/S, a company headquartered in Denmark.6 ISS C&S Building Maintenance
Corporation is a Florida corporation, and a wholly-owned subsidiary of ISS A/S.7
1
The Court notes the consequence of both sides filing motions is that facts repeat in briefing, and
several exhibits are duplicates. When the Court cites one parties’ brief or exhibits instead of the
other’s, the Court intends to imply no preference or priority to any party. The Court merely
provides a citation to the record for the fact; other citations may provide the same information, but
the Court will not cite every part of the record where the information can be found.
JanCo submitted several exhibits on May 23, 2024—the day of oral argument—that were
not included in any of the briefs. D.I. 182. The Court will not consider the belatedly produced
documents for these motions because ISS was not given adequate time to respond for summary
judgment purposes. See Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not
briefed are deemed waived.”).
2
This case arises from two cases filed in separate courts, with each side serving as the plaintiffs in
one case and defendants in the other. For the sake of clarity the Court will avoid the use of
“Plaintiffs” and “Defendants” and instead refer to the parties by name.
3
JanCo Am. Compl. ¶¶ 1–2. For clarity, where possible, the Court will refer to these parties
collectively as JanCo, rather than as “Velociti,” “Purchasers,” or “Buyers” as they are often
referred to in briefing. The Court will also treat JanCo as singular despite noting that “JanCo”
represents multiple entities.
4
JanCo Am. Compl. ¶ 11.
5
Id. ¶ 3.
6
Id.
7
Id. ¶ 4.
4
ISS TMC Services, Inc. is a New Jersey corporation and a wholly-owned subsidiary
of ISS A/S.8 ISS Facility Services California is a Delaware corporation and a
wholly-owned subsidiary of ISS A/S9 (all entities are collectively “ISS”).10
ISS provides workplace and facility management services in over 40 countries
and has approximately 400,000 employees.11 Among ISS’s services, ISS provides
commercial cleaning and janitorial services throughout North America.12 ISS also
offers security, food, technical, and workplace management services.13 ISS’s Project
Bremner (the “Cleaning Division”) was a “leading provider of commercial cleaning,
hygiene, and janitorial services” with a “[n]ationwide platform capable of servicing
national accounts while providing local-market-service quality.”14 The division had
approximately 600 customers.15
Jason Pitcock (“Pitcock”) is the former Vice President of the Cleaning
Division for ISS.16 Pitcock was offered “up to 12 months basic salary at 2021 annual
salary rate, under certain conditions described in [the] signed retention agreement”
8
Id. ¶ 5.
9
Id. ¶ 6.
10
The Court notes that the parties also refer to ISS as “Sellers.” The Court will refer to these
entities only as “ISS” and refer to ISS in the singular.
11
JanCo Am. Compl. ¶ 9.
12
Id. ¶ 10.
13
ISS Am. Compl. ¶ 10.
14
Sandy Xu Aff. in Supp. of Opp’n Br. to ISS’s Mot. for Part. Summ. J. [hereinafter “Xu Aff.”]
Ex. 109, at ISS_000022451.
15
Id.
16
Id. Ex. 138, at 6.
5
relating to the sale of the Cleaning Division.17 On July 1, 2022, Pitcock joined JanCo
as Vice President of Operations.18 On October 11, 2022, JanCo terminated Pitcock.19
On December 1, 2022, Pitcock returned to ISS to handle the IKEA account in ISS’s
Integrated Facilities Services Business Line.20
Susan Jorgensen (“Jorgensen”) is ISS’s CEO of the Americas region, former
CEO of the North American region, and former CFO of the Americas region.21
Jorgensen interviewed and hired Pitcock back at ISS.22
Rene Bartlett (“Bartlett”) was the Regional Operations Manager for the ISS
Cleaning Division.23 Bartlett was offered “3 months basic salary at 2021 annual
salary rate” as a bonus for the successful sale of the Cleaning Division.24 On July 1,
2022, Bartlett began at JanCo as Regional Manager for the Southeast Region.25
Bartlett resigned from JanCo on December 22, 2022.26 Bartlett then returned to ISS
on May 15, 2023 and currently works on the IKEA account.27
17
Id. at 12.
18
JanCo Am. Compl. ¶ 138.
19
Id. ¶ 139.
20
Id.; ISS Answer to Am. Compl. ¶ 139; Rachel R. Tunney Aff. in Supp. of Opening Br. in Supp.
of ISS Parties’ Mot. for Part. Summ. J. [hereinafter “Tunney Aff.”] Ex. 102, at 245:20–21; 247:21–
22.
21
Xu Aff. Ex. 138, at 6.
22
Tunney Aff. Ex. 103, at 97:9–17.
23
Xu Aff. Ex. 138, at 8.
24
Id. at 12.
25
Tunney Aff. Ex. 106, at 25:1–6.
26
JanCo Am. Compl. ¶¶ 187–88; Tunney Aff. Ex. 106, at 25:1–14.
27
Tunney Aff. Ex. 103, at 173:19–175:13; Xu Aff. Ex. 139, at 25:22–23.
6
David Rivas (“Rivas”) originally worked for ISS before working for JanCo.28
Rivas resigned from JanCo on October 25, 2022, with a last day of November 11,
2022.29 Rivas currently works as a facility manager for the Mars account in ISS’s
IFS business line.30
B. The Contracts
1. The APA
In 2020, ISS began preparing to sell the Cleaning Division31 and retained
Harris Williams LLC (“Harris Williams”) as the financial advisor for the sale.32
Harris Williams solicited JanCo on behalf of ISS to purchase the Cleaning Division
in late 2020.33 In January 2021, Harris Williams provided JanCo with financial and
non-financial information about the Cleaning Division.34 JanCo submitted a bid to
ISS for $80 million “based on an estimated annual EBITDA of $13 million[.]”35
JanCo and ISS (the “parties”) signed a letter of intent on May 27, 2021.36
28
See JanCo Opp’n Br. to ISS’s Mot. for Part. Summ. J. [hereinafter “JanCo Opp’n”] 27; Reply
in Supp. of ISS Parties’ Mot. for Part. Summ. J. [hereinafter “ISS Reply”] 21.
29
JanCo Am. Compl. ¶ 191; Xu Aff. Ex. 161.
30
ISS Answer ¶ 192.
31
JanCo Pls.’ Opening Br. in Supp. of Mot. for Part. Summ. J. [hereinafter “JanCo Br.”] 1 (citing
JanCo Am. Compl. ¶ 13; ISS Am. Compl ¶ 18; Nicholas F. Mastria Aff. in Supp. of Pls.’ Opening
Br. in Supp. of their Mot. for Summ. J. [hereinafter “Mastria Aff.”] Ex. A, at ISS_000023107).
32
Tunney Aff. Ex. 1, § 4.4.
33
JanCo Br. 1–2 (citing JanCo Am. Compl ¶ 15; ISS Am. Compl. ¶ 1).
34
See generally Mastria Aff. Ex. C.
35
JanCo Am. Compl. ¶ 18.
36
Id. The Court did not observe the letter of intent in the exhibits provided but notes that ISS
admitted a letter of intent was signed on that date. ISS Answer ¶ 18.
7
On September 20, 2021, the parties entered into the Asset Purchase
Agreement (the “APA”).37 On the same day, the parties also executed a Transition
Services Agreement;38 an Employee Lease Agreement;39 and an Escrow
Agreement.40 The transaction closed on November 30, 2021 (the “Closing”).41
The APA allowed for amendments and waivers with certain conditions as
depicted in Section 9.13:
No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by [JanCo] and [ISS]. No
waiver by any Party of any provision of this Agreement or any default,
misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be valid unless the same shall be in
writing and signed by the Party making such waiver nor shall such
waiver be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.42
2. The Escrow Agreement
The parties entered into an Escrow Agreement with an Escrow Agent on
November 30, 2021.43 The Escrow Agreement disclaimed any duties of the Escrow
Agent under the APA.44 The “Escrow Period” referred to “the period commencing
37
Tunney Aff. Ex. 1 [hereinafter “the APA”].
38
JanCo Am. Compl. Ex. D.
39
Id. Exs. E1, E2.
40
Tunney Aff. Ex. 108.
41
APA § 6.1(d); JanCo Am. Compl. ¶ 58.
42
APA § 9.13.
43
See generally Tunney Aff. Ex. 108 [hereinafter “Escrow Agreement”].
44
The Escrow Agreement § 10(a) stated, in part, the “Escrow Agent has no liability under and no
duty to inquire as to the provisions of any document other than this Agreement, including without
8
on the date hereof and ending at the close of Escrow Agent’s Business Day on the
first anniversary of the date of this Agreement, unless earlier terminated pursuant to
this Agreement.”45 The Escrow Agent was required to “disburse Escrow Funds at
any time and from time to time, upon receipt of, and in accordance with, a Joint
Written Direction . . . .”46 When the Escrow Period expired, “Escrow Agent shall
distribute to [JanCo] pursuant to the funds transfer instruction set forth in this
Section 4(b), as promptly as practicable, any remaining Escrow Funds not subject to
a Claim Notice as provided in Section 6.”47
The Escrow Agreement contained a dispute resolution procedure requiring:
(a) [ISS] shall give written notice of such claim (a “Claim Notice”) to
Escrow Agent and [JanCo] prior to the expiration of the Escrow Period.
Such Claim Notice must include a description of the Unobtained
Required Consent (including a copy of the written consent) and the
amount to be disbursed with respect to such Unobtained Required
Consent, as such amount is set forth in Schedule 2.2(f) of the Purchase
Agreement.
(b) Escrow Agent shall pay a Disbursement Claim to [ISS] from the
Escrow Funds only pursuant to (i) [JanCo’s] written direction, (ii) a
Joint Written Direction or (iii) a Final Order.48
limitation any other agreement between any or all of the parties hereto or any other persons even
though reference thereto may be made herein and whether or not a copy of such document has
been provided to Escrow Agent.”
45
Escrow Agreement § 1.
46
Id. § 4(a).
47
Id. § 4(b) (emphasis in original).
48
Id. § 6.
9
3. The Amendment to the APA
The parties agreed to an Amendment of the APA (the “Amendment”) on
November 30, 2021.49 The Amendment added to the purchase price the cost of
equipment ISS purchased—JanCo obtained the equipment as part of the APA.50 The
purchase price amount thus increased $1,435,387.00 plus any associated taxes.51
The Amendment also extended the deadline to obtain certain required consents.52
C. The Consents
1. The Contractual Provisions Dealing with Consents
Section 1.1(a) of the APA listed “Target Accounts” under “Purchase and Sale
of Purchased Assets.”53 Target Accounts referred to
All of [ISS’s] right, title and interest in and to all of the customer
relationships and accounts listed on attached Schedule 1.1(a), and the
right and obligation of [ISS] to provide premium cleaning and janitorial
services to such accounts and receive payment therefor, whether or not
evidenced by a written contract[.]54
Schedule 1.1(a) included 258 accounts.55 APA Section 2.2(f) required ISS to
“deliver, or cause to be delivered” to JanCo “[s]ubject to Section 6.1(d) below,
consents to assignment of Assumed Contracts from those customers listed on
49
Tunney Aff. Ex. 5 (the “Amendment”).
50
Amendment § 3.
51
Id.
52
See id. §§ 6, 8.
53
APA, Art. 1.
54
Id. § 1.1(a) (emphasis in original).
55
Id. sched. 1.1(a).
10
Schedule 2.2(f) (collectively ‘the Required Consents’)[.]”56 Schedule 2.2(f) listed
20 accounts, ten of which listed a “Potential Adjustment.”57 The APA defined
“Excluded Assets” as “all other assets of [ISS]” “except for the Purchased Assets as
specifically described” in Section 1.1.58 Section 2.8 noted that
If any Purchased Assets are not assignable or transferrable to [JanCo]
without the consent of any Governmental Authority or third party, and
such consent has not been obtained prior to the Closing and the Closing
occurs, this Agreement and the Bill of Sale shall not constitute an
assignment or transfer thereof unless and until such consent is obtained
and until such time shall constitute Excluded Assets. In such case,
[ISS] shall use their best efforts to obtain such consent as soon as
possible after the Closing; provided, however, that [JanCo] shall
cooperate, at no expense to [JanCo], with [ISS] in that endeavor.59
Section 6.1(d) detailed that
[ISS] shall have obtained and delivered to [JanCo] all of the Required
Consents; provided, that, if on or before October 31, 2021 [ISS has] not
obtained all of the Required Consents, then (i) the End Date shall
automatically be extended to November 30, 2021, and (ii) [ISS] shall
use their good faith best efforts to obtain the remaining Required
Consents prior to November 30, 2021; provided, further, that, if on or
before November 30, 2021 [ISS has] not obtained and delivered all of
the Required Consents to [JanCo], as long as [ISS has] obtained
consents to assignment or novation from the Top 10 Customers by
November 30, 2021, then, (x) subject to the other closing conditions set
forth in Section 6.1 and Section 6.2 being satisfied or waived, the
Parties will consummate the Closing and (y) at Closing, with respect to
the Required Consents that have not been obtained by [ISS]
(collectively, the “Unobtained Required Consents”), [JanCo] will
deposit into an escrow account with an escrow agent mutually agreed
upon by the Parties (the “Escrow Agent”), an amount equal to the sum
56
Id. § 2.2(f) (emphasis in original).
57
Id. sched. 2.2(f).
58
Id. § 1.2.
59
Id. § 2.8.
11
of the purchase price adjustment amounts set forth opposite the name
of each Target Account relating to the Unobtained Required Consents
on Schedule 2.2(f), provided, further, that, [ISS] will then have one
hundred twenty (120) days immediately following the Closing Date to
obtain the Unobtained Required Consents, and for each Unobtained
Required Consent obtained and delivered by [ISS] to [JanCo] during
the 120-day period immediately following the Closing Date, [JanCo]
shall authorize and instruct, jointly with [ISS], the Escrow Agent to
release and pay to [ISS] out of the escrow account an amount equal to
the purchase price adjustment amount set forth opposite the name of
each Target Account on Schedule 2.2(f) for which an Unobtained
Required Consent is obtained and delivered during the 120-day period
immediately following the Closing Date; provided, further, that, if any
of the Unobtained Required Consents are not ultimately obtained and
delivered by [ISS] within the 120-day period following the Closing
Date, then the Escrow Agent, without further instruction from [ISS] or
[JanCo], shall release and pay to [JanCo] any amounts remaining in the
escrow account relating to the Unobtained Required Consents upon the
expiration of the 120-day period[.]60
The APA also set that “[t]he Purchased Assets will collectively constitute, as
of the Closing, all of the assets, tangible and intangible, necessary to service the
Target Accounts in substantially the same manner in which the Target Accounts are
currently being serviced by [ISS].”61 The APA detailed
Since December 31, 2020, no Target Account that is party to a Material
Contract has terminated such Material Contract or has threatened to do
so and no Seller is involved in any claim, dispute or controversy with
any customer or any of its other customers related to the Target
Accounts that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. Schedule 4.22 sets forth
the ten (10) largest customers (each determined by gross revenue
received) within the Target Accounts (the “Top 10 Customers”).62
60
Id. § 6.1(d) (emphasis in original).
61
Id. § 4.16.
62
Id. § 4.22 (emphasis in original).
12
The parties agreed
No representation or warranty made by [ISS] in this Article 4, nor any
schedule attached hereto contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements
contained therein not misleading.63
As a further requirement on the parties, the APA listed
Except for the representations and warranties contained in this Article
4, neither [ISS] nor [JanCo] nor any other Person makes any express or
implied representation or warranty with respect to [ISS] or any of their
Affiliates, the probable success or profitability of the Target Accounts,
this Agreement or the other Transaction Documents or the Transactions
contemplated hereby or thereby, and [ISS] expressly disclaim[s] any
other representations, warranties, forecasts, projections, statements or
information, whether made or furnished by [ISS] or any of their
Affiliates or any of their respective representatives or any other
Person.64
The Amendment updated the consent requirements when some consents were
not obtained by the original deadline, noting that
The Parties acknowledge that pursuant to Section 6.1(d) of the Purchase
Agreement, [ISS] obtained consents to assignment or novation from the
Top 10 Customers prior to November 30, 2021, except for the Federal
Aviation Administration (“FAA”), which has not consented to the
novation to [JanCo] of the FAA’s contract with [ISS] (the “FAA
Contract”). [JanCo] agree[s] to waive the closing condition that the
FAA consent to the novation of the FAA Contract to [JanCo], and the
Parties agree to continue to use their best efforts following Closing to
obtain the FAA’s consent to novation of the FAA Contract. The Parties
further agree that the unobtained FAA consent shall be treated as an
“Unobtained Required Consent” in accordance with Section 6.1(d) of
the Purchase Agreement, including depositing into escrow the
63
Id. § 4.25 (emphasis in original).
64
Id. § 4.26 (emphasis in original).
