Aveanna Healthcare, LLC v. Epic/Freedom, LLC

• Court: Superior Court of Delaware
• Decided: July 29, 2021
• Docket: N20C-08-055 AML CCLD
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

AVEANNA HEALTHCARE, LLC ) (F/K/A BCPE EAGLE BUYER LLC), ) ) Plaintiff, ) ) v. ) ) C.A. No. N20C-08-055 AML CCLD EPIC/FREEDOM, LLC, and ) WEBSTER CAPITAL CORPORATION ) (A/K/A WEBSTER CAPITAL ) PARTNERS, and WEBSTER EQUITY ) PARTNERS), ) ) Defendants. )

Submitted: April 29, 2021 Decided: July 29, 2021

MEMORANDUM OPINION

Upon Plaintiff’s Motion for Judgment on the Pleadings: DENIED

Upon Plaintiff’s Ch. Ct. R. 56(f) Motion for An Extension of Time: GRANTED

Upon Defendants’ Motion for Judgment on the Pleadings: DENIED

Upon Epic/Freedom LLC’s Motion for Summary Judgment: DENIED WITHOUT PREJUDICE Richard L. Renck, Esquire, Tracey E. Timlin, Esquire, of DUANE MORRIS LLP, Wilmington, Delaware, Robert M. Castle, III, Esquire, Randy D. Gordon, Esquire, of DUANE MORRIS LLP, Dallas, Texas, Attorneys for Plaintiff Aveanna Healthcare, LLC.

Kenneth J. Nachbar, Esquire, Miranda N. Gilbert, Esquire, of MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware, R. Todd Cronan, Esquire, Joseph P. Rockers, Esquire, of GOODWIN PROCTER LLP, Boston, Massachusetts, Attorneys for Defendants Epic/Freedom, LLC and Webster Capital Corporation.

LEGROW, J. The buyer and the seller executed interrelated purchase agreements that

memorialized the buyer’s acquisition of two companies from the seller. To value

the companies, the buyer used an accounting model that assumed the accuracy of

certain financial statements prepared by the seller and its owner during the diligence

phase of the parties’ negotiations. The truth of those financial statements

contractually was represented and warranted by the companies, but not by the seller

or its owner. After the transaction closed, however, the buyer allegedly discovered

the seller and its owner falsified the financial statements in a knowing, concerted

effort to induce the buyer to agree to a purchase price higher than the seller and its

owner otherwise could have achieved. The buyer filed this fraud action to recover

damages from the seller and its owner for their knowledge of, and participation in,

the companies’ false contractual representations.

The seller responded with breach of contract counterclaims arising from the

buyer’s alleged failure to pay the entire agreed upon purchase price. Under the

purchase agreements, the seller was entitled to receive an upfront payment, future

payment of a federal tax refund, and distribution of escrowed funds. The buyer

agreed to remit the tax refund to the seller no later than ten business days after the

buyer received it. The seller was entitled to automatic distribution of the escrow

funds unless the buyer properly lodged an indemnification claim against the seller

within one year of the transaction’s closing. The seller alleges the buyer wrongfully refused to remit the refund despite the seller’s attempts to collect it. The seller also

alleges the buyer sidestepped the parties’ indemnification notice requirements,

which enabled the buyer to withdraw the escrow funds without the seller’s objection.

The parties have denied all wrongdoing and now move for judgment on the

pleadings as to their respective claims.

The parties’ motions present three independent questions that are controlled

by unambiguous contract language arrived at through sophisticated, arms-length

negotiation. First, may the seller and its owner escape liability for contractual fraud

by citing anti-reliance language inapplicable to fraud claims that challenge a seller’s

knowledge of a company’s false contractual representations? Second, may the buyer

withhold the tax refund by invoking self-styled “conditions” unrelated to the

refund’s release? Third, did the buyer validly extract escrow funds held for the seller

by providing an indemnification notice solely to the parties’ escrow agent despite

the buyer’s duty to deliver a single notice to the escrow agent and the seller

concurrently?

The Court answers each of these questions in the negative and declines to

resolve any embedded factual issues. Accordingly, and for the reasons discussed

below, the parties’ motions for judgment on the pleadings are DENIED. Because

fact discovery is necessary for the buyer’s tax dispute defenses, the buyer’s motion

for an extension of time to respond to the seller’s summary judgment motion is

2 GRANTED. Finally, because the seller’s summary judgment motion presents

equitable arguments, but also because this litigation’s procedural history warrants

granting the seller an opportunity to revise its arguments, that motion is DENIED

WITHOUT PREJUDICE.

BACKGROUND

This case concerns Aveanna Healthcare, LLC’s (“Aveanna” or “Buyer”)

acquisition of Epic Acquisition, LLC and FHH Holdings, Inc. (the “Companies”)

from Epic/Freedom, LLC (“Epic” or “Seller”) through an all-cash-for-stock

transaction that was memorialized in a stock purchase agreement (the “SPA”) to

which Aveanna, Epic, and the Companies are parties. Aveanna contends Epic and

its owner, Webster Capital Corporation (“Webster” and together with Epic,

“Defendants”), priced the deal based on false contractual representations of the

Companies’ financials, inducing Aveanna’s acceptance of negative value assets.1

Seller responded with two breach of contract counterclaims. First, Epic

claims Aveanna improperly is withholding a federal tax refund afforded Seller under

the SPA despite Buyer’s duty to remit that refund no later than ten business days

after Buyer receives it. Second, Epic claims Aveanna wrongfully extracted escrow

funds segregated under a companion purchase agreement (the “Escrow Agreement”)

1 Aveanna initially sued a number of Defendants’ managers in their individual capacities. It since has dismissed its claims against them. D.I. 34–35. 3 to true up the sale price by circumventing that agreement’s notice and objection

procedures.

