Beautycon Media ABC Trust v. New General Market Partners, LLC

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
BEAUTYCON MEDIA ABC )
TRUST, ACTING THROUGH )
SACCULLO BUSINESS ) C.A. No. N22C-12-143 MAA CCLD
CONSULTING, LLC, IN ITS )
CAPACITY AS TRUSTEE OF THE )
TRUST AND ASSIGNEE FOR THE )
BENEFIT OF CREDITORS OF )
ASSIGNOR BEAUTYCON MEDIA, )
INC., )
)
Plaintiff, )
)
v. )
)
NEW GENERAL MARKET )
PARTNERS, LLC, )
)
Defendant. )
Submitted: May 16, 2023
Decided: August 11, 2023
Upon Defendants’ Motion to Dismiss:
GRANTED in part and DENIED in part.
MEMORANDUM OPINION
Kevin M. Capuzzi, Esquire (Argued), of BENESCH, FRIEDLANDER, COPLAN
& ARONOFF, LLP, Wilmington, Delaware, Attorney for Plaintiff.
Paul D. Brown, Esquire, and Mark L. Desgrosseilliers, Esquire, of CHIPMAN
BROWN CICERO & COLE, LLP, Wilmington, Delaware, and F. Maximilian
Czernin, Esquire (Argued), and Peter R. Morrison, Esquire, of SQUIRE PATTON
BOGGS, LLP, Cincinnati, Ohio, Attorneys for Defendant.
INTRODUCTION
This action was filed by BeautyCon Media ABC Trust (“Plaintiff”) in its
capacity as Trustee of the BeautyCon Media Company (the “Company”) against the
Company’s investor, New General Market Partners, LLC (“Defendant” or
“NGMP”). Plaintiff brought claims for breach of contract, fraudulent inducement,
and tortious interference with prospective contractual relations.1 This is the Court’s
decision on Defendant’s motion to dismiss these claims. For the reasons stated
herein, Defendant’s motion is GRANTED in part and DENIED in part.
FACTS
I. The BeautyCon Media Company
The Company was founded in 2013 and created as a “fashion and beauty
community portal that connected consumers with beauty brands and creators.”2
Over several years, the Company grew its business to include media and e-
commerce, in addition to the beauty and fashion industry. While the Company
attracted the attention of various investors, by 2018 it was struggling to fund its
Series A financing. Additional funding was critical to the Company’s ability to host
1
Plaintiff also filed claims of breach of fiduciary duty and aiding and abetting breach of fiduciary
duty. Compl. ¶¶ 73-88. On May 16, 2023, the Court dismissed these claims on the record after
oral argument on Defendant’s motion to dismiss. BeautyCon Media ABC v. New General Market
Partners, C.A. No. N22C-12-143 MAA CCLD, Adams, J., Transaction ID 70026953 (Del. Super.
May 16, 2023).
2
Compl. ¶ 16. Unless otherwise stated, the facts are drawn from Plaintiff’s Complaint and the
attached exhibits. The Court accepts these allegations as true for purposes of a motion to dismiss.
2
and operate its signature event scheduled in 2018: “BeautyCon LA.” In March 2018,
one of the Company’s investors, A&E network, rescinded its funding commitment,
leaving the Company in a precarious financial situation.
II. Defendant’s Involvement with the Company
In May 2018, the Company’s then CEO, Moj Mahdara (“Mahdara”), met with
the head of investment of NGMP, Darryl Thompson (“Thompson”), to discuss the
possibility of NGMP providing the Company with a bridge loan. Richelieu Dennis
(“Dennis”) of Essence Ventures (a private equity company), and founder of NGMP,
had been a previous sponsor of the Company’s events. Defendant committed to
funding $3 million but never executed the note (“May 2018 Note”) pursuant to the
original terms, despite repeated assurances from Thompson.3
In connection with the May 2018 Note, the Company agreed to Defendant’s
demand that the Company “cease all conversations with other interested investors.”
In June 2018, Defendant made a second offer of $5 million (“NGMP 2018 Revised
Offer”), which the Company accepted. The Company and Defendant also entered
into a Memorandum of Understanding (the “Original MOU”) in June 2018, outlining
their understanding of Defendant’s future investment in, and commercial partnership
3
In August 2018, Defendant reduced the amount of pledged capital from $3 million to $1.678
million. Compl. ¶ 27.
3
with, the Company.4 Plaintiff alleges that in 2018 Defendant pushed the Company
to move forward with a plan to expand its retail business—“BeautyCon POP”—and
indicated future funding was contingent upon the Company’s compliance with this
expansion. The Company’s pursuit of BeautyCon POP worsened its financial
situation.5
In 2019, the Company and Defendant entered into an Amended Memorandum
of Understanding (“Amended MOU”) which “extended the deadlines [in the
Original MOU] for NGMP to establish a long-term commercial partnership with the
Company . . . .6 “Once BeautyCon POP failed to materialize,” Plaintiff alleges it
became clear Defendant was not going to provide the funding as contained in the
MOUs or complete the common share acquisition.7 Plaintiff alleges that after the
Company hired an investment banker in July 2019 to remedy its growing funding
concerns, “[Defendant] demanded that they receive 51% of the Company as part of
any transaction[]” and “backchanneled with other Series A lead investors” who
“chilled” new investors at NGMP’s direction.8
4
See infra ANALYSIS Section II.C. for additional information on the contents of the Amended
MOU, which is identical to the Original MOU, except for the deadlines in various provisions.
5
Compl. ¶ 28.
6
Compl. ¶ 29.
7
Compl. ¶ 30.
8
Compl. ¶¶ 31-32.
4
III. The Live Nation Deal
Toward the end of 2019, the Company began to seek other avenues of
financing to compensate for the insufficient funding it was receiving from
Defendant. In December 2019, the Company reached a deal in principle with Live
Nation—an events promoter and venue operator—where Live Nation would receive
a 51% stake in the Company in exchange for $4 million. Live Nation confirmed its
support via emails sent on December 20 and 21, 2019.
Plaintiff alleges Defendant had been interested in acquiring the Company as
early as 20189 and cites to a letter (the “Letter”) from Thompson to Laurent Ohana
(“Ohana”), the CEO of an investment bank providing advisory services to the
Company.10 In the Letter, dated December 21, 2019, Thompson indicated that he
was aware the Company was seeking additional capital, voiced NGMP’s belief that
there was special value in having the Company operate within the Essence Ventures
ecosystem, and indicated Essence Ventures’ preliminary interest in purchasing the
Company.11 Plaintiff alleges Defendant attempted to “dampen” the deal with Live
Nation and that the Company’s management was aware of this interference as of
9
Compl. ¶ 38; Ex. 13. All exhibits referenced were attached to the complaint.
10
Ex. 12.
11
Ex. 12; Compl. ¶ 38 (citing to Exs. 12-15).
5
January 22, 2020.12 The Company’s tentative deal with Live Nation did not
materialize.
IV. Defendant’s May 2020 Investment
In the spring of 2020, the Company approached Defendant for additional
funding needed to weather additional financial distress caused by the COVID-19
Pandemic. NGMP originally committed to loaning the Company an additional $2
million, but ultimately agreed to only fund $500,000 (May 2020 Note).
Pursuant to the terms of the May 2020 Note, the Company was prohibited
from raising additional capital unless Defendant approved the terms. Plaintiff
alleges it was “forced to pass on two prospective investors interested in investing at
least $4 million” as a “direct result” of the terms of the May 2020 Note. Plaintiff
alleges that “[t]he loans orchestrated by NGMP granted it unfettered control over the
Company to the ultimate benefit of NGMP.”
On April 26, 2021, the Company entered into the Assignment Agreement
which transferred the assets of the Assignor to the Trust. On April 28, 2021, the
Trust filed a Petition for Assignment for the Benefit of Creditors and Related
Injunctive Relief in the Court of Chancery.13 At a virtual public auction, Defendant’s
12
Compl. 37; Ex. 11
13
In re: BeautyCon Media, Inc. Assignor to: Saccullo Business Consulting LLC, C.A. No. 2021-
0368 (PAF).
6
assignee, NGM1, lodged the successful secured party credit bid. Defendant
thereafter foreclosed on substantially all of the Company’s assets.
PROCEDURAL HISTORY
Plaintiff filed its complaint on December 13, 2022, alleging five counts:
Breach of Contract regarding the Original MOU and Amended MOU (Count I);
Fraud in the Inducement (Count II); Tortious Interference with Prospective
Contractual Relations (Count III); Breach of Fiduciary Duty (Count IV); and Aiding
and Abetting Breach of Fiduciary Duty by the Company’s Directors and Officers.
Defendant filed its motion to dismiss on January 31, 2023. Briefing concluded on
April 6, 2023. On May 16, 2023, the Court held oral argument on the motion. After
the parties presented their arguments, the Court dismissed Counts IV and V for the
reasons stated on the record and reserved decision on Counts I-III.14 This is the
Court’s decision on Defendant’s motion to dismiss the remaining counts.
STANDARD OF REVIEW
On a Rule 12(b)(6) motion to dismiss, the Court must accept all well pled
allegations as true.15 A complaint’s allegations are sufficiently “‘well-pleaded’ if
14
BeautyCon Media ABC v. New General Market Partners, C.A. No. N22C-12-143 CCLD (MAA)
(Del. Super. May 16, 2023) (TRANSCRIPT at 62). The Court ruled that it lacked jurisdiction over
counts IV and V and that any narrow exception that may provide the Superior Court with
jurisdiction did not apply to these claims.
15
Spence v. Funk, 396 A.2d 967, 968 (Del. 1978).