13
“Potential Adjustment” amount set forth opposite the FAA’s name on
Schedule 2.2(f) of the Updated Schedules.65
As to unobtained consents, the Amendment noted
The Parties acknowledge and agree that as of the Closing [ISS has] not
obtained consents to assignment of the Target Accounts set forth on
Exhibit D attached hereto. The Parties agree to continue to use their
best efforts following Closing to obtain such consents, and such
unobtained consents shall be treated as “Unobtained Required
Consents” in accordance with Section 6.1(d) of the Purchase
Agreement, including depositing into escrow the “Potential
Adjustment” amount set forth opposite each Target Account’s name on
Exhibit D (without duplication with respect to the FAA as contemplated
in Section 6 above).66
The APA also included certain disclosure requirements on the parties as set
forth
After the Closing Date, if any items of payment, correspondence or
other materials pertaining to the Target Accounts are received from a
third party by [ISS], [ISS] shall promptly forward such payment,
correspondence or other materials to [JanCo].67
Similarly,
(a) The Parties agree to work cooperatively and in good faith to obtain
the Required Consents and to obtain the necessary consents to the
assignment and novation of the contracts of the Target Accounts in
addition to the Required Consents both before and after the Closing
Date. [ISS] agree[s] to undertake commercially reasonable efforts to
include [JanCo] in discussions with the Target Accounts related to
obtaining the foregoing consents, and after the Closing Date, [JanCo]
agree[s] to cause or allow members of the management team managing
the Target Accounts prior to the Closing Date and who are expected to
become employees of [JanCo] upon termination of the Employee Lease
65
Amendment § 6 (emphasis in original).
66
Id. § 8 (emphasis in original).
67
APA § 5.17(b).
14
Agreements to provide commercially reasonable assistance in
obtaining the Required Consents.
(b) The Parties acknowledge and agree that in connection with the
assignment or novation of the contracts of certain Target Accounts,
including [ISS]’s contract with the Federal Aviation Administration,
the Target Account may require [ISS] to guarantee [JanCo’s]
performance under the relevant contract after the assignment or
novation, including future changes in scope of service to which [ISS]
will not have notice or information. If any such guarantee by [ISS] is
required, then in connection with the relevant assignment or novation,
[JanCo] will provide a performance bond, in favor of [ISS] that
indemnifies [ISS] against any Losses incurred by [ISS] related to any
guarantee of performance of an assigned Target Account contract as
described above.68
The Potential Adjustments provided for in APA Section 6.1(d) “reflected the
contribution of each contract to the enterprise value of the business sold to [JanCo],
calculated by multiplying the annualized 2Q21 revenues from each contract by 0.47
(a multiple representing the ratio between the $80 million purchase price and the
$170.2 million in annualized revenues from the business).”69 The Potential
Adjustments for the consents from the entities relevant to the summary judgment
motions included $1.5 million for Ingram Micro, $5.6 million for the FAA, and $1.3
million for Pima County.70 These consents have been obtained—Ingram Micro
before the deadline, and the FAA and Pima County after the deadline—but JanCo
has not provided ISS with these amounts. A JanCo executive testified that these
68
Id. § 5.19.
69
ISS Opening Br. in Supp. of ISS Parties’ Mot. for Part. Summ. J. [hereinafter “ISS Br.”] 7–8
(citing Tunney Aff. Exs. 2, 3, 4).
70
Id. 11 (citing APA, Ex. D).
15
three escrow amounts were withheld from ISS, despite ISS obtaining the consents,
because of “unethical business practices” including that ISS was “not telling the truth
about how many employees [JanCo was] going to get so that [ISS] could falsify the
EBITDA and overcharge [JanCo] for the business.”71
No extension arrangement for the consents was ever signed by both ISS and
JanCo.72 The contemplated, unsigned extension only lasted 60-days.73 Capital
Tower, another Required Consent, was received on April 24, 2022, and JanCo
prepared the escrow release letter on July 29.74 On August 4, the parties submitted
a Joint Written Direction to the Escrow Agent for the Capital Tower consent and the
Escrow Agent disbursed the funds on August 10, 2022.75
2. The Ingram Micro Consent
Three ISS accounts regarding the consents are at issue in this litigation. The
first is Ingram Micro, a top-ten ISS customer. After ISS obtained this consent, JanCo
would be entitled to an adjustment amount of $1.49 million.76 During the time ISS
was attempting to obtain Ingram Micro’s consent, Ingram Micro was going through
structural changes wherein Ingram Micro was selling part of its logistics operation
71
Tunney Aff. Ex. 99, at 58:13–25.
72
See, e.g., JanCo Br. 6 (citing Mastria Aff. Ex. G, at ISS_000372588).
73
JanCo Reply Br. in Supp. of JanCo’s Mot. for Part. Summ. J. [hereinafter “JanCo Reply”] 8
(citing Mastria Aff. Ex. H, § 1(d); Ex. I, at ISS_000104625; Ex. J, at ISS_000105820).
74
ISS Opp’n 18–19 (citing Tunney Aff. Ex. 114, at ISS_000122155; Ex. 115, at ISS_000122314;
Ex. 116, at ISS_000122344; Ex. 117, at JANCO-00198855).
75
Tunney Aff. Ex. 118, at JANCO-00198975; Ex. 119, at ISS_000153352.
76
Amendment, sched. 2.2(f).
16
to non-party CEVA Logistics (“CEVA”).77 On January 14, 2022, Pitcock forwarded
a spreadsheet to multiple JanCo and Argenbright employees tracking changes to the
consents which indicated an awareness of the changes happening at Ingram Micro.78
In response to a question by JanCo, asking about “risks” with Ingram Micro, Pitcock
noted that Ingram had “undergone change in their organizational structures” but that
there were “[n]o operational issues that are known[.]”79
ISS obtained the Ingram Micro written consent for JanCo on January 30,
2022.80 On January 31, ISS learned from Ingram Micro that Ingram Micro was in
the process of selling part of its operations to CEVA.81 As a result, Ingram Micro
requested ISS to execute a “Partial Assignment of the Agreement” between ISS and
Ingram Micro to CEVA as part of Ingram Micro’s partial divestment (the “Novation
Agreement”)—essentially the same process ISS was undergoing on behalf of JanCo,
Ingram Micro was doing on behalf of CEVA.82 The ISS employees involved in this
77
See, e.g., Tunney Aff. Ex. 15, at JANCO-00019781.
78
Id. Ex. 20, at JANCO-00125259, F-14 (stating “Meeting complete and initial positive feedback
received. Consent is being forward to senior procurement representative for final signature.
Returned AH redline for client review on 11/18/21. Follow-up on 01/12/2022 advised that
procurement is still working to obtain document from legal (due to their own acquisitional
activities there has been a delay). Ops touch base scheduled for 01/18/22 for additional update.”).
79
Id. Ex. 21, at JANCO-00197100.
80
Id. Ex. 6.
81
See generally id. Ex. 15.
82
See generally id. Ex. 16.
17
correspondence included Pitcock, who was on lease to JanCo pursuant to the
Employee Lease Agreements.83
JanCo received notice of the signed consent from Ingram Micro regarding
consent for ISS’s accounts to shift to JanCo on February 1, 2022.84 Also on February
1, Pitcock signed the Novation Agreement for Ingram Micro to divest its contracts
to CEVA.85 JanCo notes that Pitcock signed the Novation Agreement as an
executive of ISS, not on behalf of JanCo.86 ISS, however, reinforces that Pitcock
spoke to JanCo’s CFO, Mr. Maynord, before signing the Ingram Micro Novation
Agreement.87 On February 7, Ingram Micro sent an updated Novation Agreement
which was forwarded on the same day to Pitcock.88 On February 16, Pitcock forward
the email chain and attachments to JanCo’s integration consultant, Brian Hage, who
then forward the chain and attachment to JanCo’s counsel and executives.89
On March 9, JanCo prepared a notice to the Escrow Agent directing the
release of the $1.5 million adjustment.90 On March 11, ISS responded stating that
83
ISS Br. 13 (citing Tunney Aff. Ex. 1 §§ 4.20, 5.10, sched. 4.20(a); Ex. 17, at JANCO-00055882).
84
Tunney Aff. Ex. 7.
85
See generally id. Ex. 16.
86
See id. at ISS_000223636 (signing as “Vice President” under the signature entitled “ISS
Facilities Services, Inc.”).
87
ISS Reply 9–10 (citing Louis F. Masi in Supp. of ISS Reply [hereinafter “Masi Aff.”] Ex. A, at
438:15–439:24).
88
Tunney Aff. Ex. 18.
89
Id. Ex. 19. The Court notes that the Brian Hage’s email to JanCo’s counsel and executives has
been redacted, so the Court can only determine that the Novation Agreement was forwarded, not
the content of the email in which it was attached. See also JanCo Opp’n 17 (noting that February
16, was the first time JanCo was informed of Ingram Micro’s divesting to CEVA).
90
Tunney Aff. Ex. 8.
18
ISS was “connecting internally” to “discuss this as well as other points from the
NWC call.”91 On March 21, ISS forwarded three escrow release letters to ISS’s legal
counsel, including the escrow release letter “to ISS for consent received for Ingram
Micro.”92 On March 29, JanCo followed up with ISS, noting that ISS “is sitting on
those” escrow letters.93 On May 30, ISS responded that “Ingram is correct, and we
should execute this version and release the funds[.]”94
On April 4, Ingram Micro finalized the divestment of its logistics business to
CEVA.95 On April 29, a customer survey indicated dissatisfaction with ISS via
Ingram Micro.96 On April 30, JanCo’s CFO, John Maynord, emailed to ask about
the status of Ingram Micro and was told that Ingram Micro had “split in to two
entities.”97 On June 7, ISS emailed JanCo to indicate that the Ingram Micro “release
letter is correct and contains the proper escrow amount to be released to ISS.”98 On
June 17, CEVA notified ISS that it was not continuing a contractual relationship
91
Xu Aff. Ex. 156, at ISS_000101320–21.
92
Id. Ex. 157, at ISS_000364646. The email itself is redacted as “privileged” so the Court relies
on the representation that these letters were included as an attachment based on the prior email in
the chain on March 9, 2022 listing that the three letters were attached. Id. at ISS_000364647. The
other two escrow release letters were for “[r]elease of escrow [JanCo] for lost client – Texas
Tower” and “[r]elease of escrow to [JanCo] for lost business with Smith & Nephew.” Id.
93
Id. Ex. 158, at JANCO-00139526.
94
Id. Ex. 159, at ISS_000144310.
95
See Tunney Aff. Ex. 22, at JANCO-00066236.
96
Xu Aff. Ex. 132, at JANCO-00000731 (“Primary Client Concern: Getting rid of ISS.”). JanCo
relies on this survey as evidence of ISS’s “mismanag[ement of] Ingram Micro’s remaining
business” making it harder for JanCo to retain CEVA as a client after the transfer. JanCo Opp’n
17–18.
97
Tunney Aff. Ex. 23.
98
Xu Aff. Ex. 160, at ISS_000147321.
19
with JanCo.99 The remainder of the Ingram Micro contracts with JanCo would
continue despite CEVA’s departure.100 That same day, ISS forwarded the email to
JanCo.101
JanCo did not release the adjustment amount, instead indicating on July 1 that
“[t]here are a couple of issues” to discuss.102 ISS understood the delay to be as a
result of JanCo’s impression that “consent to the assignment of the entire contract
ha[d] not been obtained” and sought additional documentation on July 11, from
JanCo.103 ISS again asked for information about the Ingram Micro escrow delay on
August 1.104
On September 7, JanCo indicated that it had “lost $1.62MM out of the
$3.18MM of revenue” from Ingram Micro “due to lost business based on the
assignment” of Ingram Micro’s business to CEVA.105 Consequently, JanCo asserted
that ISS should only receive $734,000.00 of the related escrow amount.106
The contract between Ingram Micro and ISS allowed either party to terminate
the contract “for convenience” with at least thirty (30) days’ written notice. 107 ISS
99
See generally id. Ex. 133; Tunney Aff. Ex. 26, at JANCO-00076755–56.
100
Xu Aff. Ex. 134, at 75:9–13; Ex. 135, at JANCO-00078093.
101
Tunney Aff. Ex. 26, at JANCO-00076755.
102
Id. Ex. 9.
103
Id. Ex. 10.
104
Id. Ex. 11, at JANCO-00198932.
105
Id. Ex. 12, at JANCO-00156575.
106
Id.
107
Id. Ex. 13, at ISS_000226041.
20
asserts that it “promptly advised [JanCo] of Ingram Micro’s divestment” to
CEVA.108
At ISS’s Pitcock deposition, Pitcock noted that Ingram Micro sold a portion
of its business before the Ingram Micro consent transaction.109 Pitcock, however,
clarified that he learned of the Ingram Micro divestiture “somewhere in [the] area”
of January 31, 2022.110 Pitcock detailed his involvement with Ingram Micro noting
that “subsequent” to the consent, ISS discussed with CEVA the divestment and ISS’s
contracts.111 Pitcock noted that Ingram Micro told ISS they had to “get a contract
for CEVA on [the consents] because [Ingram Micro] divested it.”112 Despite
attempting to obtain a consent contract with CEVA, CEVA declined because “[t]hey
had a different provider.”113 From this time period, through to the end of 2022,
JanCo was “reliant on ISS on all the information that [JanCo] had to run the
business[.]”114
On October 25, 2022, ISS told JanCo “we are willing to discuss a compromise
on Ingram Micro.”115 On November 2, ISS further stated, “we are willing to accept
a partial release of Ingram Micro escrow amount to [JanCo] . . . [the] Amount
108
ISS Br. 12.
109
Xu Aff. Ex. 126, at 312:18–24.
110
Masi Aff. Ex. A, at 436:20–438:10.
111
See Xu Aff. Ex. 126, at 313:1–314:6.
112
Id. at 313:19–25.
113
Id. at 316:2–7.
114
Id. Ex. 118, at 146:1–15.
115
Tunney Aff. Ex. 97, at JANCO-00118849.
21
[JanCo] will receive is USD 747k, equivalent to half of the Ingram Micro escrow
amount.”116
3. The FAA Consent
The next consent at issue is the Federal Aviation Association (“FAA”)
account, JanCo’s largest account based on revenue.117 Failing to obtain the FAA
consent entitled JanCo to the adjustment amount of $5.63 million.118 On October 4,
2021, ISS provided JanCo with a draft novation agreement for the FAA contract.119
On October 8, JanCo responded to the draft stating that it was “working on this” and
will “push to get you the materials early next week.”120 ISS responded that same
day encouraging a response because “the FAA novation is likely one of the longer
lead-time items to get to closing[.]”121 On October 12, the parties submitted the
novation documents to the FAA.122
On October 19, the FAA notified JanCo that it need to be registered in
SAM.gov, and while Argenbright was registered, it had a pending exclusion that the
FAA needed more information on.123 That day, ISS contacted JanCo requesting
116
Id. Ex. 74, at JANCO-00198573.
117
Id. Ex. 72, at JANCO-00156188; Ex. 73, at 167:8–24.
118
Amendment, sched. 2.2(f).
119
Tunney Aff. Ex. 28.
120
Id. Ex. 29, at JANCO-00104536.
121
Id. at JANCO-00104535.
122
Id. Ex. 30.
123
Id. Ex. 31, at ISS_000050112.
22
JanCo prioritize the FAA because “this [was] a key consent to obtain.”124 On
October 27, ISS informed JanCo that they “need[ed] to make progress immediately
on the FAA contract novation” and detailed the “most recent list of requests.”125 ISS
also noted that obtaining the FAA consent was “going to take a fair amount of
time.”126
On November 3, ISS forwarded JanCo the FAA email regarding
Argenbright’s exclusion, and requested JanCo respond.127 On November 5, JanCo
stated “[t]he short answer is that . . . there was an issue in the past that we should
disclose to the FAA.”128
On November 10, the FAA informed the parties that “the FAA does not find
this novation in the best interest of the Government” citing the registration issues
with JanCo and Argenbright.129 JanCo noted to ISS that “we need to be all over this
one,” and Argenbright resubmitted the SAM.gov registration.130 On November 11,
ISS informed the FAA that one of the concerns had been corrected and the other
“appears to be based upon an administrative error in SAM.gov.” and JanCo would
provide a detailed letter addressing the issue by November 16.131 On November 16,
124
Id. Ex. 32, at ISS_000196668.
125
Id. Ex. 33, at ISS_000010884.
126
Mastria Aff. Ex. D, at JANCO-00202631.
127
Tunney Aff. Ex. 34, at JANCO-00109750.
128
Id. Ex. 35, at ISS_000012849.
129
Id. Ex. 36, at ISS_000014090.
130
Id. Ex. 37, at JANCO-00202648; Ex. 38, at ISS_000014378.
131
Id. Ex. 38, at ISS_000014378.
23
JanCo addressed the exclusions with the FAA.132 On November 22, the FAA
responded that it was unable to “determine if it mitigates the risks” and instructed
“Argenbright as the parent company of [JanCo]” to be registered in SAM.gov,
stating that “[i]f Argenbright can be registered in SAM.gov, the FAA would be
satisfied and the novation can move forward.”133
On December 30, the parties submitted a second novation request to the FAA
noting that Argenbright and JanCo had been registered with SAM.gov.134 On
January 12, 2022, the FAA responded that the novation agreement was being
reviewed, but could not provide a timeline for completion.135 The FAA then
consented to a performance bond on January 28, 2022 through to February 2022.136
On March 23, 2022, JanCo emailed ISS to propose an extension on certain
client consent deadlines, including the FAA, for sixty days.137 ISS agreed, and
JanCo said it was “working on” a draft amendment to address the extension. 138 On
the day of the original 120-day period, March 31, 2022, JanCo sent a draft
amendment attached stating “[o]ur intent is clear to extend the relevant deadlines”
but clarified “we are not yet sure what the ultimate solution will be for billing and
132
See generally id. Ex. 39.
133
Id. Ex. 40, at ISS_000055361.
134
Id. Ex. 41, at ISS_000070798.
135
Id. Ex. 42.
136
ISS Br. 19 (citing Tunney Aff. Exs. 43, 44).
137
Tunney Aff. Ex. 45, at JANCO-00106741.
138
Id. at JANCO-00106738–40.
24
collecting from customers that have not provided consents by the end of the TSA
period.”139 On April 1, ISS responded with its revisions to the draft amendment,140
an updated draft of the FAA novation agreement, and a draft performance
guarantee.141 On April 5, ISS followed up indicating a “need to get this resolved
today and the amendments signed.”142 On April 8, JanCo represented to ISS that the
“APA Amendment is in final form. The Argenbright team will want to sign this in
connection with the TSA Amendment once finalized.”143 On April 11, ISS emailed
again stating “[m]y understanding is that you are signed off on the APA Amendment,
but we need your thoughts on the TSA Amendment as soon as possible.” 144 JanCo
responded on the same day with “Yes. I will send comments later today, as well as
comments on the FAA Guaranty.”145 On April 12, ISS sent a revised draft of the
TSA Agreement; JanCo responded on April 13, “[t]he revised draft works for us.”146
ISS’s Jorgensen testified that the correspondence back and forth about a possible
extension “wouldn’t be sufficient to change the deadline on the APA.”147
139
Id. Ex. 46, at JANCO-00139422.
140
Id. Ex. 47, at JANCO-00107850.
141
Id. Ex. 51, at JANCO-00107831.
142
Mastria Aff. Ex. F, at ISS_000108244.
143
Tunney Aff. Ex. 121, at ISS_000367884.
144
Id. Ex. 48, at ISS_000110065. ISS challenges JanCo, noting that JanCo never corrected ISS’s
assertion that JanCo was “signed off on the APA Amendment.” ISS Answering Br. in Opp’n to
JanCo’s Mot. for Summ. J. [hereinafter “ISS Opp’n”] 15 (citing Tunney Aff. Ex. 122, at
ISS_000110659–60).
145
Tunney Aff. Ex. 49, at ISS_000110097.
146
Id. Ex. 50, at JANCO-00107708.
147
Xu Aff. Ex. 123, at 225:14–25.
25
On May 16, the parties agreed to a final guaranty agreement for the FAA
novation.148 On May 16, ISS again asked about extending the deadlines for the
consents.149 On May 18, the parties sent the FAA the revised novation agreement.150
By request of the FAA, the parties provided a signed copy of the novation agreement
to the FAA on June 6.151 On June 27, the FAA emailed a letter indicating its consent
to the novation.152 JanCo raised concerns that the FAA had not signed the actual
agreement the parties signed, instead only providing the letter via email.153 ISS
confirmed the FAA would sign the novation agreement “where consents have been
received,”154 i.e., when ISS sent the final invoices.155
On July 1, ISS asked JanCo when the escrow letter would be completed.156
JanCo responded “There are a couple of issues we need to discuss around FAA (we
are actually waiting for their final formal sign off once ISS clears outstanding
invoices, but they have given the[ir] conditional consent which is great)[.]”157 On
August 4, the FAA sent a contract modification form158 and JanCo signed it that
148
Tunney Aff. Ex. 52, at JANCO-00107956.
149
Mastria Aff. Ex. G, at ISS_000372588 (“It would seem to me given passage of time that the
deadline for obtaining the remaining consents should be extended until June 30 (instead of end of
May).”).
150
Tunney Aff. Ex. 53, at JANCO-001991185; Ex. 54, at ISS_000137239.
151
Id. Ex. 55, at JANCO-00163124; Ex. 56, at JANCO-00199407; Ex. 123, at JANCO-00056310.
152
Id. Ex. 57, at ISS-000149798–00.
153
Id. Ex. 58, at JANCO-00194514.
154
Id. Ex. 59, at ISS_000150046.
155
Id. Ex. 58, at JANCO-00194513–14.
156
Id. Ex. 60, at JANCO-00109850.
157
Id. Ex. 9, at JANCO-00135432.
158
Id. Ex. 61, at ISS_000376280–87.
26
day.159 On August 11, ISS asked JanCo again for the FAA escrow letter. 160 On
August 23, after receiving no response, ISS emailed JanCo asking again about the
escrow letter.161 On August 25, ISS requested a call to discuss the escrow releases
and “a few additional things.”162
On September 8, ISS sent a draft escrow letter for the FAA to JanCo for
JanCo’s signature.163 ISS sent follow-up emails on September 9 and September 12;
JanCo did not respond.164 In an October 4 email, JanCo referred to the FAA consent,
among other things, in a section entitled “[o]ther considerations outside of the NWC
settlement[.]”165
By November 2022, JanCo had been servicing the FAA and received all
revenues associated with the account for approximately one year.166 The first time
that JanCo indicated an issue with the consents was on November 8, 2022.167 There,
JanCo indicated it would “agree to release these amounts to you subject to agreement
on all of the other issues resolved to our satisfaction.”168 On November 21, ISS sent
159
Id. Ex. 62, at JANCO-00203552.
160
Id. Ex. 11, at JANCO-00198932.
161
Id. Ex. 63, at JANCO-00106607.
162
Id. Ex. 64, at JANCO-00106547.
163
Id. Ex. 65, at JANCO-00108021.
164
Id. Ex. 66, at JANCO-00108013–14.
165
Id. Ex. 67, at JANCO-00156349–50.
166
See id. Ex. 69, at ISS_000061772, Ex. 70, at 148:15–149:20.
167
Id. Ex. 74, at JANCO-00198571 (“As a reminder, the FAA and Pima consents were not received
in a timely manner pursuant to the specific terms of the APA (and even the extension we
exchanged, but never executed).”).
168
Id. Ex. 74, at JANCO-00198571.
27
claim notices to the Escrow Agent and JanCo for the FAA amount.169 On
November 23, JanCo responded to the claim notice asserting that JanCo “do[es] not
consent to payment of any of the Disbursement Claims” including the FAA claim.170
On December 5, ISS contacted JanCo asserting that JanCo’s “refusal to submit a
joint instruction to the Escrow Agent for the release of the Escrow Funds constitutes
a breach of the Asset Purchase Agreement between [JanCo] and [ISS] (the ‘APA’),
as well as the Escrow Agreement.”171
4. The Pima County Consent
The final consent at issue is Pima County, Arizona.172 Pima County was the
fourteenth largest account by revenue, and the adjustment amount was $1.28
million.173 On October 8, 2021, ISS sent Pima County a consent form.174 On
October 25, ISS accepted Pima County’s redlined version of the form.175 ISS sent
several follow-up emails to Pima County throughout November requesting
169
Id. Ex. 68, at JANCO-00198448–51; Ex. 124, at JANCO-00198456–84.
170
Id. Ex. 71, at JANCO-00202950. JanCo also noted that “the Holdback Amount due to [ISS]
is zero” based on JanCo’s “estimate [that] their damages [would] be well in excess of
$10,000,000.” JanCo Am. Compl. Ex. V, at 4.
171
Id. Ex. Y, at 1.
172
Amendment, sched. 2.2(f).
173
Tunney Aff. Ex. 72, at JANCO-00156188.
174
Id. Ex. 75, at ISS_000197154–58.
175
Id. Ex. 76, at ISS_000010525.
28
execution of the agreement.176 On December 3, ISS informed JanCo that Pima
County “promise[s] to have [the] form ready early next week.”177
On March 16, 2022, JanCo sent the consent form to Pima County via
DocuSign.178 During the parties’ discussions on extending the consent deadlines,
the parties discussed Pima County at the end of March, 2022.179 On May 19, 2022,
ISS noted “[w]e are awaiting confirmation that [Pima County is] live in [JanCo’s]
setup, which I understand will be just as good as a consent (Scott [Strobridge]
confirmed they will treat it like a consent.)”180 On May 30, ISS asked JanCo for a
status update on Pima County regarding JanCo’s receipt of payments and whether
this would allow for the parties to agree to an escrow agreement. 181 On June 13,
Pitcock informed ISS that “we are working to finalize the new contract/billing setup
with Pima County this week.”182 On July 19, the Pima County consent was
received.183 Like with the FAA, JanCo declined to release the escrow funds, noting
that the parties had to resolve other issues first.184
176
Id. Ex. 77, at ISS_000055602–03.
177
Id. Ex. 78, at JANCO-00129690.
178
Id. Ex. 80, at ISS_000240992.
179
Id. Ex. 45, at JANCO-00106741.
180
ISS Br. 25 (citing Ex. 81, at ISS_000372817).
181
Tunney Aff. Ex. 82, at JANCO-00157357.
182
Id. Ex. 83, at ISS_000374994–95. See also generally JanCo Am. Compl. Ex. U3.
183
Tunney Aff. Ex. 84, at JANCO-00041034, -40, -41; Xu Aff. Ex. 142, at JANCO-00198528.
184
Tunney Aff. Ex. 74, at JANCO-00198571 (“As a reminder, the FAA and Pima consents were
not received in a timely manner pursuant to the specific terms of the APA (and even the extension
we exchanged, but never executed[.])”).
29
D. The Net Working Capital Dispute
JanCo agreed to a purchase price for the purchased assets of $80,000,000.00,
subject to specific adjustments including a $5,000,000.00 holdback amount (the
“Holdback Amount”).185 The Holdback Amount
[W]ill be reduced, but not below zero, by the amount of any Losses
indemnifiable by [ISS] under Article 7 herein. The remaining balance
of the Holdback Amount, less any then pending claims against it by
[JanCo], will be remitted to [ISS] within five (5) business days
following the twelve (12) month anniversary of the Closing Date by
wire transfer of immediately available funds in accordance with wire
instructions to be provided by notice given by the intended recipient of
the Holdback Amount.186
APA Section 2.5 governs the Working Capital Adjustment. The parties
agreed to a net working capital target of $12,877,000.00.187 JanCo was required to
deliver to ISS, “within five (5) business days after the ninetieth (90th) day following
the Closing Date, a statement (the ‘Working Capital Statement’) setting forth
[JanCo’s] determination of the actual net working capital of [ISS] on a consolidated
basis as of the Closing Date (the ‘Actual Closing Date Working Capital’).”188 The
APA detailed how the Working Capital Statement would be calculated, and
permitted ISS to access JanCo’s relevant books, records, and other documents
“related to the preparation of the Working Capital Statement.”189 The APA required:
185
APA § 2.4.
186
Id. (emphasis in original).
187
Id. § 2.5(a).
188
Id. § 2.5(b) (emphasis in original).
189
Id.
30
If the Actual Closing Date Working Capital, as finally determined
pursuant to this Section 2.5, is greater than the NWC Target by more
than $100,000.00, then [JanCo] shall pay to [ISS], as an adjustment to
the Purchase Price, the amount by which (A) Actual Closing Date
Working Capital exceeds (B) the NWC Target plus $100,000.00, paid
in accordance with Section 2.5(f). If the Actual Closing Date Working
Capital, as finally determined pursuant to this Section 2.5, is more than
$100,000.00 less than the NWC Target, then [ISS] shall pay to [JanCo],
as an adjustment to the Purchase Price, the amount by which (C) Actual
Closing Date Working Capital is less than (D) the NWC Target minus
$100,000.00, paid in accordance with Section 2.5(f).190
On March 1, 2022, JanCo sent its Net Working Capital Statement to ISS.191
On March 7, ISS expressed concerns over the calculations.192 The parties then
discussed extending the timeline for deciding on the Net Working Capital amount.193
The parties continued negotiating for several months.194 On March 21, ISS first
proposed that the Net Working Capital calculation and the FAA consent are
“outstanding processes [that] are interlinked, and given [ISS is] awaiting the final
audited accounts from [JanCo], [ISS] believe[s] it makes sense to push out and close
all this in one go.”195
On July 20, 2022, the Head of Corporate Development at Argenbright,
Tanmay Limaye (“Limaye”), informed Argenbright’s CEO, Ishwar, that JanCo
190
Id. § 2.5(e) (emphasis in original).
191
Tunney Aff. Ex. 85, at JANCO-00126446–47. See generally Xu Aff. Ex. 113.
192
Tunney Aff. Ex. 86, at ISS_000236213.
193
See Tunney Aff. Ex. 45, at JANCO-00106741; Ex. 87, at JANCO-00163465.
194
See generally id. Exs., 88, 89, 90.
195
Xu Aff. Ex. 114, at JANCO-00163465.
31
owed ISS $2.4 million.196 Ishwar responded “[c]an some of it be paid from the
escrow on customers who have not been brought in . . . ?”197 On August 8, Limaye
provided Ishwar with a “finalized NWC reconciliation” stating “[w]e effectively
owe then $3MM for the additional AR they delivered, and we collected upon.”198
This calculation included Pima County and the FAA as accounts that have been
collected upon by Argenbright.199
On September 8, JanCo sent ISS an updated Net Working Capital statement
which listed the Actual Closing Date Working Capital as $16,057,000.200 JanCo
suggested a Net Working Capital total of $2.4 million in comparison to ISS’s
calculation of $3.4 million.201 According to JanCo, the difference in amounts was
based on “payments demonstrated in the NWC statement that accrued through ISS’s
failure to make accounts receivable payments to ISS” including those from Ingram
Micro and other accounts—a total of approximately $695,000.202 On October 4, ISS
responded that its own calculations put the Net Working Capital at $16,366,000 and
noted “[t]his brings total difference in Adjusted NWC between our analyses of USD
196
Tunney Aff. Ex. 91, at JANCO-00155481.
197
Id.
198
Id. Ex. 92, at JANCO-00197921.
199
Id. at JANCO-00197922; Id. Ex. 70, at 175:3–24.
200
Id. Ex. 93, at JANCO-00041470, -73.
201
Xu Aff. Ex. 115, at 1 (Ex. 115 was supplemented to the Court on May 23, 2024). The Court
notes that neither copy of Ex. 115 has bate stamps so the Court refers only to the page as it appears
in the document file.
202
JanCo Opp’n 5 (citing Xu Aff. Ex. 115).
32
309k.”203 ISS shared their calculation explanation with JanCo, after request, on
October 19.204 On October 25, JanCo emailed ISS and stated “[w]e agree with your
base working capital calculation”205 as to the $16,366,000 amount, but “there were
two open items as noted in the email, the tablets and the incorrect insurance, which
are part of that.”206
The Net Working Capital amount has not been paid, and JanCo asserted that,
like the consents, it is “subject to coming to agreement on all of the other issues
resolved to our satisfaction.”207 JanCo was “trying to reach a global compromise
with ISS.”208 ISS had agreed to make the other issues a “part of the puzzle to try and
resolve everything[.]”209 JanCo’s Vice President of Finance, Seth Higdon, stated
that ISS’s data “is horrendous. I have never seen anything so—it was terrible.”210
JanCo also notes as evidence of bad data, that JanCo “recorded a non-cash write-off
during the year ended December 31, 2022 in the amount of $3,554,694[.]”211
On November 23, 2022, JanCo submitted an indemnification claim seeking
damages of approximately $10 million from ISS.212
203
Tunney Aff. Ex. 94, at JANCO-00041078; Xu Aff. Ex. 116, at JANCO-00198576.
204
Tunney Aff. Ex. 95, at JANCO-00118624. See also generally id. Ex. 96.
205
Id. Ex. 97, at JANCO-00118848.
206
Id. Ex. 70, at 185:23–186:8.
207
Id. Ex. 74, at JANCO-00198571.
208
JanCo Opp’n 4–5 (citing Tunney Aff. Ex. 74, at JANCO-00198571).
209
Xu Aff. Ex. 164, at 80:9–81:16.
210
Id. 140, at 43:6–7.
211
Id.. 162, at JANCO-00213097.
212
See generally JanCo Am. Compl. Ex. V.