7
they put the opposing party on notice of the claims being brought against it.”16 While
“[v]agueness or lack of detail . . . are insufficient grounds upon which to dismiss a
complaint under Rule 12(b)(6)[,]”17 courts are not “required to accept as true
conclusory allegations ‘without specific supporting factual allegations’ or ‘every
strained interpretation of the allegations . . . .’”18 The court must assess whether the
claimant “may recover under any reasonably conceivable set of circumstances
susceptible of proof.”19 The court must draw every reasonable factual inference in
favor of the non-moving party and must deny the motion to dismiss if the claimant
may recover under that standard.20 Dismissal will not be granted unless a claim is
clearly without merit.21
As a general matter, when deciding a motion to dismiss pursuant to Rule
12(b)(6), the court is limited to reviewing the allegations in the complaint. The Court
may review, however, documents extrinsic to the complaint when one or both of the
following conditions are present: (1) when the document is “integral to a plaintiff's
16
Hale v. Elizabeth W. Murphey School, Inc., 2014 WL 2119652, at *2 (Del. Super. May 20, 2014)
(citing Precision Air, Inc. v. Standard Chlorine of Delaware, Inc., 654 A.2d 403, 406 (Del. 1995));
Bramble v. Old Republic Gen. Ins. Corp., 2017 WL 345144, at *3 (Del. Super. Jan. 20, 2017)
(internal citations omitted).
17
Bramble, 2017 WL 345144, at *3 (internal citations omitted).
18
Clouser v. Doherty, 175 A.3d 86 (TABLE), 2017 WL 3947404, at *4 (Del. 2017) (cleaned up).
19
Hackett v. TD Bank, N.A., 2023 WL 3750378, at *2 (Del. Super. May 31, 2023) (internal
quotations omitted).
20
Hackett, 2023 WL 3750378, at *2.
21
Bramble, 2017 WL 345144, at *3 (internal citations omitted).
8
claim and incorporated into the complaint[;]” or (2) “when the document is not being
relied upon to prove the truth of its contents.”22
ANALYSIS
I. Defendant’s motion to dismiss the claim for tortious interference with
prospective contractual relations (Count III) is DENIED.
In Plaintiff’s claim for tortious interference with prospective contractual
relations (“tortious interference”), it alleges that Defendant intentionally interfered
with and damaged the Live Nation commitment. Defendant alleges three grounds
for dismissal of this claim pursuant to Superior Court Civil Rule 12(b)(3) and (b)(6):
(1) the claim is barred by California’s statute of limitations, (2) Plaintiff has failed
to allege Defendant committed an independent wrongful act, and (3) Plaintiff fails
to plausibly allege Defendant’s intentional interference. For the reasons that follow,
Defendant’s motion to dismiss this claim is DENIED.
A. Plaintiff’s claim is not barred by California’s statute of limitations.
Defendant alleges that California’s statute of limitations applies to this claim
because California has the most significant relationship to the action relative to
Delaware, the forum state. California’s statute of limitations requires a plaintiff to
file their claims within two years from the date when the plaintiff discovered the loss
22
Id. (quoting Vanderbilt Income & Growth Assocs., L.L.C., v. Arvida/JMB Managers, Inc., 691
A.2d 609, 613 (Del. 1996)).
9
caused by a defendant’s interference.23 Defendant alleges Plaintiff was aware of the
loss caused by its alleged interference on or around January 22, 2020.24 As Plaintiff
filed its complaint on December 13, 2022, this claim would not be timely filed if
California’s limitation period applied. Delaware’s statute of limitations for this
claim provides a plaintiff with three years from the date of the tortious act causing
injury.25
California’s statute of limitations does not apply for two reasons: (1) 10 Del.
C. § 8121 dictates that Delaware’s statute of limitations applies, and (2) statutes of
limitations govern matters of procedure and the procedural law of the forum state
generally applies.
Pursuant to 10 Del. C. § 8121, for causes of action that arise outside of
Delaware, the shorter statute of limitations applies, which in this case is the
California statute.26 Section 8121, however, provides for an exception for Delaware
residents: “[w]here the cause of action originally accrued in favor of a person who
23
Cal. Civ. P. § 339(1).
24
Def. Op. Br. at 22; Compl. ¶ 37 (“The Company knew something was amiss on January 22, 2020,
because the Company’s management believed that NGMP (or its affiliates) were trying to
‘dampen’ the Live Nation deal.”).
25
10 Del. C. § 8106. Clouser v. Doherty, 175 A.3d 86 (TABLE), 2017 WL 3947404, at *10 (Del.
2017) (“Tortious interference with prospective business relations is subject to a three-year statute
of limitations.”); WaveDivisions Holdings, LLC., 2011 WL 13175837, at *9 (“In Delaware, claims
for tortious interference with contractual relations are governed by the three year statute of
limitations.”); BTIG, LLC v. Palantir Technologies, Inc., 2020 WL 95660, at *3 (Del. Super. Jan.
3, 2020) (“For tort claims, ‘the wrongful act is a tortious act causing injury, and the cause of action
accrues at the time of injury.’”).
26
Supra n. 23; 10 Del. C. § 8121.
10
at the time of such accrual was a resident of this State, the time limited by the law of
this State shall apply.”27 “Our courts have held this to mean that a Delaware
corporation is a Delaware ‘resident’ for the purpose of bringing an action in
Delaware court.”28 The Company was a resident of Delaware when this cause of
action accrued,29 therefore, Delaware’s statute of limitations applies.
Additionally, under a conflicts of law analysis, as a general rule the forum
state applies its own statute of limitations.30 “This is consistent with the general
principle that the procedural law of the forum state (here, Delaware) usually
applies.”31 The Court will apply Delaware’s three-year statute of limitations because
this is purely a procedural matter.32 Defendant only argues that Plaintiff does not
meet California’s two-year statute of limitations, therefore, the Court declines to
analyze whether Plaintiff timely filed its claim within Delaware’s longer statute of
limitations.
27
10 Del. C. § 8121.
28
WaveDivision Holdings, LLC, 2011 WL 13175837, at *8.
29
Compl. ¶ 11.
30
US Dominion v. Fox Corp., 2022 WL 2229781, at *6 (Del. Super., June 21, 2022) (cleaned up);
Weinstein v. Luxeyard, Inc., 2022 WL 130973, at *3 (Del. Super. Jan. 14, 2022).
31
US Dominion, 2022 WL 2229781, at *6 (cleaned up); Weinstein, 2022 WL 130973, at *3.
32
Am. Energy Tech., Inc. v. Colley & McCoy Co., 1999 WL 301648, at *2 (D. Del. Apr. 15, 1999)
(“Statutes of limitations are generally considered to be procedural rather than substantive law.”);
Weinstein, 2022 WL 130973, at *3 (quoting MPEG LA, L.L.C. v. Dell Global B.V., 2013 WL
812489, at *3 (Del. Ch. Mar. 6, 2013)) (A modification of the general rule that the procedural law
of the forum state applies may be necessary when “the procedural law of the foreign state is so
inseparably interwoven with substantive rights[,]” such that a modification is necessary to
safeguard a party’s legal rights)).
11
B. Delaware substantive law applies to the tortious interference claim
because there is no actual conflict between California and Delaware
law.
Defendant alleges that Plaintiff has failed to state a claim for tortious
interference because Plaintiff has failed to allege that Defendant committed an
independent wrongful act, which is an element of tortious interference with
prospective contractual relations pursuant to California law.33 Plaintiff argues that
Delaware law applies and that this element is not required under Delaware law.
Determining the elements of a legal claim and whether such elements are sufficiently
pled involves issues of substantive law. The Court, therefore, must first engage in a
choice of law analysis to determine whether California or Delaware’s substantive
law applies.
A conflicts of tort law analysis consists of two steps.34 The court must first
determine whether there is an actual conflict between the elements of the tort as they
are defined by the jurisdictions at issue.35 If there is an actual conflict, courts must
then determine which state has the “most significant relationship” to the case.36 If
there is not an actual conflict, the court applies the substantive law of the forum
33
Defendant also alleges that Plaintiff failed to plausibly allege Defendant’s intentional
interference. The Court addresses this ground separately in the section to follow. Def. Op. Br. at
24-27.
34
KT4 Partners LLC v. Palantir Tech., Inc., 2021 WL 2823567, at *12 (Del. Super. June 24,
2021); Otto Candies, LLC v. KPMG, LLC, 2020 WL 4917596, at *5 (Del. Ch. Aug. 21, 2020).
35
Bell Helicopter Textron, Inc., 113 A.3d 1045, 1050 (Del. 2015).
36
Travelers Indem. Co. v. Lake, 594 A.2d 38, 47 (Del. 1991).
12
state.37 “Delaware law recognizes two situations in which a conflict of law is
false.”38 If one of the two states have not addressed the legal question presented,
then there can be no conflict and the court must apply the law of the state that has
“settled law” on the matter.39 The court also need not engage in a choice of law
analysis if the result would be the same under either state’s law.40
The first situation does not apply to this case because both “California and
Delaware have addressed the elements of, and defenses to, tortious interference with
prospective contractual relations claims.”41 Because the parties argue that the result
would be different depending on which State’s law applies, the Court will analyze
whether an actual conflict exists between California and Delaware’s definition of
tortious interference with prospective contractual relations.
The Court finds that the elements of tortious interference between California
and Delaware are the same in all important respects, therefore, no actual conflict
37
Otto Candies, LLC, 2020 WL 4917596, at *6, 18, 21; KT4 Partners, LLC, 2021 WL 2823567,
at *12.
38
KT4 Partners LLC, 2021 WL 2823567, at *12; see also In re Bay Hills Emerging Partners I,
LP, 2018 WL 3217650, at *5 (Del. Ch. July 2, 2018) (stating there is a false conflict when “there
is no material difference between the laws of competing jurisdictions”).
39
Arch Insurance Co. v. Murdoch, 2018 WL 1129110, at *8 (Del. Super. Mar. 1, 2018) (“When
one state’s laws failed to address a particular issue, it cannot conflict with the laws of another state.
Where one state fails to address a particular issue, the Court should apply the settled law.”)
(cleaned up); KT4 Partners LLC, 2021 WL 2823567, at *12.
40
Deuley v. DynCorp Int’l, Inc., 8 A.3d 1156, 1161 (Del. 2010); KT4 Partners LLC, 2021 WL
2823567, at *12.
41
KT4 Partners LLC, 2021 WL 2823567, at *12; Great American Opportunities, Inc. v.
Cherrydale Fundraising, Inc., 2010 WL 338219, at *8 (Del. Ch. Jan. 29, 2010) (stating both
California and Delaware require the same basic elements to establish a claim for tortious
interference with prospective contractual relations.).
13
exists. Because no actual conflict exists, the substantive law of Delaware, the forum
state, applies.
Pursuant to California law, a claim for tortious interference with prospective
economic advantage consists of the following elements:
(i) an economic relationship between the plaintiff and some third party,
with the probability of future economic benefit to the plaintiff;
(ii) the defendant’s knowledge of the relationship;
(iii) intentional acts on the part of the defendant designed to disrupt the
relationship;
(iv) actual disruption of the relationship; and
(v) economic harm to the plaintiff proximately caused by the acts of the
defendant.42
California law also requires a plaintiff to prove that the defendant has
committed an “independent wrongful act.” An act is independently wrongful if it is
“unlawful, [i.e.,] proscribed by some constitutional, statutory, regulatory, common
law or other determinable legal standard.”43 California imposes the requirement of
42
Golden Eagle Land Investment, LP v. Rancho Santa Fe Ass’n., 227 Cal. Rptr. 3d 903, at 927
(Cal. Ct. App. 4th Jan. 12, 2018) (cleaned up); SC Manufactured Homes, Inc. v. Canyon View
Estates, Inc., 56 Cal. Rptr. 3d 79, n. 7 (Cal. Ct. App. 2d Mar. 15, 2007). California courts typically
identify this tort by the name “tortious interference with prospective economic advantage.” See,
e.g., Golden Eagle Land Investment, LP, 227 Cal. Rptr. 3d at 927. Delaware identifies this tort as
either tortious interference with prospective “economic advantage,” “contractual relations” or
business relations. See, e.g., KT4 Partners, 2021 WL 2823567,at *13; Clouser v. Doherty, 175
A.3d 86 (TABLE), 2017 WL 3947404, at *10 (Del. 2017); Organovo Holdings, Inc. v. Dimitrov,
162 A.3d 102, 122 (Del. Ch. June 5, 2017). Regardless of the slight variations in names, the
elements of the torts, however, are the same in all important respects.
43
KT4 Partners, 2021 WL 2823567, at *13 (quoting Edwards v. Arthur Anderson, LLP, 189 P.3d
285, 290 (Cal. 2008)).
14
an independent wrongful act to make unlawful “improper methods of disrupting or
diverting the business relationship” while also protecting “fair competition.”44
A claim for tortious interference with prospective contractual relations
pursuant to Delaware law consists of the following elements:
(i) the reasonable probability of a business opportunity;
(ii) intentional interference by a defendant with that opportunity;
(iii) proximate causation; and
(iv) damages.45
Delaware courts are “to consider these elements ‘in light of a defendant’s
privilege to compete or protect his business interests in a fair and lawful manner’”46
so that this tort does not unduly restrict free competition.47 If a defendant acts within
his privilege to compete, those actions are protected by the business competition
exception, and are not independently wrongful.48 Delaware courts look to the
following elements in the Second Restatement of Torts to assess whether
competition constitutes proper or improper interference:
(a) the relation concerns a matter involved in the
competition between the actor and the other and
(b) the actor does not employ wrongful means and
(c) his action does not create or continue an unlawful
restraint of trade and
44
Golden Eagle Land Investment, LP, 227 Cal. Rptr. 3d at 927 (quoting Settimo Associates v.
Environ Systems, Inc. 17 Cal. Rptr. 2d 757, 758 (Cal. Ct. App. 4th Mar. 26, 1993)).
45
Clouser v. Doherty, 175 A.3d 86 (TABLE), 2017 WL 3947404, at *10 (Del. 2017).
46
KT4 Partners LLC, 2021 WL 2823567, at *13 (quoting Kable Products Services, Inc. v. TNG
GP, 2017 WL 2558270, at *10 (Del. Super. June 13, 2017) (internal quotation marks omitted)).
47
See Agilent Technologies v. Kirkland, 2009 WL 119865, at *8 (Del. Super. Jan. 20, 2009).
48
Preston Hollow, LLC v. Nuveen, LLC, 2020 WL 1814756, at *17 (Del. Ch. Apr. 9, 2020).
15
(d) his purpose is at least in part to advance his interest in
competing with the other.49
Courts must find that all four factors are met to conclude that a defendant’s
competitive actions are proper.50 If a defendant’s actions violate statutory or
common law, this satisfies the independent wrongfulness requirement pursuant to
Delaware law and the conduct would not be protected by the business competition
exception.51 The nature of the defendant’s conduct is the principal factor in
analyzing whether a defendant’s conduct is independently wrongful.52
The Court finds that the elements of this tort under California and Delaware
law are the same in all important respects. Both require some form of prospective
economic relationship between the plaintiff and a third party. Delaware requires the
“probability of a business opportunity” whereas California law requires the
“probability of an economic benefit.” The Court finds these terms to be substantially
similar.
49
RESTATEMENT (SECOND) OF TORTS § 767 (1979). To assess whether a defendant’s actions are
independently wrongful, Delaware courts analyze the following factors: (i) the nature of the actor’s
conduct; (ii) the actor’s motive; (iii) the interests of the other with which the actor’s conduct
interferes; (iv) the interests sought to be advanced by the actor; (v) the social interests in protecting
the freedom of action of the actor and the contractual interests of the other; (vi) the proximity or
remoteness of the actor’s conduct to the interference; and (vii) the relations between the parties.
RESTATEMENT (SECOND) OF TORTS § 767 (1979); Preston Hollow Capital, LLC, 2020 WL
1814756, at *17 (citing RESTATEMENT (SECOND) OF TORTS § 767 (1979)).
50
RESTATEMENT (SECOND) OF TORTS § 768; Preston Hollow Capital, LLC, 2020 WL 1814756, at
*17 (stating the court must find all four factors are met before excusing the defendant under this
analysis.).
51
RESTATEMENT (SECOND) OF TORTS § 767 cmt. c.
52
Preston Hollow, 2020 WL 1814756, at *17.
16
Both states also require defendant’s knowledge of the relationship between
the plaintiff and the third party. California law requires that a plaintiff show the
defendant’s knowledge of the plaintiff’s relationship with the third party while
Delaware requires a showing of intentional interference with the prospective
business relationship. It is not logically possible for a defendant to intentionally
interfere with the relationship without first having knowledge of that relationship,
thus both states have a knowledge requirement.53
Both states require that the act causing interference was committed
intentionally and that the interference results in damages. Additionally, both states
require that defendant’s conduct be independently wrongful to safeguard against the
infringement of free competition.54 “To be independently wrongful, each state asks
53
DG BF, LLC v. Ray, 2021 WL 776742, at n. 146 (Del. Ch. Mar. 1, 2021).
54
Kable Products Services, Inc. v. TNG GP, 2017 WL 2558270, at *10 (Del. Super. June 13, 2017)
(quoting DeBonaventura v. Nationwide Mut. Ins. Co., 419 A.2d 942, 947 (Del. Ch. 1980)) (stating
elements of this claim “must be considered in light of a defendant’s privilege to compete or protect
his business interests in a fair and lawful manner.”); Orthopaedic Assoc. of S. Delaware, PA v.
Pfaff, 2018 WL 822020, at *2 (Del. Super. Feb. 9, 2018); Preston Hollow Capital, 2020 WL
1814756, at *12 (“The tort is unusual, in that its application, even if these elements are met, is
circumscribed by consideration of competing rights. Thus, the elements of the tort must be
considered in light of a defendant’s privilege to compete in a lawful manner.”); Beard Research,
Inc. v. Kates, 8 A.3d 573, 608 (Del. Ch. Apr. 23, 2010) (“The tortious interference with prospective
business relations standard is arguably more favorable to a defendant than the tortious interference
with contractual relations standard because, under the former standard, a court must consider the
defendant’s privilege to compete or protect his business interests in a fair and lawful manner.”);
Agilent Technologies v. Kirkland, 2009 WL 119865, at *5 (Del. Super. Jan. 20, 2009); Korea
Supply Co. v. Lockheed Martin Corp., 63 P.3d 937, 953 (Cal. 2003) (stating a plaintiff bringing a
claim for interference with prospective economic advance must show defendant’s conduct was
independently wrongful); Quelimane Co. v. Stewart Title Guaranty Co., 960 P.2d 513, 530 (Cal.
1998) (stating claim for tortious interference with prospective economic advantage, unlike tortious
interference with an existing contract, requires plaintiffs to establish conduct was wrongful); Ixchel
Pharma, LLC v. Biogen, Inc., 470 P.3d 571, 576 (Cal. 2020) (“intentionally interfering with
17
whether the defendant’s conduct constitutes a violation of positive law, judicial
rulings, or expressly or by implication, a ‘determinable legal standard.’”55 Because
the result would be the same under either state’s law, the conflict is false and
Delaware law applies.