33
E. The LaSalle Tax Receipts
JanCo bought cleaning equipment from non-party LaSalle Systems Leasing,
Inc. (“LaSalle”) which was paid for as part of the APA purchase price.213 JanCo
also agreed to pay post-acquisition taxes that ISS originally paid when acquiring the
equipment.214 In February 2022, ISS provided JanCo with the tax receipts indicating
a total of $165,211.96.215 JanCo repeatedly acknowledged its responsibility to pay
the tax amount,216 but has not yet paid this amount to ISS.217 JanCo notes that
“[b]oth parties have treated the tax payments related to this buyout as part of the
NWC compromise.”218
F. The Employment Agreements
Pitcock, Bartlett, and Rivas were all subject to non-compete agreements and
non-solicitation agreements.219 The APA’s covenant not to solicit read
[ISS] agrees that for a period of three (3) years from and after the
Closing Date, [ISS] and its Affiliates will not, directly or indirectly,
whether as an owner, director, officer, employee, consultant or in any
other capacity solicit for employment with [ISS] any person employed
by [ISS] as of the Closing Date who is hired by [JanCo] and who
provides services to the Target Accounts (other than through general
213
APA, sched. 4.17; Amendment § 3.
214
Amendment § 3.
215
Tunney Aff. Ex. 98, at JANCO-00159835.
216
See, e.g., id. Ex. 70, at 163:4–8; Ex. 85, at JANCO-00126446–47.
217
ISS Br. 29.
218
JanCo Opp’n 19 (citing Xu Aff. Ex. 155, at JANCO-0019851; Ex. 145, at JANCO-00163429;
Ex. 146, at JANCO-00198603).
219
Xu Aff. Ex. 150, §§ 4, 6 (Ex. 150 was supplemented to the Court on May 23, 2024). JanCo
cites only to Pitcock’s signed agreement in briefing. JanCo Opp’n 20.
34
solicitations which are not directed to specific individuals or
companies).220
Prior to JanCo’s acquisition, Pitcock served as ISS’s VP of its Cleaning
Division.221 On July 1, 2022, Pitcock joined JanCo as Vice President of
Operations.222 Pitcock was responsible for trying to set up an account with IKEA
for JanCo.223 JanCo terminated Pitcock on October 11, 2022 while JanCo was losing
customers and the “performance of the business was not very good” which would
have been Pitcock’s responsibility.224 ISS ended up obtaining the IKEA account,
and Pitcock was hired back by ISS on December 1, 2022 to replace the ISS’s IKEA
account leader who had recently resigned.225
JanCo is skeptical that Pitcock ever intended to bring the IKEA account to
JanCo, and instead JanCo believes Pitcock sought to maintain the IKEA relationship
to bring it back to ISS.226 After Pitcock left JanCo, JanCo’s “entire conversation
[with IKEA] just stopped.”227 JanCo never entered into a contract with IKEA.228
220
APA § 5.5(b).
221
JanCo Opp’n 19 (citing “Argenbright Dep. 47:15”). The Court notes JanCo did not direct the
Court to any exhibit for this citation, and only two exhibits contains portions of the Argenbright
Deposition, but it does not include page 47.
222
JanCo Am. Compl. ¶ 138.
223
See Xu Aff. Ex. 123, at 84:10–12; Ex. 163, at 107:17–108:15.
224
Id. Ex. 118, at 205:4–13.
225
JanCo Am. Compl. ¶ 139; ISS Answer to Am. Compl. ¶ 139; Tunney Aff. Ex. 102, at 245:20–
21; 247:21–22.
226
JanCo Opp’n 21 (citing Ex. 126, at 223:5–19; Ex. 163, at 107:22–108:8).
227
Xu Aff. Ex. 118, at 207:23–208:4.
228
Id. Ex. 126, at 225:4–6.
35
JanCo is also skeptical of ISS’s employee, Jorgensen, and Pitcock’s
relationship because they met in 2017 and Pitcock was one of Jorgensen’s direct
reports.229 The two saw each other monthly at business reviews.230 During the
transition period of the APA, the two spoke bi-weekly to “discuss elements of
support needed and approval of consents to assign[.]”231 Jorgensen and Pitcock also
had weekly standing meetings for a “regular update.”232 JanCo noted that both
Jorgensen and Pitcock admitted their conversations would span beyond work-related
topics to include current events and travel interests.233
Pitcock contacted ISS about returning to work on the same day he was
terminated by JanCo; he returned to ISS in December 2022.234 According to
Jorgensen, who was “directly involved with the hiring of Jason,” Pitcock was hired
back with ISS specifically to manage the IKEA account.235 Jorgensen noted that she
was the one who informed Pitcock that ISS had a “resignation of the key account
leader” for IKEA and inquired if Pitcock would be interested in the role.236 Between
229
Id. Ex. 123, at 26:10–11; 65:13–16.
230
Id. at 69:16–19.
231
Id. Ex. 138, at 21.
232
Id. Ex. 123, at 74:7–10.
233
JanCo Opp’n 23–24 (citing Ex. 123, at 79:10–17; Ex. 126, at 246:8–13; 247:7–17).
234
Tunney Aff. Ex. 102, at 244:22–245:21; Ex. 103, at 81:5–20; 82:20–83:8.
235
Xu Aff. Ex. 123, at 97:15–16; 176:11–15.
236
Id. Ex. 126, at 247:7–13.
36
July and August 2022, before Pitcock was terminated by JanCo, Jorgensen and
Pitcock spoke six times and had three calls on the day he was terminated.237
On December 7, 2022, JanCo sent ISS a cease and desist letter alleging that
Pitcock violated his non-compete.238 JanCo’s CEO, Ishwar, asserts Pitcock reached
out to him to discuss the letter, and in that conversation—which Ishwar recorded—
Pitcock challenged JanCo with “dirt” he had on JanCo, as a way to stop JanCo from
enforcing the non-compete.239
Bartlett worked for JanCo as regional manager for the southeast region from
July 1, 2022, through December 16, 2022.240 Bartlett resigned from JanCo because
of “many unethical practices” and “a serious lack of integrity.”241 JanCo challenged
Bartlett’s resignation letter as relying on information Pitcock must have provided
her, because only Pitcock could have known that information.242 This accusation,
however, was made by someone who admitted he “wasn’t in the room” when these
characterizations were made, he was just “informed kind of by some of the people
about some of the conversations that were going on and what was said.”243 Bartlett
testified she learned of the unethical and illegal conduct from JanCo’s president.244
237
Id. Ex. 138, at 21–22.
238
See generally id. Ex. 148.
239
Id. Ex. 118, at 214:1–25.
240
Id. Ex. 139, at 25:1–6.
241
Tunney Aff. Ex. 104, at JANCO-00003247.
242
Xu Aff. Ex. 140, at 178:17–179:25.
243
Masi Aff. Ex. B, at 179:19–180:3.
244
Id. Ex. C, at 53:8–68:21.
37
After resigning and taking several months off, Bartlett reached out to ISS for
employment.245 In the time between her resignation and returning to ISS, she had
multiple conversations with Pitcock, including about how his return to ISS had
been.246 Pitcock conducted Bartlett’s interview when she returned to ISS.247
JanCo also asserts that ISS violated the contracts by soliciting Rivas from
JanCo.248 On October 25, 2022, Rivas submitted his resignation to JanCo “to accept
another job offer.”249 Pitcock, however, was of the impression that Rivas also left
JanCo, then reached out to ISS about opportunities.250 Rivas, like Pitcock and
Bartlett, all omitted from their LinkedIn profiles that they ever worked for JanCo.251
Bartlett stated this was because she did “not want to be associated with those
crooks.”252
JanCo’s John Maynord declined to answer, deferring to counsel, about what
evidence JanCo had indicating that ISS solicited employees or induced the
employees to breach their respective contracts.253
245
Tunney Aff. Ex. 106, at 25:19–26:13.
246
Xu Aff. Ex. 139, at 28:3–29:21.
247
Id. at 26:21–24.
248
JanCo Opp’n 27.
249
Xu Aff. Ex. 161.
250
Tunney Aff. Ex. 103, at 172:16–25.
251
JanCo Opp’n 27; Xu Aff. Ex. 123, at 172:11–24.
252
Masi Aff. Ex. C, 27:6–7
253
Tunney Aff. Ex. 107, at 224:12–225:24; 228:12–229:12.
38
II. PROCEDURAL HISTORY
The legal proceedings between these parties began in the Court of Chancery
on December 27, 2022, when ISS filed a Complaint against JanCo.254 ISS moved to
dismiss for lack of equitable jurisdiction under Court of Chancery Rule 12(b)(1).
Concurrent to briefing the motion, on March 3, 2023, JanCo filed a Complaint in the
Superior Court of Delaware.255 On June 20, 2023, Vice Chancellor Glasscock
granted JanCo’s motion to dismiss the Complaint in Chancery, with leave to transfer
to Superior Court subject to 10 Del. C. § 1902. Vice Chancellor Glasscock granted
the transfer to the Complex Commercial Litigation Division on July 6, 2023. On
July 7, ISS filed its transferred Complaint in Superior Court.256 On September 26,
2023, this Court granted an Order of Consolidation, consolidating N23C-07-036
MAA CCLD and N23C-03-005 MAA CCLD.257
On November 7, 2023, ISS filed an Amended Complaint asserting five
counts:258 (I) Breach of Contract (Failure to Provide Escrow Instructions);259 (II)
Unjust Enrichment (in the Alternative to Count I);260 (III) Breach of the Implied
254
ISS Facility Servs. Inc. v. JanCo FS 2, LLC, 2022-1197-SG.
255
JanCo FS 2, LLC v. ISS Facility Servs., Inc., C.A. N23C-03-005-AML CCLD. On May 11,
2023, the case was reassigned to Judge Adams after then-Judge LeGrow was appointed to Justice
of the Supreme Court of Delaware. D.I. 65.
256
ISS Facility Servs., Inc. v. JanCo FS 2, LLC, C.A. N23C-07-036 MAA CCLD.
257
N23C-03-005 MAA CCLD, D.I. 104; N23C-07-036 MAA CCLD, D.I. 3. All D.I. references
hereafter will refer to the consolidated docket at N23C-03-005 MAA CCLD.
258
D.I. 128.
259
Id. ¶¶ 75–80.
260
Id. ¶¶ 81–87.
39
Covenant (in the Alternative to Count I);261 (IV) Breach of Contract (Failure to Pay
Working Capital Adjustment and Purchase Price Adjustments);262 and (V)
Declaratory Judgment.263 On November 21, 2023, JanCo filed an Answer and
Affirmative Defenses to ISS’s Amended Complaint.264
On November 22, 2023, JanCo filed an Amended Complaint alleging eight
counts:265 (I) Fraud/Intentional Misrepresentation;266 (II) Indemnification for
Breaches of Representations and Warranties;267 (III) Breach of Transition Services
Agreement;268 (IV) Declaratory Judgment (Declaring Escrow Funds Relating to
FAA and Pima County to be Released to Purchasers);269 (V) Breach of Duty of Good
Faith and Fair Dealing (Escrow Funds Relating to Ingram Micro);270 (VI)
Indemnification for Excluded Liability and Breach of Representation and Warranty
(Avnet);271 (VII) Breach of Asset Purchase Agreement (Covenant Not to Solicit);272
and (VIII) Intentional Interference with Contractual Relations.273 On December 8,
261
Id. ¶¶ 88–94.
262
Id. ¶¶ 95–01.
263
Id. ¶¶ 102–06.
264
D.I. 133.
265
D.I. 134.
266
Id. ¶¶ 207–26.
267
Id. ¶¶ 227–42.
268
Id. ¶¶ 243–45.
269
Id. ¶¶ 246–50.
270
Id. ¶¶ 251–59.
271
Id. ¶¶ 260–64.
272
Id. ¶¶ 265–68.
273
Id. ¶¶ 269–76.
40
2023, ISS filed an Answer and Affirmative Defenses to JanCo’s Amended
Complaint.274
On March 29, 2024, both ISS and JanCo filed motions for summary
judgment.275 On April 26, 2024, the parties filed their opposition briefs to each
other’s motions.276 On May 9, 2024, the parties filed their reply briefs.277 The Court
heard oral argument on both motions on May 23, 2024 and reserved decision.278
III. STANDARD OF REVIEW
The standard on a motion for summary judgment is well settled. Delaware
Superior Court Rule 56(c) instructs that the “judgment sought shall be rendered
forthwith if the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of
law.”279 A genuine dispute about a material fact is one where “the evidence is such
that a reasonable jury could return a verdict for the nonmoving party.”280
274
D.I. 140.
275
D.I. 156; 159.
276
D.I. 169; 171.
277
D.I. 177; 179.
278
D.I. 183.
279
Super. Ct. Civ. R. 56(c).
280
Gateway Ests., Inc. v. New Castle Cty., 2015 WL 13145613, at *13 (Del. Super. Sept. 29, 2015)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 243 (1986)) (internal quotation marks
omitted).
41
The burden is on the moving party to show the undisputed facts support its
position.281 Once the burden is met, the burden shifts to the nonmoving party to
“show that there are material issues of fact the ultimate fact-finder must resolve.”282
A court will not grant summary judgment if “it appears that there is a material fact
in dispute or that further inquiry into the facts would be appropriate.”283 The moving
party’s claim must be “based on more than mere speculation.”284
When the parties have filed cross-motions for summary judgment, as is the
case for some of the claims here, “the standard for summary judgment ‘is not
altered.’”285 If “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[m].’”286 However, even where
cross-motions are filed, if “an issue of material fact exists, summary judgment is not
appropriate.”287
281
Olga J. Nowak Irrevocable Tr. v. Voya Fin’l Inc., 2020 WL 7181368, at *3 (Del. Super. Nov.
30, 2020) (citing Moore v. Sizemore, 405 A.2d 679, 681 (Del. 1979)).
282
Id. (citing Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995)).
283
Capano v. Lockwood, 2013 WL 2724634, at *2 (Del. Super. May 31, 2013) (citing Ebersole v.
Lowengrub, 180 A.2d 467, 470 (Del. 1962)).
284
Pazuniak L. Off., LLC v. Pi-Net Int’l, Inc., 2016 WL 3916281, at *2 (Del. Super. July 7, 2016).
285
Capano, 2013 WL 2724634, at *2 (quoting Total Care Physicians, P.A. v. O’Hara, 798 A.2d
1043, 1050 (Del. Super. 2001)) (internal quotation marks omitted).
286
Radulski v. Liberty Mut. Fire Ins. Co., 2020 WL 8676027, at *4 (Del. Super. Oct. 28, 2020)
(quoting Del. Super. Ct. Civ. R. 56(h)).
287
Motors Liquid. Co. DIP Lenders Tr. v. Allianz Ins. Co., 2017 WL 2495417, at *5 (Del. Super.
June 8, 2017) (citing Comet Sys., Inc. S’holders’ Agent v. MIVA, Inc., 980 A.2d 1024, 1029 (Del.
Ch. 2008)).
42
IV. ANALYSIS
A. The Parties’ Contentions
1. JanCo’s Motion for Summary Judgment
JanCo moves for summary judgment on four of ISS’s counts: Count I (breach
of contract for failure to provide escrow instructions); Count II (unjust enrichment);
Count III (breach of the implied covenant); and Count V (declaratory judgment and
claims relating to the Holdback Amount).288
For Count I, JanCo argues that JanCo was not obligated, or even authorized,
to instruct the escrow agent to release the funds once the 120-day consent period had
passed based on the APA’s “abundantly clear” Section 6.1(d).289 Two of the
consents, the FAA and Pima County, were obtained after the 120-day deadline, and
thus, JanCo had no obligation to instruct the escrow agent.290 ISS’s reading of the
contract is incorrect because it “would require the Court to (1) entirely ignore ISS’s
contractual obligations to timely provide the consents and (2) impose a non-existent
obligation upon JanCo that ISS never bargained for.”291
JanCo asserts that ISS’s unjust enrichment claim cannot proceed because
“valid contract terms squarely govern.”292 JanCo further argues ISS cannot plead in
288
JanCo Br. 1.
289
Id. 10.
290
Id. 11.
291
Id. 12.
292
Id. 14.
43
the alternative because ISS has not alleged the APA is an invalid or unenforceable
contract.293 JanCo similarly argues the APA “language controls and leaves no gap
to fill” so ISS’s implied covenant claim must be dismissed.294 Nor did JanCo engage
in any “oppressive or underhanded tactics” that the Court could determine violated
an implied covenant.295
JanCo moves to dismiss Count V for two reasons. First, ISS has no claim to
the Holdback Amount because APA Section 2.4(b) reduces the amount by pending
claims and JanCo had pending claims so no payment was due.296 Second, ISS is not
entitled to declaratory judgment because the claim is “overripe” and “duplicative of
other claims in this litigation.”297 The Court should dismiss the claim because the
declaration is based on the “very same indemnification claims that are asserted in
JanCo’s Amended Complaint” and thus the Court will already address these issues
elsewhere.298
ISS disputes JanCo’s breach of contract argument on two main grounds. First,
ISS asserts JanCo’s “interpretation of the APA is unreasonable in light of the parties’
intent embodied in the entire agreement and in the contracts ancillary to the APA—
293
Id. 14–16.
294
Id. 16–20.
295
Id. 20–21.
296
Id. 22–23.
297
Id. 23.
298
Id. 24.