C. Plaintiff sufficiently alleged Defendant committed an independent
wrongful act.56
For Plaintiff to show that Defendant tortiously interfered with Plaintiff’s
prospective contractual relations with Live Nation, it must show Defendant’s
conduct was wrongful independent of the interference and not protected by the
business competition exception.57 The business competition exception “rests on the
belief that competition is a necessary or desirable incident of free enterprise”58 and
exists to prevent “wholesome competitive practices” from being “made tortious.”59
prospective economic advantage requires pleading that the defendant committed an independently
wrongful act.”).
55
KT4 Partners LLC v. Palantir Tech., Inc., 2021 WL 2823567, at *14 (Del. Super. June 24, 2021)
(cleaned up).
56
Because Defendant contests only that Plaintiff has failed to sufficiently plead that Defendant
committed an independent wrongful act and intentionally interfered, the Court limits its Rule
12(b)(6) analysis to these two elements.
57
KT4 Partners, LLC, 2021 WL 2823567, at *13; Preston Hollow Capital, LLC, 2020 WL
1814756, at *12. The Court notes that Plaintiff did not expressly include the term “independent
wrongful act” in its count for tortious interference. Defendant raised this requirement as an
affirmative defense to the claim of tortious interference. Def. Op. Br. at 23-24. In Plaintiff’s brief
in opposition to Defendant’s motion to dismiss, Plaintiff only asserts that independent
wrongfulness is not a requirement pursuant to Delaware law. Pl. Br. at 32-33. As explained above,
Delaware does require plaintiffs to plead an independent wrongful act. Because this is a
requirement and because Defendant raised this as an affirmative defense in the motion to dismiss,
the Court will analyze whether Plaintiff has sufficiently alleged that Defendant committed an
independent wrongful act.
58
RESTATEMENT (SECOND) OF TORTS § 768 cmt. on Clause (b).
59
NuVasive, Inc. v. Miles, 2020 WL 5106554, at *12 (Del. Ch. Aug. 31, 2020).
18
Competition is not necessarily an improper basis for interference. 60 “If one party is
seeking to acquire a prospective contractual relation, the other can seek to acquire it
too.”61
The second element in § 768 asks whether the defendant has employed
wrongful means. Delaware courts look to the factors listed in § 767 to determine
whether a defendant has employed wrongful means. When a plaintiff has only a
prospective contractual relationship with a third party as opposed to a present
contractual relationship, there is a higher burden on the plaintiff to show that the
defendant improperly interfered with that relationship.62 The burden for the plaintiff
is lower in the context of a present contractual relationship because of “the greater
definiteness of the [plaintiff’s] expectancy and his stronger claim to security for it
and in part to the lesser social utility of the [defendant’s] conduct.”63
While the nature of Defendant’s conduct related to the Live Nation deal when
viewed in isolation is not improper, the Court finds that when viewed within the
larger context of Defendant’s actions, Plaintiff has sufficiently pled that Defendant
committed an independent wrongful act pursuant to § 767 and § 768. Plaintiff has
60
RESTATEMENT (SECOND) OF TORTS § 768 cmt. a.
61
Id.
62
§ 767 cmt. on Clause (c) (“the actor’s conduct in interfering with the other’s prospective
contractual relations with a third party may be held to be not improper, although his interference
would be improper if it involved persuading the third party to commit a breach of an existing
contract with the other.”).
63
Id.
19
pled sufficient facts at this stage to establish that Defendant’s conduct was part of a
larger scheme of economic pressure it wrongfully exerted upon the Company for the
ultimate purpose of takeover. This finding is based primarily on an analysis of
certain enumerated factors in § 767, specifically Defendant and the Company’s (“the
Parties”) interests, and Defendant’s purpose or motivation for interfering with the
Live Nation deal.64 Because the Court finds Defendant has employed wrongful
means, it will not address the remaining elements of the business competition
exception.65
1. The Nature of Defendant’s Conduct Relating to the Live Nation
Deal
The “chief factor in determining whether the conduct is privileged despite its
harm to the other person,” is the nature of a defendant’s conduct. 66 As stated above,
the Company and Live Nation reached a deal in principle in December 2019, with
Live Nation confirming its support in writing on December 20 and 21, 2019.
Plaintiff alleges the nature of Defendant’s conduct in response to the deal as follows:
• Thompson’s letter to Ohana wherein he expressed awareness that the
Company was “seeking to raise additional equity capital[,]” conveying
64
For the sake of economy, the Court hereinafter refers to “Defendant and the Company”
collectively as “the parties,” while noting that Plaintiff is not the Company, but the BeautyCon
Media ABC Trust in its capacity as Trustee of the Company.
65
See § 767; Preston Hollow Capital, LLC v. Nuveen, LLC, 2020 WL 1814756, at *17 (Del. Ch.
Apr. 9, 2020) (declining to address the remaining elements, having found defendant employed
wrongful means in its competition with plaintiff.).
66
§ 767 cmt. on Clause (a).
20
Essence Ventures’ “preliminary indication of interest to purchase certain
assets of [the Company,]” and conveying Essence Ventures’ belief that “there
is special value [] by having [the Company] operate within the Essence
Ventures ecosystem.”67
• “[U]pon information and belief, [Defendant] was in contact with Live Nation
about [Defendant’s] non-support of the proposed Live Nation deal” and told
Live Nation that it preferred to “roll-up” the Company with other brands to
sell as one package.68
To summarize, Plaintiff alleges that Defendant intentionally interfered with the Live
Nation deal when Defendant’s head of investment contacted the Company’s
investment banker to discourage the Live Nation deal and encouraged the sale of the
Company to Essence Ventures; and when Defendant allegedly contacted Live
Nation directly around January 2020 to discourage the deal.
This conduct is not in itself wrongful. Plaintiff does not identify any of
Defendant’s conduct as violative of statutory law, common law or “legal standards
of behavior more broadly.”69 There is no allegation that Defendant committed any
67
Compl. ¶ 38; Ex. 12.
68
Compl. ¶ 36.
69
KT4 Partners LLC v. Palantir Tech., Inc., 2021 WL 2823567, at *19 (Del. Super. June 24, 2021).
21
acts of physical violence, threatened suit, or made any false representations to Live
Nation to induce it to pull away from the deal.70
2. Plaintiff sufficiently alleged that Defendant exerted improper
economic pressure on the Company.
The nature of Defendant’s conduct with respect to the Live Nation deal, in
isolation, is not wrongful. The question remains, however, whether this conduct was
proper when viewed within the larger context of Defendant’s dealings with the
Company.71 For the reasons that follow, the Court finds that, viewing the complaint
as a whole and drawing all reasonable inferences therefrom, Plaintiff has sufficiently
alleged Defendant’s conduct with respect to Live Nation was committed in
furtherance of Defendant’s goal to weaken the Company’s capital structure and
position itself to take over the Company. As an investor who also entered into
MOUs to negotiate a long-term commercial partnership with the Company, the
Court finds that Defendant’s conduct was improper and not protected by the business
competition exception.
“A party loses its privilege to compete if it exerts improper economic pressure
. . . . Propriety of economic pressure is a contextual inquiry: there is no ‘crystallized
set of definite rules,’ and the ‘decision therefore depends upon a judgment and
70
§ 767 cmt. on Clause (a).
71
Preston Hollow Capital, LLC, 2020 WL 1814756, at *17.
22
choice of values in each situation.’”72 When analyzing whether a defendant’s
conduct was independently wrongful due to economic pressure, “it is proper to look
at the entire picture to understand the economic pressure applied.”73 Although a
defendant may exert limited economic pressure, “Delaware law also recognizes that
when a defendant intends the interference to drive a competitor out of business and
‘shut its doors,’ this constitutes wrongful means, and the conduct is not privileged.”74
At the motion to dismiss phase, Plaintiff sufficiently alleges Defendant
exerted wrongful economic pressure in a concerted effort to take ownership of the
Company.75 Plaintiff alleges Defendant accomplished this by delaying or refusing
to fully fund promised investments,76 demanding the Company not solicit other
72
Id. at *18 (quoting § 767 cmt. b.); § 767 cmt. on Clause (a) (To examine the propriety of
economic pressure, courts should assess “the circumstances in which it is exerted, the object sought
to be accomplished by the actor, the degree of coercion involved, the extent of the harm that it
threatens, the effect upon the neutral parties drawn into the situation, the effects upon competition,
and the general reasonableness and appropriateness of this pressure as a means of accomplishing
the actor’s objective.”).
73
Preston Hollow LLC, 2020 WL 1814756, at *18.
74
Id. (citing Beard Research, Inc. v. Kates, 8 A.3d 573, 611–12 (Del. Ch. Apr. 23, 2010), aff’d
sub nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010). Limited economic pressure
is permitted as long as a defendant avoids an illegal restraint on trade and does not intentionally
interfere to drive a competitor out of business. Id.75
The Letter expressed a desire that Essence Ventures purchase the Company. Ex. 12. Plaintiff
also alleged “numerous conversations” from 2018 forward wherein Thompson allegedly expressed
a desire to own the Company. Compl. ¶ 38.
76
Plaintiff alleges: Defendant committed to a $3 million investment in the May 2018 Note, but
reduced the amount of pledged capital to $1.678 million in August 2018; in June 2018, Defendant
committed to funding a $5 million convertible note based on a $27 million valuation, as opposed
to the $60 million valuation agreed upon approximately one month earlier (“NGMP 2018 Revised
Offer”); instead of timely funding $2 million promised in the May 2020 Note, Defendant delayed
and only funded $500,000, and with the knowledge that this amount “left many vendors and other
customers” of the Company unpaid during the pandemic; Defendant never completed its
commitments under the Amended MOU).