44
particularly the Escrow Agreement.”299 ISS claims that “[a]t minimum, the APA’s
silence on the disposition of consents delivered more than 120 days post-Closing
evinces an ambiguity or a contractual gap[.]”300 Second, even if the Court adopts
JanCo’s interpretation, JanCo “amended and/or waived the 120-day window.”301
ISS argues JanCo’s conduct evidences a waiver or at the very least, ISS’s affirmative
defenses of waiver, estoppel, and acquiescence should be considered fact
questions.302
ISS reinforces that its unjust enrichment and implied covenant claims are
permissible alternative claims “based on potential gaps in the parties’ contracts.”303
As to Count V, ISS argues the overlapping claims “rise and fall together.”304
JanCo’s overripeness arguments are inadequately briefed because JanCo failed to
argue the seven factors established in prior case law.305 JanCo’s duplicative
arguments are insufficient because the Court can deal with all related issues at trial
without any additional burden.306
299
ISS Opp’n 23.
300
Id. 25.
301
Id.
302
Id. 27.
303
Id. 30–36.
304
Id. 36.
305
Id. 37–38 (citing CRE Niagara Hldgs., LLC v. Resorts Grps., Inc., 2023 WL 2625838, at *8–
10 (Del. Super. Mar. 24, 2023)).
306
Id. 37–38.
45
JanCo responds that Section 6.1(d) “plainly ties the timely delivery of the
consents to who receives the escrowed funds.”307 ISS’s approach ignores ISS’s
contractual obligation to continue to use “best efforts” to obtain the consents,
irrespective of the deadline.308 JanCo notes that “only by ignoring [the best efforts
requirements] can ISS misleadingly contend” there is a gap to be filled.309 Even if
JanCo waived or amended the 120-day deadline—which JanCo disputes—the
consents were still received after the contemplated extension.310
JanCo emphasizes that dismissing “ISS’s entirely duplicative claim for a
declaratory judgment about who is entitled to the holdback will streamline and
simplify the trial.”311
2. ISS’s Motion for Summary Judgment
ISS moves for summary judgment on ISS’s Count I (breach of contract for
failure to provide escrow instructions) and Count IV (breach of contract for failure
to pay working capital adjustment and purchase price adjustments).312 ISS also
moves for summary judgment on JanCo’s Count IV (declaratory judgment); Count
V (breach of duty of good faith and fair dealing); Count VII (breach of the asset
307
JanCo Reply 4.
308
Id. 5–7.
309
Id. 7–8.
310
Id. 8–9.
311
Id. 26.
312
ISS Br. 4.
46
purchase agreement); and Count VIII (intentional interference with contractual
relations).313
Regarding Count I, ISS asserts it is entitled to the Purchase Price Adjustments
for three accounts: Ingram Micro, FAA, and Pima County.314 ISS argues it is entitled
to the Ingram Micro payment because the consent was obtained within the deadline,
and ISS is not responsible for Ingram Micro’s subsequent decision to terminate its
relationship with JanCo.315 ISS suggests Count I is tied into JanCo’s Count V
because JanCo argues ISS allegedly “knew the business was effectively lost but
withheld that information” from JanCo.316 ISS advances, however, that “the record
refutes this claim.”317
ISS argues for summary judgment of ISS’s Count I for the FAA and Pima
County consents despite missing the deadlines for two reasons. First, the APA
requires payment for any consent obtained, regardless of the deadlines, because the
alternative—JanCo obtaining the accounts without payment—“would be inequitable
and absurd.”318 Second, JanCo amended and/or waived the APA’s deadline for the
313
Id.
314
Id. 33.
315
Id.
316
Id. 33–34.
317
Id. 34–35.
318
Id. 35–36.
47
consents by signing multiple agreements to extend the deadline, and waiving the
deadline through its subsequent conduct.319
As to ISS’s Count IV, ISS asserts that ISS is entitled to the Working Capital
Adjustment pursuant to APA Section 2.5(e).320 JanCo’s attempt to avoid paying the
Working Capital Adjustment “by attempting to tie that payment to other unresolved
issues between the parties” is not supported by the APA or Delaware law. 321 ISS
similarly argues it is entitled to the tax liabilities for the LaSalle Equipment pursuant
to APA Section 3.322
ISS jointly argues that JanCo’s Counts VII and VIII fail as a matter of law,
and thus summary judgment should be granted for ISS.323 ISS contends the evidence
disputes JanCo’s allegations that ISS solicited several employees 324 and further
cannot satisfy the elements for tortious interference.325
JanCo disputes its obligation to pay the Net Working Capital adjustment
because APA Section 2.5(e) requires a final determination as to the amount first
which the parties never reached.326
319
Id. 36–38.
320
Id. 31.
321
Id. 32.
322
Id. 32–33.
323
Id. 38.
324
Id. 39–40.
325
Id. 40–41.
326
JanCo Opp’n 28–30.
48
As to the consent issues, JanCo emphasizes ISS is not entitled to the FAA and
Pima County amounts because they were obtained past the deadline.327 Ignoring the
clear language of APA Section 4.6 would “(1) entirely ignore ISS’s contractual
obligations to timely provide the consents and (2) impose a non-existence obligation
upon JanCo that ISS never bargained for.”328 To say the outcome is “absurd” or
“outrageous” ignores the fact that sophisticated parties bargained for these terms;
JanCo encourages the Court to follow Delaware’s well-established law and interpret
the contract by its plain terms.329 JanCo further argues ISS’s waiver argument
ignores the APA’s clear requirements for waiver that have not been met.330
Regarding Ingram Micro, JanCo asserts summary judgment should not be
granted for either party because there remains a fact issue about the amount owed
because JanCo did not receive all of Ingram Micro’s business.331 JanCo’s own Count
V is tied to this fact issue, challenging ISS’s alleged failure to inform JanCo about
Ingram Micro’s divestment to CEVA.332
JanCo also argues JanCo’s Count VII and VIII have remaining factual
disputes that preclude summary judgment.333 JanCo disagrees with ISS’s
327
Id. 30.
328
Id. 31.
329
Id. 32–33.
330
Id. 34.
331
Id. 34.
332
Id. 34–36.
333
Id. 37.
49
characterization of the facts as “ignor[ing] the larger context of the events,”334
improperly asking the Court to make credibility determinations,335 and failing to
acknowledge factual discrepancies.336
ISS notes that “JanCo concedes that, after additional discussions between the
parties, JanCo told ISS on November 8, 2022 that JanCo was ‘in agreement on the
amount of the NWC’ of $16.36 million” and this should end the inquiry. 337 ISS
contends that the APA’s Net Working Capital provision is stand-alone and not
implicated by other calculations or unresolved issues by the parties.338 Any alleged
disputes arose after the APA and ISS argues they should not be considered.339
Regarding Ingram Micro, ISS notes that the implied covenant of good faith is
a “cautious enterprise” and unsupported by JanCo’s claims.340 By agreeing that the
consent for Ingram Micro was obtained timely, no fact dispute exists.341 JanCo’s
allegations that ISS failed to disclose information about Ingram Micro in a timely
manner is not an implied issue because correspondence pertaining to Target
Accounts is encompassed in APA Section 5.17(b).342 As to the FAA and Pima
334
Id. 37–38.
335
Id. 38–39.
336
Id. 39.
337
ISS Reply 1–2.
338
Id. 3.
339
Id. 4–5.
340
Id. 6–7.
341
Id.
342
Id. 9.
50
County consents, ISS argues “[w]hether framed as an amendment or a waiver, the
unrebutted contemporaneous record demonstrates that the parties were in agreement
that the 120-day period did not apply[.]”343
ISS lastly argues it should obtain summary judgment on JanCo’s Count VII
and VIII because the evidence fails to support either claim and JanCo has not alleged
any harm resulting from the claims.344
B. The Consents and Entitlement to the Adjustment Amounts
1. FAA and Pima County
a. JanCo’s Motion as to ISS’s Count II, Unjust Enrichment, is
Granted.
i. The Law on Unjust Enrichment
Unjust enrichment is “the unjust retention of a benefit to the loss of another,
or the retention of money or property of another against the fundamental principles
of justice or equity and good conscience.”345 The elements are “(1) an enrichment,
(2) an impoverishment, (3) a relation between the enrichment and impoverishment,
[and] (4) the absence of justification.”346 Commonly referred to as a threshold
343
Id. 11–14.
344
Id. 15–22.
345
Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010) (quoting Fleer Corp. v. Topps Chewing
Gum, Inc., 539 A.2d 1060, 1062 (Del. 1988)) (internal quotation marks omitted).
346
Chumash Cap. Inves., LLC v. Grand Mesa P’rs, LLC, 2024 WL 1554184, at *14 (Del. Super.
Apr. 10, 2024) (quoting CFGI, LLC v. Common C Hldgs. LP, 2024 WL 325567, at *6 (Del. Super.
Jan. 29, 2024)) (internal quotation marks omitted).
51
question,347 the Court must also consider that this cause of action “is not available if
there is a contract that governs the relationship between parties that gives rise to the
unjust enrichment claim.”348 This means that “if ‘[t]he contract is the measure of
[the plaintiff’s] right, there can be no recovery under an unjust enrichment theory
independent of it.’”349
Unjust enrichment and breach of contract can be pled in the alternative only
when “there is doubt surrounding [the relevant contract’s] enforceability or
. . . existence.”350 Alternative pleading, however, “does not obviate the obligation
to provide factual support for each theory.”351 Pleading in the alternative merely as
a safe strategy is insufficient; “just because an enforceable contract may not provide
the relief a litigant wants does not mean its case is ‘not controlled by the
contract.’”352
347
See, e.g., Vichi v. Koninklijke Philips Elecs. N.V., 62 A.3d 26, 58 (Del. Ch. 2012) (citing
MetCap Secs. LLC v. Pearl Senior Care, Inc., 2007 WL 1498989, at *19 (Del. Ch. May 16, 2007)).
348
Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 891 (Del. Ch. 2009).
349
Chumash, 2024 WL 1554184, at *16 (quoting Kuroda, 971 A.2d at 891) (internal quotation
marks omitted).
350
Intermec IP Corp. v. TransCore, LP, 2021 WL 3620435, at *17 (Del. Super. Aug. 16, 2021)
(quoting Khushaim v. Tullow Inc., 2016 WL 3594752, at *8 (Del. Super. June 27, 2016)) (internal
quotation marks omitted).
351
BAE Sys. Info. & Elec. Sys. Integration, Inc. v. Lockheed Martin Corp., 2009 WL 264088, at
*8 (Del. Ch. Feb. 3, 2009).
352
Intermec IP Corp., 2021 WL 3620435, at *17) (citing S’holder Rep. Servs. LLC v. RSI Holdco,
LLC, 2019 WL 2207452, at *6 (Del. Ch. May 22, 2019)).
52
Another exception is if “it is the [contract], itself, that is the unjust
enrichment,” then the claims can proceed together.353 Stated differently, unjust
enrichment is not duplicative of a breach of contract claim “where the claim is
premised on an allegation that the contract arose from wrongdoing (such
as . . . fraud) or mistake and the [defendant] has been unjustly enriched by the
benefits flowing from the contract.”354
Despite pleading in the alternative, a plaintiff can only recover once, so if both
claims proceed to trial, the finder of fact may provide a remedy for the breach of
contract claim, and decline to award relief for an unjust enrichment claim when the
contract governs the relationship.355 When “[t]here is no benefit to be
gained . . . from delving into the alternative theories to assess how they may interact”
the unjust enrichment claim can be dismissed.356
ii. The Contract Entirely Governs the Consent Issues.
Both parties agree the APA is a valid and enforceable contract.357 ISS seeks
to avoid dismissal of its unjust enrichment claim because “the APA did not explicitly
353
LVI Grp Invs., LLC v. NCM Grp. Hldgs., LLC, 2018 WL 1559936, at *16 (Del. Ch. Mar. 28,
2018) (quoting McPadden v. Sidhu, 964 A.2d 1262, 1276 (Del. Ch. 2008)) (internal quotation
marks omitted).
354
Chumash, 2024 WL 1554184, at *16 (quoting LVI Grp. Invs., LLC, 2018 WL 1559936, at *16)
(internal quotation marks omitted).
355
See Garfield on behalf of ODP Corp., v. Allen, 277 A.3d 296, 361 (Del. Ch. 2022) (citing ID
Biomedical Corp. v. TM Techs., Inc., 1995 WL 130743, at *15 (Del. Ch. Mar. 16, 1995)).
356
Id. at 361–62.
357
JanCo Br. 14 (citing ISS Am. Compl. ¶ 76; JanCo Am. Compl., Ex. C). See also JanCo Am.
Compl. ¶ 228.
53
cover the circumstances that emerged—the 120-day post-Closing period ended, the
parties continued to work together to obtain the Unobtained Required Consents,
[ISS] later secured those consents, and [JanCo] accepted the accounts.”358 ISS
therefore does not rely on either alternative pleading exception; if ISS succeeds, it
must be because the Court finds the APA does not cover the conduct challenged.
The Court determines the APA governs the entire relationship between the
parties as it relates to the consents. Section 5.17 requires ISS to “continue to use
their commercially reasonable efforts” to obtain the consents for JanCo.359 Section
5.19 also requires the parties to “work cooperatively and in good faith” to obtain the
consents “both before and after the Closing Date.”360 Section 6.1(d) of the APA, in
extensive detail, outlines ISS’s obligation to obtain the consents before the Closing,
after Closing, and the consequences for failure to obtain such consents within the
prescribed time period.361
ISS pursuing unjust enrichment “[i]n the event the Court finds that [ISS]
cannot recover the escrow funds under the APA or the APA Amendment for breach
of contract as alleged in Count I”362 is insufficient to survive summary judgment.
ISS has failed to establish how multiple requirements of “good faith” efforts
358
ISS Opp’n 32.
359
APA § 5.17(c).
360
Id. § 5.19(a).
361
See id. § 6.1(d).
362
ISS Am. Compl. ¶ 82.
54
throughout and after Closing do not comprehensively govern the obligations ISS
may have had to continue to obtain the consents. As to this count, it is immaterial
whether the Court finds merit in the other claims surrounding the consents; the fact
that the APA outlines the procedure for obtaining consent is sufficient to encompass
the parties’ obligations. Pleading unjust enrichment as a “just in case” to ensure
recovery is not appropriate; ISS is bound to the contract terms it agreed to. JanCo’s
motion for partial summary judgment as to ISS’s Count II is therefore GRANTED.
b. JanCo’s Motion as to ISS’s Count III, Implied Covenant, is
Granted.
i. The Law on the Implied Covenant of Good Faith and Fair
Dealing
The implied covenant of good faith and fair dealing is “‘inherent in all
contracts’ and ensures that parties do not ‘frustrat[e] the fruits of the bargain’ by
acting ‘arbitrarily or unreasonably.’”363 To succeed on the claim, a plaintiff must
establish “a specific implied contractual obligation, breach of that obligation by the
defendant, and resulting damage to the plaintiff.”364 “Good faith” has been
interpreted to mean a “wide range of heterogeneous forms of bad faith.”365 The
implied covenant “requires ‘a party in a contractual relationship to refrain from
363
Baldwin v. New Wood Res. LLC, 283 A.3d 1099, 1116 (Del. 2022) (quoting Dieckman v.
Regency GP LP, 155 A.3d 358, 367 (Del. 2017)).
364
Id. at 1117–18 (quoting Sheehan v. AssuredPartners, Inc., 2020 WL 2838575, at *11 (Del. Ch.
May 29, 2020)) (internal quotation marks omitted).
365
Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 441 (Del. 2005) (internal citations
omitted).
55
arbitrary or unreasonable conduct which has the effect of preventing the other party
to the contract from receiving the fruits’ [sic] of the bargain.’”366 The purpose of the
implied covenant is to “enforce the parties’ contractual bargain by implying terms
that the parties would have agreed to during their original negotiations if they had
thought to address them.”367
The covenant, however “cannot properly be applied to give the plaintiffs
contractual protections that ‘they failed to secure for themselves at the bargaining
table.’”368 If the contract addresses the conduct challenged by the implied covenant,
then the implied covenant does not apply.369 A court thus “must first engage in the
process of contract construction to determine whether there is a gap that needs to be
filled.”370 The implied covenant cannot “infer language that contradicts a clear
exercise of an express contractual right.”371
Notably, “[n]ot all gaps should be filled.”372 The implied covenant should not
be used “for rebalancing economic interests after events that could have been
366
Kuroda, 971 A.2d at 888 (quoting Dunlap, 878 A.2d at 442).
367
ArchKey Intermediate Hldgs. Inc. v. Mona, 302 A.3d 975, 1003 (Del. Ch. 2023).
368
Winshall v. Viacom Intern., Inc., 76 A.3d 808, 816 (Del. 2013) (quoting Aspen Advisors LLC
v. United Artists Theatre Co., 861 A.2d 1251, 1260 (Del. 2004)).
369
See Nationwide Emerging Mgrs., LLC v. Northpointe Hldgs., LLC, 112 A.3d 878, 896 (Del.
2015) (citing Dunlap, 878 A.2d at 441).
370
Allen v. El Paso Pipeline GP Co., L.L.C., 113 A.3d 167, 183 (Del. Ch. 2014) (internal citations
omitted).
371
Nemec, 991 A.2d at 1127.
372
Allen, 113 A.3d at 183.
56
anticipated, but were not, that later adversely affected one party to a contract.”373
The implied covenant is referred to as a “cautious enterprise” because it “infer[s]
contractual terms to handle developments or contractual gaps that the asserting party
pleads neither party anticipated.”374 A court cannot allow the implied covenant to
“re-write the agreement between the parties, and ‘should be most chary about
implying a contractual protection when the contract could easily have been drafted
to expressly provide for it.’”375 The covenant should not serve “as a backstop to
imply terms that parties failed to include but which could easily have been
drafted.”376 The implied covenant is a “limited and extraordinary legal remedy.”377
ii. There is No Gap to be Filled in the APA or the
Amendment.
The reasoning the Court applies here mirrors that of ISS’s Count II: 378 the
APA and the Amendment entirely governs the parties’ relationship and obligations
relating to the consents. The Court declines to find any gap the implied covenant
can fill, nor does the record thus far reflect that JanCo engaged in such “oppressive
or underhanded tactics”379 that would go beyond the reasonable expectations of the
373
Cygnus Opportunity Fund, LLC v. Washington Prime Grp., LLC, 302 A.3d 430, 457 (Del. Ch.
2023) (quoting Nemec, 991 A.2d at 1128) (internal quotation marks omitted).
374
Nemec, 991 A.2d at 1125 (citing Dunlap, 878 A.2d at 441).
375
Nationwide Emerging Mgrs., 112 A.3d at 897 (quoting Allied Cap. Corp. v. GC-Sun Hldgs.,
L.P., 910 A.2d 1020, 1035 (Del. Ch. 2006)).
376
Baldwin, 283 A.3d at 1117 (citing Nationwide Emerging Mgrs., LLC, 112 A.3d at 897).
377
Glaxo Grp. Ltd. v. DRIT LP, 248 A.3d 911, 920 (Del. 2021) (quoting Nemec, 991 A.2d at 1128).
378
See supra Section IV. B. 1. a.
379
ISS Am. Compl. ¶ 90.
57
parties. ISS’s attempt to again plead, in case its breach claim fails, is not supported
by law on the implied covenant.380
The APA outlines the procedures for obtaining the consents, and how the
escrow funds are to be distributed depending on if and when the consents are
obtained by the agreed-to deadline.381 Several provisions require the parties to
engage in “good faith” or with “commercially reasonable efforts” including while
attempting to obtain the consents.382 What the parties were required to do, and how
they were supposed to do it is defined by the APA. The Amendment only reinforces
these requirements noting the parties “agree to continue to use their best efforts
following Closing to obtain such consents”383 without noting an end date for those
continued best efforts. If the parties wanted an end date, they should have contracted
for one; instead, the plain reading of the Amendment reinforces that ISS had an
obligation to continue seeking the consents, rather than JanCo “inducing” ISS to do
so.384 There is no contractual gap the implied covenant can fill; the APA and the
Amendment entirely governs the parties relationship.
380
See id. ¶ 89 (“In the event the Court finds that [ISS] cannot recover the escrow funds under the
APA or the APA Amendment for breach of contract as alleged in Count I, [JanCo has] breached
the implied covenant of good faith and fair dealing for which [ISS is] entitled to recover [its]
damages.”).
381
APA § 6.1(d).
382
See, e.g., id. §§ 5.17(c); 5.19(a); 6.1(d).
383
Amendment § 8.
384
See ISS Am. Compl. ¶ 92.
58
ISS’s argument that JanCo engaged in “oppressive or underhanded tactics” is
equally unavailing. As an initial matter, at the summary judgment stage, it is not
enough to just plead an assertion; a party must demonstrate evidence in the record
to support its claim.385 ISS disagrees with JanCo’s assertion that the record does not
establish “oppressive or underhand tactics” but provides no citation to the record to
show where such tactics can be found.386 There are approximately 200 exhibits in
the record supplied between both parties, give or take some duplicates, and several
depositions were taken for each side. If there is evidence in the record to show
JanCo’s oppressive or underhanded tactics, ISS has the burden to demonstrate them
through citation or explanation. ISS also omitted discussion of this claim at oral
argument, reinforcing that the record has not uncovered “oppressive” or
“underhanded” behavior. The Court will not go looking for evidence in the record
for ISS; inferences in favor of the non-moving party must be reasonable.387
The Court, therefore, GRANTS JanCo’s motion for summary judgment as to
ISS’s Count III. Any question as to JanCo’s conduct surrounding the consents is
covered entirely by the contract and is dealt with by the Court’s analysis below.
385
See, e.g., KT4 P’rs LLC v. Palantir Techs. Inc., 2021 WL 2823567, at *11 (Del. Super. June
24, 2021) (noting that the movant bears the initial burden to show there are no genuine issues of
material facts, then the burden shifts to the non-moving party to show there are disputed facts).
386
ISS Opp’n 35.
387
See, e.g., Lyondell Chem. Co. v. Ryan, 970 A.2d 235, 241 (Del. 2009) (“The facts, and all
reasonable inferences, must be considered in the light most favorable to the non-moving party.”)
(emphasis added) (internal citations omitted).
59
c. JanCo is entitled to the Adjustment Amounts for the FAA and
Pima County because the Consents were Untimely.
i. The Law on Contract Interpretation
Delaware law on contract interpretation is well-settled. Delaware courts apply
the objective theory of contracts, “i.e., a contract’s construction should be that which
would be understood by an objective, reasonable third party.’”388 The court, when
interpreting a contract, gives “‘priority to the parties’ intentions as reflected in the
four corners of the agreement,’ construing the agreement as a whole and giving
effect to all its provisions.”389 The court “must give effect to all terms of the
instrument, must read the instrument as a whole, and, if possible, reconcile all the
provisions of the instrument.”390 A court applies the contract’s “ordinary meaning”
such that “a reasonable person in the position of either party would have no
expectations inconsistent with the contract language.”391
When interpreting a contract, courts look at the terms “‘as a whole
and . . . give each provision and term effect, so as not to render any part of the
contract mere surplusage,’ and ‘will not read a contract to render a provision or term
388
N. Am. Leasing, Inc. v. NASDI Hldgs., LLC, 276 A.3d 463, 467 (Del. 2022) (quoting Salamone
v. Gorman, 106 A.3d 354, 367 (Del. 2014)).
389
Salamone, 106 A.3d at 368 (quoting GMG Cap. Inv., LLC v. Athenian Venture P’rs I, L.P., 36
A.3d 776, 779 (Del. 2012)).
390
ArchKey Intermediate Hldgs., 302 A.2d at 988 (quoting Elliott Assocs., L.P. v. Avatex Corp.,
715 A.2d 843, 854 (Del. 1998)) (internal quotation marks omitted).
391
GMG, 36 A.3d at 780 (quoting Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d
1228, 1232 (Del. 1997)) (internal quotation marks omitted).
60
meaningless or illusory.’”392 If the contract is “plain and clear on its face, i.e., its
language conveys an unmistakable meaning, the writing itself is the sole source for
gaining an understanding of intent.”393 Courts do not look to extrinsic evidence for
the meaning of a contract unless the text is ambiguous.394 To be ambiguous, a
provision must be “reasonably or fairly susceptible of different interpretations or
may have two or more different meanings.”395 If ambiguous, courts can look at
“overt statements and acts of the parties, the business context, prior dealings between
the parties, and business custom and usage in the industry.”396 The parties’
disagreement about the meaning of the contract “will not, alone, render the contract
ambiguous.”397
A party can waive a contractual requirement or condition, but the standards
for doing so are “quite exacting.”398 To waive a provision means to “voluntar[ily]
392
In re Shorenstein Hays-Nederlander Theatres LLC Appeals, 213 A.3d 39, 56 (Del. 2019)
(quoting Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010)).
393
ArchKey, 302 A.3d at 988 (quoting City Investing Co. Liquidating Tr. v. Cont’l Cas. Co., 624
A.2d 1191, 1198 (Del. 1993)) (internal quotation marks omitted).
394
See, e.g., Cox Commcns., Inc. v. T-Mobile US, Inc., 273 A.3d 752, 760 (Del. 2022) (citing
Exelon Generation Acqs., LLC v. Deere & Co., 176 A.3d 1262, 1267 (Del. 2017)).
395
Cox Commcns., 273 A.3d at 760 (quoting Rhone-Poulenc Basic Chems. Co. v. Am. Motorists
Ins. Co., 616 A.2d 1192, 1196 (Del. 1992)) (internal quotation marks omitted).
396
Am. Healthcare Admin. Servs., Inc. v. Aizen, 285 A.3d 461, 476 (Del. Ch. 2022) (quoting
Salamone, 106 A.3d at 374) (internal quotation marks omitted). See also In re Viking Pump, Inc.,
148 A.3d 633, 648 (Del. 2016) (citing Eagle Indus., 702 A.2d at 1233).
397
Kemp, 991 A.2d at 1160 (citing Rhone-Poulenc Basic Chem. Co., 616 A.2d at 1195).
398
See AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 444 (Del. 2005) (citing
Am. Family Mortg. Corp. v. Acierno, 640 A.2d 655 (TABLE), 1994 WL 144591, at *5 (Del.
1994)).
61
and intentional[ly] relinquish[] a known right.”399 To establish that a right has been
waived, the party must demonstrate that “(1) there is a requirement or condition to
be waived, (2) the waiving party must know of the requirement or condition, and (3)
the waiving party must intend to waive that requirement or condition.”400 “Waiver
involves ‘knowledge of all material facts and an intent to waive, together with a
willingness to refrain from enforcing those contractual rights.’” 401 A waiver must
be “clear and unequivocal.”402 The waiver can be either written or oral or “by a
course of conduct just like any other contractual provision.”403
ii. The Law on Declaratory Judgment
The Declaratory Judgment Act authorizes a court to issue a declaratory
judgment so long as there is an actual controversy between the parties.404 An “actual
controversy” has four elements:
(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
399
In re Coinmint, LLC, 261 A.3d 867, 893 (Del. Ch. 2021) (quoting AeroGlobal, 871 A.2d at
444) (internal quotation marks omitted).
400
Javice v. JP Morgan Chase Bank, N.A., 2023 WL 4561017, at *4 (Del. Ch. July 13, 2023)
(quoting AeroGlobal, 871 A.2d at 444).
401
Simon-Mills II, LLC v. Kan Am. USA XVI Ltd. P’ship, 2017 WL 1191061, at *34 (Del. Ch. Mar.
30, 2017) (quoting AeroGlobal, 871 A.2d at 444) (internal quotation marks omitted).
402
Perik v. Student Res. Ctr., LLC, 2024 WL 181848, at *4 (Del. Ch. Jan. 17, 2024) (citing Javice,
2023 WL 4561017, at *4).
403
Cont’l Ins. Co. v. Rutledge & Co., 750 A.2d 1219, 1229 (Del. Ch. 2000) (citing Pepsi-Cola
Bottling Co. of Asbury Park v. Pepsico, Inc., 297 A.2d 28, 33 (Del. 1972)).
404
XL Specialty Ins. Co. v. WMI Liquidating Tr., 93 A.3d 1208, 1216–17 (Del. 2014) (citing Stroud
v. Milliken Enters., Inc., 552 A.2d 476, 479 (Del. 1989)).
62
between parties whose interests are real and adverse; [and] (4) the issue
involved in the controversy must be ripe for judicial determination.405
Declaratory judgment is “born out of practical concerns, affording efficient
relief where a traditional remedy is otherwise unavailable.”406 Declaratory judgment
is thus a “statutory action; it is meant to provide relief in situations where a claim is
ripe but would not support an action under common-law pleading rules.”407
iii. The APA and the Amendment Support the Interpretation
that JanCo Retains the Adjustment Amounts if Not
Obtained by the Deadline.
Section 6.1(d) required ISS to obtain all the Unobtained Required Consents
within 120 days of Closing such that for all consents “obtained and delivered” by
ISS to JanCo within that period, JanCo
[S]hall authorize and instruct, jointly with [ISS], the Escrow Agent to
release and pay to Sellers out of the escrow account an amount equal to
the purchase price adjustment set forth opposite the name of each
Target Account on Schedule 2.2(f) for which an Unobtained Required
Consent is obtained and delivered during the 120-day period
immediately following the Closing Date; provided, further, that, if any
of the Unobtained Required Consents are not ultimately obtained and
delivered by [ISS] within the 120-day period following the Closing
Date, then the Escrow Agent, without further instruction from [ISS] or
[JanCo], shall release and pay to [JanCo] any amounts remaining in the
escrow account relating to the Unobtained Required Consents upon the
expiration of the 120-day period.408
405
Id. (quoting Stroud, 552 A.2d at 479–80) (internal quotation marks omitted).
406
Blue Cube Spinco LLC v. Dow Chem. Co., 2021 WL 4453460, at *13 (Del. Super. Sept. 29,
2021) (citing Schick Inc. v. Amalgamated Clothing & Textile Workers Union, 533 A.2d 1235, 1238
(Del. Ch. 1987)) (internal quotation marks omitted).
407
Great Hill Equity P’rs IV, LP v. SIG Growth Equity Fund I, LLLP, 2014 WL 6703980, at *29
(Del. Ch. Nov. 26, 2014).
408
APA § 6.1(d) (emphasis in original).
63
There is no dispute that the FAA and Pima County consents were not obtained
until after March 31, 2022—the end of the 120-day period.409 ISS asserts that despite
this, it is still entitled to the purchase price adjustments for both accounts because
the “only reasonable interpretation of the APA requires [JanCo] to pay the Potential
Adjustments for any consents that [ISS] delivered and [JanCo] accepted.”410 JanCo
disagrees, arguing that ISS’s interpretation would “require the Court to (1) entirely
ignore ISS’s contractual obligations to timely provide the consents and (2) impose a
non-existent obligation upon JanCo that ISS never bargained for.”411
The parties discuss the relevance of several Delaware cases, so the Court will
do the same.
In PR Acquisitions, LLC v. Midland Funding LLC,412 the Court of Chancery
considered obligations of an escrow agreement entered into relating to a
corresponding asset purchase agreement.413 The purchase agreement included a
repurchase provision for ineligible accounts wherein the purchaser must pay the
adjustment amount for each account being repurchased within a designated time
period subject to certain notice requirements.414 The court determined that the
escrow agreement was “express and clear” and “require[d] the release of the escrow
409
JanCo Br. 11; ISS Br. 35.
410
ISS Br. 35–36.
411
JanCo Br. 12.
412
2018 WL 2041521 (Del. Ch. Apr. 30, 2018).
413
Id. at *3.
414
Id. at *3–4.
64
funds if there is no timely claim before the expiration date[.]”415 The parties both
agreed there was no notice in compliance with the escrow agreement.416 The party
that failed to give notice attempted to argue that “the contract does not call for strict
compliance with its own terms” but the court was unconvinced.417 Noting that the
agreement was clear, and there was no dispute that the agreement’s provisions were
not met, the court applied the terms as written and granted summary judgment
against the party failing to give notice.418
In American Healthcare Administrative Services, Inc. v. Aizen,419 the Court of
Chancery also enforced the agreement terms as written and released escrow funds
as contracted.420 The court considered the plain meaning of multiple terms of a
purchase contract to find that “[a]s soon as the requirements were met” the escrow
requirements must be followed—requirements the court referred to as
“mandatory.”421
JanCo relies on these two cases as evidence that “the terms of the APA dictate
how and when the escrow funds should be released.”422 ISS argues the two cases
are “inapposite” and “[i]f anything, these decisions support [ISS] by sharpening the
415
Id. at *6.
416
Id.
417
Id. at *7.
418
Id.
419
285 A.3d 461 (Del. Ch. 2022).
420
Id. at 476–77.
421
Id. at 477–78.
422
JanCo Br. 13.
65
contrast between the operative agreements[.]”423 While the Court acknowledges
every contract is unique the Court will apply the contract based on its ordinary
meaning.424
The fact that the parties may disagree on the reasonable interpretation of the
contract does not render the contract ambiguous.425 The APA in this case is not
ambiguous: it requires release of the adjustment amounts to ISS if they are obtained
within the 120-day deadline; otherwise, JanCo is entitled to the remaining escrow
funds. ISS’s “third scenario”—that ISS is entitled to the adjustment amounts no
matter when the consents are obtained—is not based on the language of Section
6.1(d).
ISS argues it is “inequitable and absurd” for JanCo to be able to obtain the
consents, and keep the adjustment amounts, just because ISS failed to meet the
deadline.426 ISS, however, fails to explain why there is a deadline at all if ISS can
always obtain the adjustment amounts, even if it fails to meet the deadline. To
interpret the APA in this way would be to either render the deadline itself
superfluous, or ISS’s obligations to “continue to use their commercially reasonable
efforts to deliver”427 the consents, and to “work cooperatively and in good faith to
423
ISS Opp’n 29–30.
424
See JanCo Reply 12–13.
425
See, e.g., Manti Hldgs., LLC v. Authentix Acq. Co., 261 A.3d 1199, 1208 (Del. 2021) (citing
Osborn, 991 A.2d at 1160).