23
investors,77 discouraging other investors from investing in the company,78 and
conditioning future investment on the Company’s pursuit of commercial endeavors
harmful to its financial interests,79 all while Defendant allegedly knew of the
Company’s dire financial situation.80 Defendant’s conduct with respect to the Live
Nation deal, when viewed in this broader context, sufficiently alleges that Defendant
interfered with the Deal as a means of exerting improper economic pressure on the
Company.
The presence of economic pressure in this case shares similarities with that
found in Preston Hollow, LLC v. Nuveen, LLC.81 In Preston Hollow, the court found
77
In conjunction with the May 2018 Note, Plaintiff alleges Defendant demanded the Company
cease all conversations with other interested investors; the May 2020 Note prohibited the Company
from raising additional capital without preapproval from Defendant, resulting in the Company
foregoing two prospective investment offers which could have delivered at least $4 million in
capital. See Ex. 20.
78
Plaintiff alleges Defendant demanded it receive 51% of the Company once it learned that the
Company had hired an investment banker, which allegedly deterred potential investors; Defendant
consorted with other Series A lead investors to chill new investors; Defendant expressed to Live
Nation its non-support of Live Nation’s $5 million investment and “dampened” the deal.
79
Dennis and Thompson allegedly told the Company it would only fund the Original MOU if the
Company moved forward with BeautyCon POP, which the Company allegedly told Defendant was
stretching to the “breaking point.”
80
Compl. ¶ 42. “Upon information and belief, [Defendant] was aware that funding only 25% of
the promised amount left many vendors and other customers of [the Company] unpaid during the
middle of a global pandemic . . . .”).
81
2020 WL 1814756 (Del. Ch. Apr. 9, 2020). The Court notes that Preston Hollow is a post-trial
memorandum opinion. The Court of Chancery found by a preponderance of the evidence that the
defendant committed tortious interference with prospective business relations after a review of the
evidence submitted at trial. Id. at *11-12; see Robinson v. Oakwood Village, LLC, 2017 WL
1548549, at *11 (Del. Ch. Apr. 28, 2017) (stating plaintiffs bare the burden of proving each
element of their claims by a preponderance of the evidence). The Court does not have the benefit
of viewing evidence and testimony that would be submitted at trial, however, Plaintiff has a lesser
burden here defending against the motion to dismiss compared to proving this claim at trial by a
preponderance of the evidence. At this stage in the litigation, Plaintiff need not prove that
24
that, while each of the defendant’s interactions with third parties may not have
amounted to wrongful means of shutting down the plaintiff’s ability to do business,
when the court considered the defendant’s conduct as a whole, it revealed the
defendant’s systematic efforts to push the plaintiff out of business.82 Here, while
Defendant’s alleged interaction with Live Nation and letter communication with the
Company’s investment banker may not be sufficient to establish wrongful means of
interfering with the Live Nation deal, when these alleged acts are viewed in the
context of Defendant’s broader efforts to control and take ownership of the
Company, it is reasonably conceivable at the pleading stage that this conduct was
part of a broader campaign of exerting economic pressure on the Company.
The Court notes that additional factors in § 767, namely Defendant’s
motivation, the Parties’ relationship, their respective interests, and social interests
weigh in favor of a finding that Defendant’s conduct is not protected by the business
competition exception. It is not necessary at this stage to analyze these factors as
the Court has already found Plaintiff sufficiently alleged Defendant exerted
improper economic pressure on the Company.
Defendant did in fact tortiously interfere, but only that it has alleged “a reasonably conceivable set
of facts susceptible to proof entitling it to relief.” See Hackett v. TD Bank, N.A., 2023 WL
3750378, at *2 (Del. Super. May 31, 2023) (internal quotations omitted).
82
See Preston Hollow, 2020 WL 1814756, at *18-19 (finding defendant exerted improper
economic pressure because “[t]he record, taken as a whole, shows consistent, systematic efforts
by [the defendant] to shut down [the plaintiff’s] ability to continue to do business.”). Id. at *18.
25
D. Plaintiff has plausibly alleged Defendant intentionally interfered with
the Live Nation deal.
Defendant also argues Plaintiff’s tortious interference claim should be
dismissed because Plaintiff failed to plausible allege that Defendant intentionally
interfered with the Live Nation deal. The analysis required for the intentional
interference requirement overlaps substantially with the above analysis on the
independent wrongful act requirement. The Court will not unnecessarily duplicate
that analysis here and briefly sets forth the reasons demonstrating that Plaintiff has
plausibly alleged intentional interference.
“The interference with the other’s prospective contractual relation is
intentional if the actor desires to bring it about or if he knows that the interference is
certain or substantially certain to occur as a result of his action.” 83 At this stage of
the proceedings, the Court must accept all non-conclusory allegations as true.
Plaintiff’s allegation of intentional interference would be conclusory if, for example,
it stated only that “Defendant intentionally interfered because Defendant
intentionally interfered.” This example is not to suggest that an allegation of any
greater specificity would adequately plead this element. Plaintiff’s allegations,
however, go far enough beyond this by including: (1) how Defendant interfered, (2)
when Defendant interfered, (3) the individuals involved in the interference, (4) why
83
RESTATEMENT (SECOND) OF TORTS § 766B cmt. d. (1979).
26
Defendant may have interfered (to purchase the Company), (5) and the proximity in
time between the acts of interference and the deal’s failure.
Plaintiff alleged Defendant interfered by way of the Letter that Thompson sent
on the same day Live Nation confirmed its support. The Letter in no uncertain terms
expressed Defendant’s dislike for the deal. When drawing all reasonable inference
from the complaint, it is no far inferential leap that Defendant contacted Live Nation
with the intent to quelch the deal, especially considering that this deal would likely
decrease Defendant’s stake in the Company.84 For these reasons, the Court finds
Plaintiff has sufficiently stated that Defendant desired to bring about the
interference, or at the very least knew that its actions made it substantially certain
interference would occur.
II. Defendant’s motion to dismiss the claim for breach of contract
regarding of the Original MOU and Amended MOU (Count I) is
GRANTED in part.
A. California law applies to Plaintiff’s claim for breach of the MOUs.
The MOUs contain identical California choice-of-law provisions. The
choice-of-law provision states, “This Agreement and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of law
84
Plaintiff also alleged that Defendant contacted Live Nation directly to convey its non-support of
the deal and preference to combine the Company with various brands to sell as one package.
Compl. ¶ 36.
27
provisions of the State of California or of any other state.”85 As a general matter,
where parties specify a choice of law, Section 187 of the Restatement (Second) of
Conflicts “allows the law of the state chosen by the parties to govern contractual
rights and duties unless the chosen state lacks a substantial relationship to the parties
or transaction or applying the law of the chosen state will offend a fundamental
policy of a state with a material greater interest.”86 The parties do not dispute that
California law applies to Plaintiff’s breach of contract claims. The Court finds that
this choice-of-law provision is valid and enforceable and that the exceptions listed
in Section 187 do not apply to this case.87 Principles of contract law as applied by
California courts therefore apply to this claim.88
B. Defendant’s motion to dismiss the claim for breach of the Original
MOU is GRANTED.
In Count I of the complaint, Plaintiff alleges that Defendant breached both the
Original MOU and the Amended MOU. In Defendant’s first ground for dismissal,
85
Exs. 5, 5-A.
86
SIGA Technologies, Inc. v. PharmaAthene, Inc., 67 A.3d 330, 342 (Del. 2013) (citing
RESTATEMENT (SECOND) OF CONFLICTS OF LAWS § 187 (1971), then quoting Abry Partners V, L.P.
v. F & W Acq. LLC, 891 A.2d 1032, 1047 (Del. Ch. Feb. 14, 2006)); Change Capital Partners
Fund I, LLC v. Volt Electrical Sys., LLC, 2018 WL 1635006, at * 1 (Del. Super. Apr. 3, 2018)
(“Delaware courts are generally reluctant to subvert parties’ agreed-upon choice-of-law
provisions.”).
87
The Court does not find that California lacks a substantial relationship to the parties or
transaction. The Company’s headquarters were located in California, the parties’ relationship was
centered in California, injury to the Company was suffered in California, and key witnesses are
located in California.
88
See infra ANALYSIS Section II.C.4.
28
it argues that Plaintiff’s claim of breach of the original MOU is barred by the
Amended MOU based on the integration clause in the Amended MOU:
This Agreement constitutes the sole and entire agreement
of the parties to this agreement with respect to the subject
matter contained herein, and supersedes all prior
contemporaneous understandings and agreements, both
written and oral, with respect to such subject matter.
Pursuant to California law,
“[w]hen the parties to an agreement express their intention
that it is the final and complete expression of their
agreement, an integration occurs. Such a contract may not
be contradicted by evidence of other agreements. Whether
an agreement is an integration, i.e., intended as the final
and complete expression of the parties’ agreement, is a
question of law . . . .”89
As Plaintiff correctly asserts, the MOUs are identical except for the fact that the
Amended MOU extended the deadlines for performance. Curiously, Plaintiff does
not contest the validity or enforceability of the integration clause and simply states
that it has pled a viable claim of breach of both MOUs.
The Court finds no merit to Plaintiff’s claim that the original MOU is still
actionable in light of the integration clause. The parties agreed in unequivocal
language that the Amended MOU superseded all prior written agreements, which
includes the Original MOU. Any deadlines in the Original MOU, therefore, were
89
Williams v. Atria Las Posas, 235 Cal. Rptr. 3d 341, 344 (Cal. Ct. App. 2d. June 27, 2018)
(internal citations omitted).
29
superseded by the new deadlines in the Amended MOU. Defendant’s motion to
dismiss Plaintiff’s claim of breach of the Original MOU is GRANTED.
C. Defendant’s motion to dismiss the claim for breach of the Amended
MOU is GRANTED in part.