426
ISS Opp’n 24.
427
APA § 5.17(c).
66
obtain the Required Consents[.]”428 It is not a reasonable interpretation to render
certain portions of a contract meaningless;429 therefore, the Court cannot reasonably
adopt ISS’s argument that it was indefinitely entitled to an adjustment amount if a
consent ever was obtained. It is also a matter of common sense that the parties would
agree to an incentive to obtain the consents, such that it would be mutually beneficial
for both parties: JanCo gets the contracts sooner, and ISS gets its adjustment amount.
The alternative would require JanCo to always be prepared to return the adjustment
amount, indefinitely, no matter how long it took for the consents to be obtained. The
Court considers this alternative “absurd” and declines to adopt it.
ISS also attempts to direct the Court to the Escrow Agreement as evidence of
the parties’ intent,430 but such an argument is irrelevant unless the APA is
ambiguous. Courts only look to external evidence to resolve ambiguous terms431—
which is not the case here—so the Escrow Agreement cannot instruct the Court’s
analysis. The terms of the APA are clear that adjustment amounts are paid to ISS
when the consents are obtained within the contractually agreed deadline. There is
428
Id. § 5.19(a).
429
See, e.g., In Re Shorenstein Hays-Nederlander Theatres LLC Appeals, 213 A.3d at 56 (citing
Osborn, 991 A.3d at 1159).
430
ISS Opp’n 24–25.
431
See, e.g., Holifield v. XRI Invs. Hldgs. LLC, 304 A.3d 896, 924 (Del. 2023) (quoting City
Investing Co, 624 A.2d at 1198) (“If a writing is plain and clear on its face, i.e., its language
conveys an unmistakable meaning, the writing itself is the sole source for gaining an understanding
of intent.”) (internal quotation marks omitted).
67
no dispute that the consents were obtained after the deadline, and therefore the Court
must reinforce the terms of the contract and find in favor of JanCo.
iv. JanCo did not Amend or Waive the Consent Deadlines.
As an alternative road to recovery, ISS attempts to argue that JanCo amended
or waived the consent deadlines for the FAA and Pima County consents, and
therefore ISS is entitled to the adjustment amounts.432
As to an amendment to the deadlines, the APA is clear: “No amendment of
any provision of this Agreement shall be valid unless the same shall be in writing
and signed by [JanCo] and [ISS].”433 There is no dispute of fact—both parties never
signed an amendment to the deadlines for the FAA or Pima County consents.434 The
Court therefore declines to re-write the plain terms of the APA and find that any
amendment was otherwise made.
As to waiver, there is no dispute the first two elements for waiver under the
law435—there is a condition capable of being waived, and the waiving party knows
432
See, e.g., ISS Opp’n 25–27.
433
APA § 9.13.
434
See, e.g., ISS Opp’n 25–30 (arguing for a waiver, but failing to substantively argue an
amendment was signed by both parties); JanCo Opp’n 34. ISS’s argument that the parties signed
a novation agreement for the assignment of the FAA contract form ISS to JanCo is insufficient.
ISS Reply 14. ISS fails to explain how signing this agreement alone constituted an extension to
the deadlines. See JanCo Opp’n 34.
435
The APA also requires “No waiver by any Party of any provision of this Agreement or any
default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or
not, shall be valid unless the same shall be in writing and signed by the Party making such
waiver . . . .” APA § 9.13. The Court notes that a waiver may also occur orally or through course
of conduct, so despite no signed waiver, the Court considers ISS’s waiver arguments. See ISS
Reply 12 (citing Pepsi-Cola Bottling Co. of Asbury Park, 297 A.2d at 33).
68
of that condition—are satisfied in favor of ISS. ISS, however, fails as to the third
element: ISS cannot demonstrate that “the waiving party intends to waive that
condition.”436 As its primary evidence, ISS cites a JanCo executive’s email wherein
he stated, “Our intent is clear to extend the relevant deadlines.”437 ISS also cites
several examples of JanCo’s “course of conduct,” including that JanCo released the
adjustment amount for Capital Tower, another consent that was obtained outside of
the deadline without a signed amendment allowing an extension.438
The fatal flaw in ISS’s waiver argument, however, is that even if the Court
credits that all the correspondence between the parties about potentially extending
the deadlines indicated a waiver, that waiver was always intended to only be an
additional sixty days.439 Both the FAA and Pima County consents were obtained
beyond this additional sixty day period.440 The Capital Tower consent, on the other
hand, was obtained within that potential sixty day extended deadline.441 Even if the
Court finds that JanCo did waive the deadline for sixty days, ISS still failed to meet
the extension. The Court, therefore, GRANTS JanCo’s motion and DENIES ISS’s
motion as to ISS’s entitlement to the FAA and Pima County Adjustment Amounts.
436
See ISS Opp’n 25–26.
437
ISS Br. 37 (citing Tunney Aff. Ex. 46, at JANCO-00139422).
438
ISS Opp’n 26–27 (citing Xu Aff. Exs. 114–116).
439
See, e.g., JanCo Reply 9–10 (citing Masi Exs. H, K).
440
Id.
441
Id.
69
2. Ingram Micro
a. JanCo’s Count V, the Implied Covenant Claim, is Dismissed.
Both parties brief JanCo’s Count V (breach of the implied covenant) in
conjunction with ISS’s Count I (breach of contract), arguing that each should be
found in their own favor. For the same reasons that the Court grants JanCo’s motion
as to ISS’s Count III claim for breach of the implied covenant, the Court grants ISS’s
motion to JanCo’s Count V claim for breach of the implied covenant. The Court
will delve further into the Ingram Micro consent issue below,442 but notes for the
purposes of this section, that despite dismissing JanCo’s implied covenant claim,
JanCo may still assert its arguments as to why ISS is not entitled to the Adjustment
Amount in the context of the contractual obligations.
The APA and the Amendment entirely govern the requirements to obtain the
consents, turn over the escrow amounts in concurrence with obtaining the consents,
and to share information as part of that process. Section 4.22 of the APA explicitly
states that “[s]ince December 31, 2020, no Target Account that is a party to a
Material Contract has terminated such Material Contract or has threatened to do
so . . . .”443 Section 5.17 obligates ISS to forward any “payment, correspondence or
other materials pertaining to the Target Accounts” to JanCo that are received from a
442
See infra Section IV. B. 2. b.
443
APA § 4.22.
70
third party.444 Section 5.19(a) requires ISS to “undertake commercially reasonable
efforts to include [JanCo] in discussions with the Target Accounts related to
obtaining the foregoing consents . . . .”445
JanCo asserts the implied claim should proceed for “ISS’s failure to inform
JanCo that a looming divestiture by Ingram Micro would cut the amount of business
it received from Ingram Micro in half.”446 Even if the Court agrees that ISS did fail
to inform JanCo about this divestiture, the APA’s aforementioned Sections provide
the authority wherein ISS would have a contractual obligation to do so—there is no
gap that needs to be filled. The escrow amount relating to Ingram Micro is an issue
embedded in breach of contract allegations. Therefore, ISS’s motion for summary
judgment is GRANTED as to JanCo’s Count V.
b. All Remaining Issues Relating to the Ingram Micro Consent will
Proceed to Trial.
It is undisputed that ISS obtained the consent from Ingram Micro on January
30, 2022, within the 120-day window to obtain the deadline pursuant to APA §
6.1(d).447 As discussed in the previous section, JanCo argues that despite obtaining
the consent from ISS for the Ingram Micro account, there is a remaining fact dispute
about the total amount ISS is entitled to recover.448 By failing to inform JanCo of
444
Id. § 5.17(b).
445
Id. § 5.19(a).
446
JanCo Opp’n 35.
447
ISS Br. 33; JanCo Opp’n 34–35.
448
JanCo Opp’n 34–35.
71
the impending divesture of Ingram Micro to CEVA, JanCo alleges, ISS breached
disclosure obligations. Furthermore, ISS’s past service issues prevented JanCo from
obtaining all the Ingram Micro assets JanCo was entitled to. 449 ISS disputes these
allegations, stating “JanCo cites no credible evidence to supports its novel theory
that ISS knew about the impending divestiture of half of Ingram Micro’s business
months before the APA closed.”450 Similarly, ISS asserts, “the record is squarely to
the contrary” that ISS failed to uphold its APA requirements to disclose materials to
JanCo.451
The Court declines to consider the “credibility” of the evidence JanCo relies
on at the summary judgment stage. Inferring all reasonable inferences in JanCo’s
favor, there is a possibility that reasonable minds could differ based on the record
established as to whether or not ISS adequately abided by APA Sections 4.22, 5.17,
and 5.19. Pitcock is involved in many of the disputes pending before the Court.
Pitcock’s role working with Ingram Micro to obtain the consents, signing the
Novation Agreement for Ingram Micro and CEVA, and how he represented his role
to his employer and related third parties, is relevant to determine when ISS was
aware of the divestment, and when JanCo was notified. Further, Pitcock testified
449
Id. 35–36.
450
ISS Reply 7 (emphasis added).
451
Id. at 9.
72
that he spoke with a JanCo Executive before signing the Novation Agreement, which
contradicts JanCo’s characterization of when it learned of the divestment.452
JanCo further argues that ISS “was mismanaging Ingram Micro’s remaining
business” creating a “poor-performance backdrop” for JanCo to “approach CEVA
about retaining services.”453 Coinciding with the disputes surrounding the Net
Working Capital,454 ISS stated it would be “willing to discuss a compromise on
Ingram Micro.”455 Whether or not JanCo will be able to conform its various
criticisms of ISS’s dealings with Ingram Micro and CEVA into a breach of the
aforementioned Sections of the APA or not, is a question better reserved for
determination in light of the entire factual record, when the Court can determine the
credibility of evidence and the entire context of what correspondence was provided,
and what role the sender was serving when sent. Therefore, ISS’s motion as to ISS’s
Count I is DENIED; both parties will be able to present evidence on the Ingram
Micro issue at trial.
452
Compare Masi Aff. Ex. A, at 438:15–439:24 (noting that Pitcock spoke to John Maynard before
“approving of the transfer of the Ingram Micro to CEVA”), with Xu Aff. Ex. 124, at JANCO-
00197547 (showing that Pitcock shared the Novation Agreement with JanCo “for possible
inspiration on the revision”). JanCo asserts that Pitcock’s forward of the Novation Agreement
did not contain a signed copy, only a blank copy “to show how other firms were handling their
own collection of consents.” JanCo Opp’n 17.
453
JanCo Opp’n 17–18.
454
See infra Section IV. D.
455
Tunney Aff. Ex. 97, at JANCO-00118849.
73
C. The Holdback Amount
1. Declaratory Judgment Law on Duplicative Claims and Overripeness
“The decision to entertain an action for declaratory judgment is discretionary
with the trial court.”456 A declaratory judgment claim that mirrors a common law
claim cannot proceed because the two are duplicative.457 A claim is duplicative if
the issues will “necessarily [] be decided, positively or negatively, in the resolution
of” the other claim.458 It follows then, that “a declaratory count must be ‘distinct’
from the affirmative counts in the complaint such that a decision on the affirmative
counts would not resolve the declaratory count.”459 Avoiding duplicative counts
promotes the “efficiency-based rationale animating declaratory judgment
jurisdiction.”460 A court can decline to issue declaratory judgment where such a
claim would “not advance the litigation, but rather, would waste judicial
resources.”461
456
Burris v. Cross, 583 A.2d 1364, 1372 (Del. Super. 1990) (internal citations omitted).
457
See id. at 1372–76 (dismissing a declaratory count where plaintiffs sought common-law and
equitable affirmative remedies, in contract, tort, and equity).
458
See Intermec IP Corp., 2021 WL 3620435, at *25.
459
Blue Cube Spinco LLC, 2021 WL 4453460, at *15.
460
Id. (citing IDT Corp. v. U.S. Specialty Ins. Co., 2019 WL 413692, at *15 (Del. Super. Jan. 31,
2019)).
461
Intermec IP Corp., 2021 WL 3620435, at *25 (citing Stroud, 552 A.2d at 480).
74
“Overripeness”—a rarely used challenge in Delaware courts462—also
implicates the court’s “limited judicial resources.”463 Where “the mere existence of
another remedy does not require dismissal, it can constitute sufficient grounds for
dismissal in the Court’s discretion.”464 The Superior Court outlined seven factors to
consider when determining whether a given claim is overripe and should be
dismissed.465 All courts, however, have not applied the seven factor analysis,
462
See CRE Niagara Hldgs., 2023 WL 2625838, at *8 (“As an initial matter, the term ‘overripe’
as used in this context appears in only 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.”).
463
Burris, 583 A.2d at 1372 (noting that overripeness is the opposition to a “typical declaratory
judgment action, [where] an unwilling litigant will have cast a cloud upon a property right (or other
legal interest) of the declaratory plaintiff, but will not have moved forward to litigate the claim.”)
(internal citations omitted) (emphasis in original).
464
Id. at 1376 (dismissing a case in Superior where the action in the Court of Chancery “appears
to be not only ‘equally serviceable,’ but indeed superior to the remedy available in this Court.”).
465
Id. at 1372 (considering “if the plaintiff cannot show good reason why the conventional action
pending in Chancery should be avoided in favor of this declaratory judgment action, then in my
opinion use of this type of action may be inappropriate and, in the sound discretion of the Court,
jurisdiction may be declined”).
In considering the appropriateness of a declaratory judgment action under the facts
and circumstances of this case, I believe that I should consider the following
factors:
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, 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.
75
“[w]here non-declaratory claims are pending in another court, the declaratory
version of those same claims are overripe and risk the unnecessary burdening of the
court’s resources and the possibility of inconsistent factual and legal findings
between the courts.”466 The factors have since been relied on in cases where the
same claims are being asserted in another court around a similar time.467
2. The Court Exercises its Discretion to Decline to Dismiss ISS’s Count
V.
JanCo seeks dismissal because ISS’s declaratory judgment claim is (1)
overripe and (2) duplicative of other claims.468 JanCo acknowledges that issuing a
declaratory judgment is within the discretion of the trial court.469 While the Court
agrees that JanCo’s indemnification claims resemble the same issues in ISS’s
declaratory judgment, the Court declines to find that there is any judicial efficiency
achieved by dismissing one claim from one party, in favor of another claim for
another party, when a trial will resolve all claims at once. The Court agrees with
ISS that the claims “will rise and fall together.”470
6. Whether the instant action was filed in an apparent anticipation of other
pending proceedings.
7. Whether plaintiff will suffer any prejudice if the instant action is dismissed.
Id. at 1372–73.
466
Markusic v. Blum, 2021 WL 2456637, at *5 (Del. Ch. June 16, 2021) (declining to provide
declaratory relief, where non-declaratory relief was already sought in a California court).
467
See CRE Niagara Hldgs., 2023 WL 2625838, at *9 (“While Markusic was recently affirmed
by the Delaware Supreme Court, the Court here would be remiss if it rested its decision on
Markusic without engaging in the Burris analysis.”).
468
JanCo Br. 23.
469
Id.470
ISS Opp’n 36.
76
If the claims are duplicative to the extent JanCo suggests, there is no additional
burden on the Court, nor any additional burden on the parties to present evidence, if
both claims proceed to trial concurrently. This is especially true where neither party
has sought summary judgment on JanCo’s indemnification claim. Regardless of the
Court’s decision as to ISS’s Count V, the Court will still have to resolve the
underlying indemnification issues based on ISS’s unchallenged claims. JanCo’s
assertion that this point actually supports JanCo471 is misplaced. It would be a
different question if the Court were to choose to grant a summary judgment motion
in JanCo’s favor as to indemnification, then refuse to dismiss this mirrored count—
judicial resources to resolve an issue at trial, already resolved at summary judgment
would then undoubtedly be implicated.
JanCo chooses not to respond to ISS’s assertion that JanCo failed to
sufficiently brief the “overripeness” issue other than a statement that “JanCo’s
response brief appropriately presents the issues for the Court’s consideration,
invoking multiple authorities and explaining why this Court has discretion to dismiss
the declaratory relief sought given the other claims in this case.”472 JanCo only
meaningfully responds to ISS arguments as to duplicative claims, rather than
overripeness. JanCo also fails to explain why opposing claims as to the same issues
471
JanCo Reply 26.
472
Id. 25–26.
77
would make trial any more complex. The Court will therefore consider the
overripeness argument likely waived by JanCo.473
For completeness, however, the Court notes the significant difference between
this case and previous cases dismissing on overripeness grounds: the overripe claims
in this case are all within the pending action, not concurrently proceeding in another
action in another court.474 The judicial inefficiency of two courts handling similar
or the same claims is clear; there is no similar judicial inefficiency before this Court
where both claims appear before the same Judge, and will be determined in the same
trial. The Court, thus, declines to determine whether consideration of Burris’s seven
factors is necessary because there are no other courts currently managing these
issues. The Court, therefore, exercises its discretion over declaratory judgment
claims and DENIES JanCo’s partial motion for summary judgment as to ISS’s
Count IV.