The parties executed the Amended MOU on December 16, 2018, which “sets
forth certain agreements and understandings” between the Parties. The purpose of
the document, as stated in paragraph 1, is “to outline the terms and conditions under
which the parties intend that Investor [Defendant] will provide subsequent
investment in the Company.” Paragraph 2, titled “Partnership framework” states
that “[t]he Parties would like to enter into an understanding for a larger partnership
going forward, which is connected, but not contingent on, Investor’s [Defendant]
investment of $5.0M.” The MOU lists the following key elements of this
partnership: “Qualified Financing Investment,” “Common Share Acquisition,” and
“Commercial Agreement(s).”
1. The Partnership Framework
Under the “Qualified Financing Investment” provision (“QFI Provision”), the
parties agreed that the Company would use “commercially reasonable efforts to
provide that Investor [Defendant] will be permitted to invest additional amounts in
30
the first Qualified Financing (as defined in the Note) after the date hereof, which
may occur . . . no later than June 2019.”90 The parties agreed:
“within 6 months of the closing of the Note investment,
the Company and Investor shall negotiate in good faith
with respect to the terms and conditions upon which
Investor would serve as the lead investor in the Qualified
Financing, with an investment of at least $10 million in
additional capital.”91
The “Common Share Acquisition” provision (“CSA Provision”) of the partnership
framework provides that the Company believed certain existing holders of Common
Stock would be willing to sell their existing shares to Defendant. The Parties agreed
that the Company would use “commercially reasonable efforts to cooperate with
Investor [Defendant]” so that Defendant could acquire such shares. This provision
also memorialized Defendant’s understanding that the number of shares and pricing
was “not guaranteed.” The Parties agreed to cooperate to complete this acquisition
by March 1, 2019.92 The “Commercial Agreement(s)” provision provides that the
parties agreed to “negotiate in good faith to establish a long-term commercial
partnership across multiple lines of business no later than March 31, 2019.”93
90
By the terms of the Original MOU, the deadline for the qualified financing investment was
March 2019.
91
Am. MOU (emphasis added).
92
By the terms of the Original MOU, the deadline for the common shares acquisition was
December 31, 2018.
93
Am. MOU (emphasis added). By the terms of the Original MOU, the deadline to establish a
long-term commercial partnership was December 31, 2018.
31
2. Plaintiff’s Allegations of Breach of the Amended MOU
Plaintiff alleges Defendant breached the three provisions summarized above
in the following ways:
• “[A]mong other things . . . [Defendant] fail[ed] to serve as the lead
investor in the Qualified Financing, with an investment of at least $10M
in additional capital.”94
• Defendant failed to complete the common shares acquisition.95
• “[A]mong other things[,] . . . failing to establish a long-term
commercial partnership . . . .”96
Plaintiff alleges damages of no less than $10 million. Defendant asserts Plaintiff’s
claims under the MOUs should be dismissed because the terms are not sufficiently
definite to support a breach of contract claim.
For the reasons that follow, Defendant’s motion to dismiss Plaintiff’s claim
for breach of the Common Shares Acquisition Provision is GRANTED; Defendant’s
motion to dismiss Plaintiff’s claim for breach of the Qualified Financing Provision
and the Commercial Agreement(s) Provision is GRANTED in part, because the
agreement to “negotiate in good faith” is enforceable pursuant to California law.
94
Compl. ¶ 56. Plaintiff does not allege that Defendant failed to fund the NGMP 2018 Revised
Offer referenced in Paragraph 2.a. of the Amended MOU and the first sentence of the QFI
Provision.
95
Compl. ¶ 57.
96
Compl. ¶ 57.
32
3. Principles of California Contract Law
For a contract to be enforceable, the terms must be sufficiently definite.97 A
contract’s terms are sufficiently definite if they create a reasonable certainty of
performance and “provide a basis for determining breach and fashioning a
remedy.”98 “If, by contrast, a supposed ‘contract’ does not provide a basis for
determining what obligations the parties have agreed to, and hence does not make
possible a determination of whether those agreed obligations have been breached,
there is no contract.”99
An “agreement to agree” is not sufficiently definite to be enforceable. 100 “It
is still the general rule that where any of the essential elements of a promise are
reserved for the future agreement of both parties, no legal obligation arises ‘until
such future agreement is made.’”101 “Whether a term is essential depends on its
relative importance to the parties and whether its absence from the contract would
make enforcing the contract unfair to any party.”102
97
Ladas v. California State Auto. Ass’n, 23 Cal. Rptr. 2d 810, 814 (Cal. Ct. App. 1st Oct. 22,
1993).
98
Gordon v. Rother, 2019 WL 762151, at *5 (Cal. Ct. App. 2d Feb. 21, 2019); Weddington
Productions Inc. v. Flick, 71 Cal. Rptr. 2d 265, 277 (Cal. Ct. App. 2d Jan. 7, 1998).
99
Weddington Productions Inc., 71 Cal. Rptr. 2d at 277.
100
Gordon, 2019 WL 762151, at *5 (quoting Copeland v. Baskin Robbins USA, 117 Cal. Rptr. 2d
875 (Cal. App. Ct. 2d. Mar. 19, 2002)).
101
Id. (quoting Baskin Robbins 117 Cal. Rptr. 2d 875, 879).
102
Id. (quoting Baskin Robbins 117 Cal. Rptr. 2d at n. 3).
33
4. Defendant’s motion to dismiss Plaintiff’s claim for breach of
the Qualified Financing Provision is GRANTED in part.
The second sentence of the QFI Provision states that “[w]ithin 6 months of
the closing of the Note investment, the company and [Defendant] shall negotiate in
good faith with respect to the terms and conditions” on which Defendant would
become the lead investor and invest at least an additional $10 million. For the
reasons that follow, this provision did not obligate Defendant to invest at least $10
million, thus there can be no breach on this basis; however, the Parties’ agreement
to negotiate in good faith to determine the means by which Defendant would become
the lead investor and invest this minimum amount is enforceable.
Copeland v. Baskin Robbins U.S.A, issued by the California Court of Appeals,
Second District, speaks directly to the narrow issue presented by Plaintiff’s claim
for breach of the Amended MOU.103 In Baskin Robbins, the plaintiff-buyer entered
into a contract with the defendant-seller to buy an ice cream factory.104 The contract
provided that the parties agreed to negotiate a separate co-packing agreement
wherein the defendant would agree to provide the ice cream to the plaintiff over a
three-year period.105 The contract stated that the parties agreed to negotiate the
specific terms of the co-packing agreement.106 Negotiations over the co-packing
103
Baskin Robbins, 117 Cal. Rptr. 2d 875.
104
Id. at 878-89.
105
Id. at 878.
106
Id.
34
agreement failed and the plaintiff filed suit alleging the defendant breached the
contract by refusing to enter into a co-packing agreement.107 The trial court granted
summary judgment to the defendant and the plaintiff appealed.108 The appellate
court distinguished an “agreement to negotiate” from an “agreement to agree” and
found that, while the latter was unenforceable, the former was enforceable.109 When
parties have agreed to negotiate a specific term or provision, “[f]ailure to agree is
not, itself, a breach of the contract to negotiate. A party will be liable only if a failure
to reach ultimate agreement resulted from a breach of that party’s obligation to
negotiate or to negotiate in good faith.”110 When parties have agreed to negotiate in
107
Id. at 878-79.
108
Id. at 879.
109
Id. at 880-83.
110
Id. at 880 (internal citations omitted). California courts have repeatedly affirmed and cited to
the holding in Baskin Robbins that an agreement to negotiate or negotiate in good faith is an
enforceable agreement. See, e.g., Sheen v. Wells Fargo Bank, NA, 505 P.3d 625, nn. 4-5 (Cal.
2022); Machado v. Myers, 252 Cal. Rptr. 3d 493, n. 9 (Cal. Ct. App. 4th Aug. 16, 2019) (holding
“parties’ agreement to ‘meet and confer’ regarding conditions for revocation of the license
agreement does not render the agreement unenforceable” (citing Baskin Robbins)); Cedar Fair,
LP v. City of Santa Clara, 123 Cal. Rptr. 3d 667, 681 (Cal. Ct. App. 6th Apr. 6, 2011) (holding
term sheet expressly bound parties to continue negotiating in good faith); Brehm v. 21st Century
Ins. Co, 83 Cal. Rptr. 3d 410, 423 (Cal. Ct. App. 2d. Sept. 16, 2008) (holding defendant’s “express
contractual right to resolve any remaining disputes by arbitration is not inconsistent with its
implied obligation to attempt in good faith to reach agreement with its insured prior to
arbitration”); Keystone Land & Development Co. v. Xerox Corp., 353 F.3d 1093, 1097 (9th Cir.
2003) (finding “[m]ost jurisdictions recognize the enforceability of contracts to negotiate in an
appropriate case” (citing Baskin Robbins and collecting cases in accord)); In re Sony Gaming
networks and Customer Data Security Breach Litigation, 996 F. Supp. 2d 942, 1013-1014 (S.D.
Cal. 2014) (holding “[p]laintiff’s claim could be based on an alleged breach of an ‘agreement to
negotiation’” (citing to Baskin Robbins)).
35
good faith, the defendant has performed his obligations under the contract when it
has made a good faith effort to reach an ultimate agreement.111
Here, Defendant was obligated to negotiate in good faith to determine the
terms and conditions under which it would become the lead investor and provide at
least $10 million, but was not obligated to reach an ultimate agreement on the
necessary terms. Plaintiff’s claim for breach of contract on the basis that Defendant
did not provide at least $10 million in additional financing and by not becoming the
lead investor is DISMISSED. Plaintiff’s claim that Defendant failed to negotiate in
good faith to establish the terms under which Defendant could accomplish the goals
in the QFI Provision remains pending.