473
See Emerald P’rs, 726 A.2d at 1224.
474
See, e.g., CRE Niagara Hldgs., 2023 WL 2625838, at *10 (noting defendant was pursuing
claims in New York, filed one day after the claims plaintiff filed in the Superior Court); E.I.
DuPont de Nemours & Co. v. Huttig Bldg. Prods., 2002 WL 32072447, at *4 (Del. Super. May
28, 2002) (analyzing Burris where there was a pending action in California filed one month after
the action filed in Delaware); Sec. Nat’l Mortg. Co. v. Lehman Bro’s Hldgs, Inc., 2016 WL
6396343, at *7–8 (Del. Super. Aug. 24, 2016) (dismissing as overripe an action where Delaware
Bankruptcy Court had already been dealing with the issues between the parties for several years).
78
D. The Net Working Capital Dispute and the LaSalle Payments
1. The Contracts and the Law on Summary Judgment Discretion
APA Section 2.5 governs the Net Working Capital Adjustment stating:
If the Actual Closing Date Working Capital, as finally determined
pursuant to this Section 2.5, is greater than the NWC Target by more
than $100,000.00 then [JanCo] shall pay to [ISS], as an adjustment to
the Purchase Price, the amount by which (A) Actual Closing Date
Working Capital exceeds (B) the NWC Target plus $100,000.00, paid
in accordance with Section 2.5(f). If the Actual Closing Date Working
Capital, as finally determined pursuant to this Section 2.5, is more than
$100,000.00 less than the NWC Target, then [ISS] shall pay to [JanCo],
as an adjustment to the Purchase Price, the amount by which (C) Actual
Closing Date Working Capital is less than (D) the NWC Target minus
$100,000.00, paid in accordance with Section 2.5(f).475
The APA Amendment provided that the “Parties further acknowledge and
agree that the Purchase Price is hereby increased by the amount of the LaSalle
Equipment Cost, and that at the Closing, [JanCo] shall pay to [ISS] additional
consideration equal to the LaSalle Equipment Cost[.]”476
“There is no ‘right’ to a summary judgment[;]” a trial court has discretion and
is “entitled to a high level of deference.”477 Further, “[s]ummary judgment is a harsh
remedy that affects a party’s substantive rights” so it “must be cautiously invoked,
and is not a mechanism for resolving contested issues of fact.”478 A court “shall not
475
APA § 2.5(e) (emphasis in original).
476
Amendment § 3.
477
Empire Fin. Servs., Inc. v. Bank of New York (Delaware), 900 A.2d 92, 97 (Del. 2006) (internal
quotation marks omitted).
478
GMG, 36 A.3d at 783 (citing Williams v. Geier, 671 A.2d 1368, 1389 (Del. 1996)).
79
weigh the evidence or resolve conflicts presented by pretrial discovery.” 479 The
Supreme Court of Delaware “consider[s] it an exercise of ‘good judicial
administration [for a trial court] to withhold decision . . . until [the record] present[s]
a more solid basis of findings based on litigation or on a comprehensive statement
of agreed facts.’”480
2. The LaSalle Tax Payment is Embedded in the Net Working Capital
Dispute that Presents Fact Issues Better Reserved for Trial.
ISS plead its Count IV, breach of contract claim, to encompass both the Net
Working Capital amount and the LaSalle Tax Payment (pled as the “Purchase Price
Adjustments”), but then briefed the issues separately in its motion for summary
judgment in favor of its own Count IV. ISS argues the parties “finally determined”
the Net Working Capital amount, and therefore unambiguous Section 2.5 requires
payment be made regardless of another other unresolved disputes.481 ISS then
argues it is entitled to the LaSalle amount because Section 3 of the Amendment is
similarly unambiguous and JanCo did not dispute the amount.482
JanCo does not dispute a general obligation to pay the LaSalle tax payments,
but notes that it has not paid yet because the amount is “interlinked” with
479
AeroGlobal, 871 A.2d at 444 (Del. 2005) (citing Telxon Corp. v. Meyerson, 802 A.2d 257, 262
(Del. 2002)).
480
Id. (quoting Kennedy v. Silas Mason Co., 334 U.S. 249, 257 (1948)).
481
ISS Br. 31–32.
482
Id. at 32–33.
80
outstanding issues, including the Net Working Capital calculation.483 Noting that
the Net Working Capital amount was not actually “finally determined” as required
by Section 2.5, JanCo is not yet obligated to pay the amount while the parties
continue to work to resolve their disputes.484 JanCo instead argues fact disputes
remain, especially considering JanCo has asserted claims for fraud and breach,
which challenge the information ISS provided to represent the “financial condition
of the Company.”485
The Court cannot ignore that ISS asserted both the LaSalle payment and the
Net Working Capital amount in the same count. While not dispositive, it appears
to the Court that ISS is seeking to have its cake and eat it too. ISS considered the
claims related enough to plead them together, but now seeks to differentiate them
in summary judgment, but still plead the same argument: the contract is
unambiguous, so JanCo should pay. JanCo may in fact be required to pay these
amounts, and to some extent JanCo acknowledges that it may be the one owing an
amount at the resolution of the factual issues. This concession alone is insufficient
to grant summary judgment when there are remaining factual issues as to what the
final payment should be. The Court acknowledges the LaSalle amount appears to
be undisputed, and is not subject to other calculations to the same extent the Net
483
JanCo Opp’n 19 (citing Xu Aff. Ex. 114, at JANCO-00163465).
484
Id. at 28.
485
Id. at 30.
81
Working Capital amount is. These amounts, however, are all related to the Closing
payments as agreed to by the parties, and the Court sees no reason to issue a
piecemeal decision on a part of a count at this point.
The Court sees each party as selecting quotes from exhibits that can be read
in isolation to support their position: ISS arguing a final determination was made;
JanCo arguing one was not. It is undeniable that JanCo made statements that
suggested some level of agreement with ISS’s calculations, but those statements
were all qualified, rather than an absolute “yes” or “we agree.”486 The Court finds
this raises a sufficient factual dispute to preclude summary judgment at this time.
It is entirely reasonable for disputing parties to concede to certain things as a
negotiating tactic while working to solve other issues, and have that original
concession be contingent on later resolutions—a possibility that is not unreasonable
here. There are two reasonable interpretations of the various exhibits detailing the
parties’ correspondence on the Net Working Capital amounts such that it should be
left to a fact finder to determine after trial.
In addition, it is not lost on the Court that JanCo has sought other claims not
raised in this motion, including fraud, wherein JanCo challenges the ways in which
486
See, e.g., Tunney Aff. Ex. 74, at JANCO-00198571 (“We are in agreement on the amount of
the NWC . . . subject to coming to agreement on all of the other issues resolved to our
satisfaction.”).
82
ISS represented the business, and may have inflated the assets’ value.487 JanCo’s
Count I is not raised by either summary judgment motion, and the Court makes no
determination as to the potential success JanCo may have on such claim, but the
Court disagrees with ISS’s assessment that such a distrust is “meritless” because
only one exhibit has been relied on to assert it.488 If there is any merit that the
financials provided to JanCo were incorrect, then JanCo may be able to establish
that the amounts used in the Net Working Capital calculation are inaccurate as well.
The Court, in its discretion, defers ruling on the Net Working Capital amount until
all factual issues are presented and developed at trial.
E. The Employee Disputes
1. The Covenant Not to Solicit
Section 5.5 of the APA restricts ISS “for a period of three (3) years from and
after the Closing Date” from “directly or indirectly” “solicit[ing] employment with
[ISS] any person employed by [ISS] as of the Closing Date who is hired by [JanCo]
and who provides services to the Target Accounts (other than through general
solicitations which are not directed to specific individuals or companies).”489
“Solicit” is not a defined term in the APA or the Amendment.490 When a term in a
487
See JanCo Am. Compl. ¶¶ 207–26.
488
ISS Reply 5 (referring to Xu Aff. Ex. 115).
489
APA § 5.5(b).
490
See generally APA; Amendment.
83
contract is not defined, it is given its “ordinary meaning.”491 “Solicit” therefore
means, among other definitions, “to make petition to,” “to approach with a request
or plea,” “to urge (something, such as one’s cause) strongly,” “to entice or lure
especially into evil,” “to proposition (someone) especially as or in the character of a
prostitute,” or “to try to obtain by usually urgent requests or pleas.”492
2. The Law on Intentional Interference with Contractual Relations
To allege a claim for intentional interference with contractual relations, a party
must establish: “(1) the reasonable probability of a business opportunity, (2) the
intentional inference by defendant with the opportunity, (3) proximate causation,
and (4) damages, all of which must be considered in light of defendant’s privilege
to compete or protect his business interests in a fair and lawful manner.” 493 To
establish the first element, the plaintiff “must identify a specific party who was
491
See, e.g., Navient Sols., LLC v. BPG Off. P’rs XIII Iron Hill LLC, 315 A.3d 1164, 1173 (Del.
Super. 2024) (citing Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del. 2006))
(relying on Merriam-Webster to define undefined terms in a contract). See also Stream TV
Networks, Inc. v. SeeCubic, Inc., 279 A.3d 323, 339 (Del. 2022) (quoting In re Solera Ins.
Coverage Appeals, 240 A.3d 1121, 1132 (Del. 2020) (internal quotation marks omitted) (“Words
or phrases used . . . are to be given their commonly accepted meaning, and this Court ‘often looks
to dictionaries to ascertain a term’s plain meaning.’”) (relying on Black’s Law Dictionary,
Merriam-Webster, Cambridge Dictionary, and others).
492
Solicit, MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/solicit (last visited
Aug. 28, 2024). The Court does not consider this an exhaustive list of definitions of “solicit,” but
instead cites these as examples.
493
Halpern v. Maschauer, 2013 WL 5755467, at *1 (Del. Super. Oct. 16, 2013) (citing
DeBonaventura v. Nationwide Mut. Ins. Co., 419 A.2d 942, 947 (Del. Ch. 1980)).
84
prepared to entered [sic] into a business relationship but was dissuaded from doing
so by the defendant and cannot rely on generalized allegations of harm.”494
Courts have emphasized that “the adjective ‘improper’ is critical” because
“[f]or participants in a competitive capitalist economy, some types of intentional
interference with contractual relations are a legitimate part of doing business.”495
Delaware relies on the Second Restatement of Torts to determine “if intentional
interference with another’s contract is improper or without justification.”496 The
factors to consider include:
(a) the nature of the actor’s conduct,
(b) the actor’s motive,
(c) the interests of the other with which the actor’s conduct interferes,
(d) the interest sought to be advanced by the actor,
(e) the social interests in protecting the freedom of action of the actor
and the contractual interests of the other,
(f) the proximity or remoteness of the actor’s conduct to the interference
and
(g) the relations between the parties.497
494
Organovo Hldgs., Inc. v. Dimitrov, 162 A.3d 102, 122 (Del. Ch. 2017) (quoting Agilent Techs.,
Inc. v. Kirkland, 2009 WL 119865, at *7 (Del. Ch. Jan. 20, 2009)).
495
New Enters. Assocs. 14, L.P. v. Rich, 292 A.3d 112, 142 (Del. Ch. 2023) (quoting NAMA Hldgs.,
LLC v. Related WMC LLC, 2014 WL 6436647, at *26 (Del. Ch. Nov. 17, 2014)) (internal quotation
marks omitted).
496
WaveDivision Hldgs., LLC v. Highland Cap. Mgmt., L.P., 49 A.3d 1168, 1174 (Del. 2012)
(citing Restatement (Second) of Torts § 767 (1979)).
497
Id. (quoting Restatement (Second) of Torts § 767 (1979)).
85
Analyzing if there has been an intentional interference is thus a “fact-specific inquiry
to determine whether the interference with contract is improper under the particular
circumstances of the case.”498
3. Fact Issues Remain that Preclude Summary Judgment for Both
Counts.
Both parties agree that Pitcock, Bartlett, and Rivas are implicated by the
APA’s Covenant Not to Solicit and may be relevant to an analysis of intentional
interference with contract relations.499 ISS, however, argues that JanCo has failed
to satisfy its burden to present evidence in support of either claim as it relates to any
of the three employees.500 JanCo counters that there are genuine issues of material
fact remaining to be resolved, and these issues are better reserved for trial.501 The
Court agrees with JanCo.
The Court takes note of ISS’s allegations, and expresses some skepticism
given the record presented in briefing, but nonetheless, highlights that both claims
are factual-intensive inquiries which are not appropriate at the summary judgment
stage.502 Summary judgment is not the time to judge the credibility of potential
498
New Enters. Assocs. 14, L.P., 292 A.3d at 142.
499
See, e.g., ISS Br. 38–41; JanCo Opp’n 37–40. Both sides brief these counts together, so the
Court similarly sees no reason to separate the analysis of the motions as to the related claims.
500
ISS Br. 38–41; ISS Reply 15–22.
501
JanCo Opp’n 37–40.
502
See, e.g., Wilm. Tr., Nat’l Ass’n v. Sun Life Assurance Co. of Canada, 294 A.3d 1062, 1071
(Del. 2023) (“If material issues of fact exist or if a court determines that it does not have sufficient
facts to enable it to apply the law to the facts before it, then summary judgment is inappropriate.”)
(internal quotation marks omitted).
86
witnesses503 nor to decide circumstantial conclusions based on several pieces of
independent evidence.504 Further, “[w]here the inference or ultimate fact to be
established concerns intent or other subjective reaction, summary judgment is
ordinarily inappropriate.”505 ISS asks the Court to conclude that the testimony of
the involved persons—Pitcock, Bartlett, and Rivas—as well as documents including
email correspondence and resignation letters preclude a finding on either count. As
an initial matter, given all three individuals currently are employed with ISS, there
is a credibility issue as to whether or not their characterization of the facts is the only
reasonable interpretation.
JanCo has suggested that Bartlett has been found “not credible” in prior
litigation.506 This Court, by denying summary judgment, does not make a finding
that these three individuals are not credible, only that it is more appropriate for the
finder of fact to make that determination at trial based on depositions, documents in
the record, and testimony at trial. The Court also notes that the circumstances
503
See, e.g., Allen, 113 A.3d at 177 (internal quotation marks omitted) (“If the matter depends to
any material extent upon a determination of credibility, summary judgment is inappropriate.”);
Nationwide Gen. Ins. Co. v. Mendes, 2007 WL 1748651, at *2 (Del. Super. May 31, 2007)
(denying summary judgment where facts relied on the credibility of particular witnesses).
504
See, e.g., Smith v. Del. State Univ., 47 A.3d 472, 478 (Del. 2012) (“In deciding a motion for
summary judgment, courts are permitted to consider that the plaintiff’s testimony is self-
contradictory and unsupported by other evidence, such that no rational juror could find in the
plaintiff’s favor.”); Burris v. Penn Mart Supermarkets, Inc., 2006 WL 2329373, at *2 (Del. Super.
July 13, 2006) (noting that conflicting testimony can create an issue of fact).
505
AeroGlobal Cap. Mgmt., 871 A.2d at 446 (citing George v. Frank A. Robino, Inc., 334 A.2d
223, 224 (Del. 1975)).
506
JanCo Opp’n 38–39.
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surrounding Pitcock’s termination are disputed, such that JanCo asserts Pitcock may
have sabotaged his own employment at JanCo with intentions of returning to ISS.507
The record as to Rivas is less developed than for Pitcock or Bartlett, but the fact that
Rivas indicated in his resignation to JanCo that he left for another offer,508 leaves the
open question for the fact-finder whether the other offer was from ISS, or somewhere
else—a key distinction when determining the two counts at issue.
Arguments about what conclusion can be drawn from all three employees
leaving JanCo off their LinkedIn profiles is a question for the fact finder—at best it
is circumstantial evidence, but even the appropriate conclusion to be drawn is
unclear. Only Bartlett addresses that choice;509 the Court is left to guess the other
two’s reasoning based on the record presented.
All of these facts, among others, indicate that there are remaining issues of
fact where a fact finder could find for either side. The Court, therefore, DENIES
ISS’s motion for summary judgment as to JanCo’s Counts VII and VIII. The factual
issues, and conclusions that can be drawn from the evidence, are best reserved for
trial.
507
Id. at 37–38. See, e.g., Xu Aff. Ex. 126, at 223:5–19.
508
See Xu Aff. Ex. 161.
509
Masi Aff. Ex. C, 27:6–7 (“Because I do not want to be associated with those crooks.”).
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V. CONCLUSION
In conclusion, ISS’s Motion for Summary Judgment is GRANTED in part,
and DENIED in part, and JanCo’s Motion for Summary Judgment is GRANTED
in part, and DENIED in part. More specifically, the Court herein dismisses JanCo’s
Count V and ISS’s Counts I, II, and III. The Court GRANTS summary judgment
for JanCo as to JanCo’s Count IV relating to the FAA and Pima County consents.
JanCo’s Counts VII and VIII, and ISS’s Counts IV and V all survive summary
judgment. JanCo’s Counts I, II, III, and VI also proceed unchallenged by the
summary judgment motions.
IT IS SO ORDERED.
89