5. Defendant’s motion to dismiss Plaintiff’s claim for breach of
the Commercial Agreements Provision is GRANTED in part.
The Commercial Agreements Provision states that “the Parties agree to
negotiate in good faith to establish a long-term commercial partnership across
multiple lines of business no later than March 31, 2019.”112 Due to the language in
the Amended MOU, Plaintiff’s characterization of Defendant’s breach, as stated
above, is particularly important in adjudicating Defendant’s motion to dismiss.
The Court applies the analysis used for the QFI provision to the Commercial
Agreements Provision (the “Provision”). Like the QFI Provision, Defendant’s
111
Baskin Robbins, 117 Cal. Rptr. 2d at 880-81.
112
Am. MOU (emphasis added).
36
alleged failure to establish a “long-term commercial partnership” is not a breach of
this Provision. The Amended MOU did not require that the parties reach an ultimate
agreement on the nature and scope of a long-term commercial partnership. The
failure to “negotiate in good faith” to establish this partnership, however, is
sufficiently definite to establish that Defendant had an obligation to negotiate the
establishment of this partnership. 113
a. Plaintiff has stated a claim for breach based on
Defendant’s failure to “negotiate in good faith.”
Defendant asserts that the complaint does not include a claim for breach of
the duty to negotiate in good faith and that Plaintiff therefore cannot raise this claim
of breach in its opposition to the motion to dismiss.114 Although Plaintiff does not
expressly allege in its complaint that Defendant breached the Amended MOU by
failing to negotiate in good faith, the Court has an obligation to generously construe
the allegations in the complaint at this stage in the litigation. Plaintiff has alleged
generally that Defendant breached the Amended MOU, which includes a provision
113
See supra nn. 103-111 and accompanying text. Pursuant to California law, reliance damages
(including out of pocket costs of negotiating or perhaps lost opportunity costs) are the only form
of damages available for a breach of an agreement to negotiate in good faith. Baskin Robbins, 117
Cal. Rptr. 2d at 885. Expectation damages are not permitted because courts have “no way of
knowing what the ultimate terms of the agreement would have been or even if there would have
been an ultimate agreement.” Id. Plaintiff has not alleged reliance damages for this claim.
Plaintiff only alleges damages in the amount of $10 million or more based on a breach of the QFI
provision. Although Defendant does not raise this issue, it could constitute an independent ground
for dismissal.
114
Def. Reply Br. at 18-19.
37
to “negotiate in good faith.” In the factual background section to Plaintiff’s
complaint, Plaintiff makes several allegations related to Defendant’s alleged refusal
to negotiate in good faith.115 For these reasons, the Court finds that Plaintiff has
alleged breach of contract based on Defendant’s alleged failure to negotiate in good
faith a long-term commercial partnership.
b. Plaintiff has not stated a claim for breach based on
Defendant’s failure to establish a “long-term commercial
partnership” with the Company.
Although Plaintiff claims that Defendant had an obligation to enter into a
commercial partnership, the phrase “agree to negotiate in good faith” itself shows
that the term “long-term commercial partnership” was left to the future agreement
of both parties. Where an essential element of an agreement is left to the “future
agreement of both parties, no legal obligation arises ‘until such future agreement is
made.’”116 The plain language of the Provision shows that at the time the Amended
MOU was signed, the parties had yet to negotiate, or at least complete negotiations,
to finalize the parameters of a “long-term commercial partnership.” If the parties
115
Compl. ¶¶ 23, 28, 29, 42 (shortly after Defendant signed the May 2018 commitment, Defendant
refused to respond to numerous communications and “went dark” as the Company “sought to
secure the promised funds with BeautyCon LA looming”; Defendant refused to completely fund
its loan agreements and conditioned funding on the Company’s pursuit of BeautyCon POP which
“stretched the Company to the breaking point”; Defendant’s chief of retail was unable (or
unwilling) to support BeautyCon POP as Defendant promised; Upon information and belief,
Defendant was aware that funding only 25% of the May 2020 Note left many vendors and
Company customers unpaid during the pandemic.).
116
Baskin Robbins, 117 Cal. Rptr. 2d at 879 (quoting City of Los Angeles v. Superior Court, 333
P.2d 745, 750 (Cal. 1959)).
38
had already reached an agreement on this term, there would be no need specify that
the parties were agreeing to negotiate its establishment.
Even if this Provision had not included the phrase, “agree to negotiate,” and
had unambiguously stated that “the parties shall establish a long-term commercial
partnership,” it would still not be sufficiently definite for the Court to determine
breach or fashion a remedy. The provision does not define the parameters of a “long-
term commercial partnership.” It does not specify what amount of time would
qualify as “long term.” Would Plaintiff have had a claim for breach if the
commercial partnership with Defendant broke down after five years, for example, or
would Defendant have met its obligation under this provision? Furthermore, while
the provision does state that this partnership was to span across “multiple lines of
business,” there is a lacuna of information as to what would constitute the
partnership itself. The Provision does not define the nature and extent of the parties’
collaboration or whether it would include any profit-sharing arrangement. Even if
the MOU had obligated Defendant to engage in a commercial partnership, without
this term being further fleshed out, it would not be possible to determine whether
Defendant had breached.
6. Defendant’s motion to dismiss Plaintiff’s claim for breach of
the Common Share Acquisition Provision is GRANTED.
The Court finds that the CSA Provision is not enforceable because its terms
are not sufficiently definite to determine Defendant’s performance obligations with
39
respect to acquiring shares. While the CSA Provision states that Defendant was to
complete acquisition of the shares by a date certain, the provision does not specify
whether any shares needed to be acquired for Defendant to have performed.
Subsection 3 of the CSA Provision states that Defendant “acknowledges that the
total number of shares available for acquisition (if any) and the exact pricing is not
guaranteed” and is subject to the Company and shareholders receiving approvals for
transfer.117
The CSA Provision plainly provides for the possibility that Defendant would
not acquire any shares because this acquisition depended in part on factors outside
of Defendant’s control. Thus, under the CSA Provision, it was possible for
Defendant to acquire zero shares and not be in breach. In fact, the weight of the
obligations in this provision appears to be on the Company rather than Defendant.
The Company agreed to use “commercially reasonable efforts” to cooperate with
Defendant and determine the optimal structure and mechanism to complete the
acquisition. It is fair to assume that the Company’s agreement to cooperate with
Defendant implies Defendant’s agreement to reciprocate that cooperation. The CSA
Provision fails, however, to sufficiently define what Defendant had to do or refrain
from doing to cooperate in accordance with this Provision. 118 For these reasons,
117
Am. MOU (emphasis added).
118
See Ladas v. California State Auto. Ass’n., 23 Cal. Rptr. 2d 810, 814 (Cal. Ct. App. 1st, Oct.
22, 1993) (affirming trial court’s holding that insurance company’s alleged promise to pay parity
40
there is no workable basis to identify Defendant’s obligations and whether
Defendant is in breach.
III. Fraud in the Inducement
Plaintiff alleges that Defendant fraudulently induced it into executing the
MOUs. Plaintiff claims that during negotiations leading up to the execution of the
MOUs Defendant represented that Defendant would perform under them if the
Company ceased discussions with other investors. Defendant asserts three grounds
for dismissal: (1) Plaintiff’s claim is barred by California’s statute of limitations; (2)
Plaintiff’s claim violates the economic loss doctrine; and (3) the allegations of
fraudulent inducement do not satisfy Superior Court Civil Rule 9(b).
Delaware law applies to the procedural ground for dismissal.
As a threshold matter, both Delaware and California have a three-year statute
of limitations for the claim of fraud in the inducement. Plaintiff does not contest
that it did not file this claim within the three-year time period, but argues that the
statute of limitations was tolled pursuant to Delaware law for the following reasons:
the discovery rule tolls Plaintiffs claims, Defendant fraudulently concealed facts
in setting commission rates “is too vague and indefinite to give rise to an enforceable contractual
duty.”); Peterson Development Co. v. Torrey Pines Bank, 284 Cal. Rptr. 367, 374-75 (Cal. Ct.
App. 4th Aug. 9, 1991) (holding loan commitment was not enforceable where it did not specify
identity of the potential borrower, loan amount, percentage of purchase price, interest rates or
repayment terms); Goldberg v. Santa Clara, 98 Cal. Rptr. 862, 862-63 (Cal. Ct. App. 1st, Dec. 6,
1971) (finding contract calling for additional compensation if plaintiff achieved “savings to the
City of such magnitude” to justify that compensation was too vague to be enforceable).
41
regarding this claim, this claim is equitably tolled, and the filing of the assignment
tolls the statute. Defendant argues in its reply that the statute of limitations is not
tolled and also cites exclusively to Delaware law, however, Defendant also asserts
California law applies because of the California choice-of-law provision in the
MOUs. Although the statutory time period is equivalent, because the parties appear
to disagree on which state’s law applies, the Court will briefly address the conflict
of law issue presented.
As stated above, the MOUs contain a choice-of-law provision wherein the
Parties agreed that California law would apply to “all actions arising out of or in
connection with this Agreement . . . without regard to the conflicts of law provisions
of the State of California or of any other state.” However, pursuant to Delaware law,
“choice-of-law provisions in contracts do not apply to statutes of limitations, unless
a provision expressly includes it. If no provision expressly includes it, then the law
of the forum applies because the statute of limitations is a procedural matter.”119
Here, the choice of law provision does not specify whether it includes California’s
statute of limitations. As such, because statutes of limitations relate to matters of
119
Pivotal Payments Direct Corp. v. Planet Payment, Inc., 2015 WL 11120934, at *3 (Del. Super.
Dec. 29, 2015) (internal citations omitted); see also Weinstein v. Luxeyard, Inc., 2022 WL 130973,
at *3 (Del. Super. Jan. 14, 2022); In re Rehabilitation of Manhattan Re-Insurance Co., 2011 WL
4553582, at *8 (Del. Ch. Oct. 4, 2011); B.E. Capital Management Fund LP v. Fnd.com, Inc., 171
A.3d 140, 147 (Del. Ch. Oct. 4, 2017).
42
procedure, Delaware law applies. Because Delaware’s statute of limitations applies,
Delaware law with respect to tolling also applies.
“[C]ourts apply a three-step analysis to determine whether a claim is time-
barred. First, the court determines when the cause of action accrues. Second, the
court determines whether the statute of limitations may be tolled so that the cause of
action accrues after the time of breach or injury.”120 If a plaintiff has not filed within
the statutory time period, it “bear[s] the burden of pleading specific facts
demonstrating that the statute was tolled.”121 The third step in the analysis, assuming
tolling applies, is to determine when the plaintiff was on inquiry notice, which is the
date the statute of limitations begins to run.122 Once the plaintiff has discovered
“facts sufficient to put a person of ordinary intelligence on inquiry which, if pursued,
would lead to discovery” the plaintiff has inquiry notice.123 A plaintiff need not
know of every aspect of the alleged wrongful conduct for the court to find the
plaintiff is on inquiry notice, but only when the plaintiff should have discovered the
120
AssuredPartners of Virginia, LLC v. Sheehan, 2020 WL 2789706, at *12 (Del. Super. May 29,
2020).
121
Puig v. Seminole Night Club, LLC, 2011 WL 3275948, n. 21 (Del. Ch. July 29, 2011) (quoting
In re Coca–Cola Enters., Inc., 2007 WL 3122370, at *6 (Del. Ch. Oct. 17, 2007); see also Solow
v. Aspect Resources, LLC, 2004 WL 2694916, at *3 (Del. Ch. Oct. 19, 2004)).
122
AssuredPartners of Virginia, LLC, 2020 WL 2789706, at *12.
123
S&R Associates, LP v. Shell Oil Co., 725 A.2d 431, 439 (Del. Super. Sept. 30, 1998); Jeter v.
RevolutionWear, Inc., 2016 WL 3947951, at *10 (Del. Ch. July 19, 2016); Pivotal Payments Direct
Corp. v. Planet Payment, Inc., 2015 WL 11120934, at *5 (Del. Super. Dec. 29, 2015).
43
“general fraudulent scheme.”124 “[N]o theory will toll the statute beyond the point
where the plaintiff was objectively aware, or should have been aware, of facts giving
rise to the wrong.”125
With respect to the first step in the analysis, a claim for fraudulent inducement
accrues at the time of the wrongful act, i.e., when the fraudulent statements were
made, not when the harmful effects of the wrongful act were felt.126 “The fraudulent
statements must have occurred on or before the date when the parties entered into
the contract.”127 With respect to the dates of execution of the MOUs, the original
MOU does not contain the date that it was signed, though Plaintiff alleges in the
complaint that the parties entered into the original MOU in June 2018.128 The
Company’s board of directors approved the original MOU on June 24, 2018. For
the purpose of Defendant’s motion, the Court assumes that the original MOU was
executed between June 24 and June 30, 2018. For Plaintiff’s claim to be timely filed
with respect to the Original MOU, it would have to be filed no later than June 30,
2021, unless the statute is tolled. The Amended MOU is dated December 16, 2018.
For Plaintiff’s claim to be timely filed with respect to the Amended MOU, it would
have to be filed within three years of that date, unless the statute is tolled. Plaintiff
124
Ocimum Biosolutions (India) Ltd. v. AstraZeneca UK Ltd., 2019 WL 672836, at *9 (Del. Super.
Dec. 4, 2019).
125
In re Tyson Foods, Inc., 919 A.2d 563, 585 (Del. Ch. Feb. 6, 2007).
126
See Pivotal Payments Direct Corp., 2015 WL 11120934, at *4.
127
Id.128
The Note referred to in the original MOU is dated June 18, 2018.
44
filed its complaint on December 13, 2022, therefore, unless a tolling exception
applies, Plaintiff’s claim is time-barred.
With respect to the second step in the analysis, statutes of limitations may be
tolled in “certain circumstances, including fraudulent concealment, inherently
unknowable injury [known as the “discovery rule”], and equitable tolling.”129 To
toll the statute of limitations based on fraudulent concealment “the plaintiff must
allege some affirmative act by the defendant that either prevented the plaintiff from
gaining knowledge of material facts or led the plaintiff away from the truth.”130 The
discovery rule applies where the injury was “inherently unknowable” and the injured
party was “blamelessly ignorant.”131 “When these ‘factual requisites’ are met, ‘“the
limitations period commence[s] to run when the person ha[s] reason to know that a
wrong ha[s] been committed.’”132 The limitations period is only tolled until the
plaintiff is on inquiry notice.
Plaintiff asserts that its fraudulent inducement claim is tolled by the discovery
rule because it was not on notice that it possessed this claim until December 21,
2019, the date Thompson sent the Letter to Ohana. In support of its position that it
129
Pivotal Payments Direct Corp., 2015 WL 11120934, at *5.
130
Jeter v. RevolutionWear, Inc., 2016 WL 3947951, at *10 (internal quotations omitted).
131
Morton v. Sky Nails, 884 A.2d 480, 482 (Del. 2005); Pack & Process, Inc. v. Celotex Corp.,
503 A.2d 646, 650 (Del. Super. Oct. 16, 1985) (quoting Pioneer Nat. Title Ins. Co. v. Sabo, 382
A.2d 265 (Del. Super. Jan. 17, 1978); S&R Associates, LP v. Shell Oil Co., 725 A.2d 431, 439
(Del. Super. Sept. 30, 1998).
132
Pack & Process, Inc., 503 A.2d at 650 (quoting Pioneer Nat. Title Ins. Co., 382 A.2d 266-67.
45
was not on notice until this date, Plaintiff cites to paragraphs 32, 38, and 39 of its
complaint.133 Paragraphs 38 and 39 discuss the Letter wherein Thompson indicated
Essence Ventures’ interest in purchasing the Company. If Plaintiff was not on
inquiry notice until December 21, 2019, this would toll the statute until December
20, 2022, seven days after Plaintiff filed the complaint.
The Court does not find that the discovery rule applies because the injury was
not inherently unknowable before Thompson sent the Letter on December 21, 2019.
Plaintiff alleged that “it was no secret going back to 2018” that Defendant wished to
control the Company.134 Plaintiff also alleges that the Company had to hire an
investment banker in July 2019 due to Defendant’s failure to provide the promised
financing —a little over a year after entering into the original MOU and about seven
months after entering into the Amended MOU. The Court finds that Plaintiff has
established by its own allegations that it was on inquiry notice it had a claim for
fraudulent inducement for more than three years before it filed this claim.
Plaintiff asserts the same grounds in its fraudulent concealment argument as
it does for its discovery rule argument, namely the Letter. Plaintiff, however, has
failed to articulate how the Letter amounts to an affirmative act that prevented
Plaintiff from gaining knowledge of material facts or lead it away from the truth that
133
Paragraph 32 of the complaint alleges that Defendant backchannelled with other Series A
investors to chill new investors but does not provide a time frame as to when this occurred.
134
Compl. ¶ 38.
46
Defendant did not intend to fund the MOUs.135 Plaintiff bears the burden of asserting
specific facts of fraudulent concealment and it has not done so.
Plaintiff’s claim of equitable tolling is without merit as it relies on Defendant’s
alleged role as a fiduciary. The Court dismissed the claim for breach of fiduciary
duty on the record after oral argument.136 Finally, Plaintiff argues the filing of the
Assignment tolls the statute. The Court finds that there is no merit to this claim.
The Assignment was filed twenty months before Plaintiff filed its claim which
provided a reasonable amount of time for the Trust to file the complaint within the
statutory time period. Plaintiff has not identified any relevant Delaware caselaw to
support its position, and the Court has not identified a case to support tolling on this
basis.
Plaintiff’s claim for fraud in the inducement is barred by Delaware’s statute
of limitations because Plaintiff did not file it within the statutory time period and no
tolling exception applies. Because Plaintiff’s claim is time barred, the Court will not
address Defendant’s remaining two grounds for dismissal for this claim.
CONCLUSION
For the reasons stated herein:
135
See Jeter v. RevolutionWear, Inc., 2016 WL 3947951, at *10.
136
See BeautyCon Media ABC v. New General Market Partners, C.A. No. N22C-12-143 MAA
CCLD, Adams, J., Transaction ID 70026953 (Del. Super. May 16, 2023).
47
1. Defendant’s motion to dismiss Plaintiff’s claim of tortious interference with
prospective contractual relations is DENIED.
2. Defendant’s motion to dismiss Plaintiff’s claim of breach of the Original
MOU and Amended MOU is GRANTED in part.
a. Defendant’s motion to dismiss Plaintiff’s claim of breach of the Original
MOU is GRANTED.
b. Defendant’s motion to dismiss Plaintiff’s claim of breach of the Amended
MOU is DENIED in part.
i. Plaintiff’s claim of breach of the CSA Provision is DISMISSED.
ii. Plaintiff’s claim of breach of the QFI and Commercial Agreements
provisions based on Defendant’s alleged failure to negotiate those
provisions in good faith remains pending; the balance of Plaintiff’s
claims of breach of these provisions is DISMISSED.
3. Defendant’s motion to dismiss Plaintiff’s claim of fraud in the inducement is
GRANTED, because it was not timely filed and no exception applies to toll the
statute.
IT IS SO ORDERED.
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