A. The Parties

Aveanna develops and sells home healthcare technology and personalized

therapeutic services.2 Aveanna operates primarily in the “enteral solution” space.

Enteral solutions are food consumption products designed to assist patients who

have difficulty ingesting nutrients without synthetic aids.3

Before the sale, Epic offered services and supplies similar to those offered by

Aveanna.4 When Epic entered the enteral solution industry, it began targeting the

populations from which Aveanna solicited its clients.5 Epic’s expansion into

Aveanna’s market segment was pioneered by Webster, a private equity firm that

owned a majority stake in Epic.6

B. The Sale

During the fall of 2015, Webster directed Epic to purchase various home

healthcare assets, including two lucrative enteral solution businesses.7 Epic’s

acquisition of those firms strengthened Epic’s influence over what was acclaimed

2 D.I. 1, Compl. ¶ 14. 3 Id. 4 Id. ¶ 15. 5 Id. 6 Id. ¶¶ 8, 15. 7 Id. ¶ 15. 4 publicly as a billion-dollar sector.8 Given that news, Webster decided to put Epic’s

enteral lines up for sale in April 2016.9

Defendants hired investment banks and private consultants who generated

financial performance analyses and documentation through which prospective

buyers independently could assess Epic’s financial health.10 The reports purported

to disclose the full extent of Epic’s performance during its 2016 fiscal year.11

Around the fall of 2016, Aveanna expressed interest in purchasing Epic. A

deal for Aveanna would include synergies, as managing Epic’s enteral assets would

allow Aveanna to control a wider share of the enteral solution market. Preliminary

negotiations between Aveanna and Defendants concluded in December 2016, at

which time Aveanna and Epic reached a purchase agreement in principle.12 Under

that agreement, Aveanna would acquire the Companies through an all-cash-for-stock

merger. Before the merger, Epic would convey all its enteral assets to the

Companies.

To finalize the transaction, the SPA’s parties conducted diligence. Aveanna

priced the Companies based on the projections and analyses prepared by

8 Id. ¶ 16; see generally D.I. 44, Ex. A, Amy Or, Webster Capital Explores Sale of Epic Health Services, Wall St. J., https://www.wsj.com/articles/webster-capital-explores-sale-of-epic-health- services-1461245592 (last updated Apr. 21, 2016, 9:33 AM). 9 Compl. ¶ 16. 10 Id. ¶ 31. 11 Id. ¶ 18. 12 Id. 5 Defendants’ advisors.13 The reports would survive closing as the contractually-

defined and incorporated “Financial Statements.” Using the Financial Statements,

Aveanna developed an earnings before interest, taxes, depreciation, and amortization

(“EBITDA”) model. Based on that model, Aveanna agreed to purchase the

Companies for $950 million.14 That figure aligned with price ranges produced by

Defendants’ third-party advisors, suggesting the Financial Statements were reliable.

With that understanding, the transaction closed on March 16, 2017.15

C. The Terms

1. The SPA

In addition to the parties’ material representations, the SPA contains language

governing the scope of permissible reliance, the viability of fraud claims, and the

procedures surrounding tax refunds and indemnification claims and notices.

a. Representations; Anti-Reliance; Fraud Carve-Outs

Under SPA Section 3.4, the Companies—but not Defendants—represented

the truth of the Financial Statements. Specifically, the Companies represented that

the Financial Statements “present fairly in all material respects the consolidated

13 Id. ¶ 21. 14 The purchase price was subject to adjustments that could increase or decrease the price depending on certain corrections. See D.I. 3, Ex. A § 2.3 (hereinafter “SPA”). For example, a revision to the Companies’ net working capital increased the purchase price if the revised amount exceeded the total identified pre-closing. Id. § 1.1 (defining “Net Working Capital Adjustment Amount”); id. § 2.3(b) (providing for increase); id. § 2.4 (describing payment procedure). 15 Compl. ¶ 20. 6 financial condition and results of operations of Seller” and that the Financial

Statements “were prepared in accordance with GAAP applied on a consistent

basis.”16 The Companies also represented that they had no undisclosed liabilities.17

In the same Article, the SPA’s parties drafted broad anti-reliance language

that precluded Aveanna from relying on any representation not memorialized in the

SPA. Specifically, the SPA’s parties agreed:

NONE OF SELLER, THE COMPANIES OR ANY OF THEIR DIRECT OR INDIRECT SUBSIDIARIES OR OWNERS, INCLUDING, WITHOUT LIMITATION CAPITAL III, L.P., WEBSTER CAPITAL II, L.P., WEBSTER CAPITAL II-QP, L.P., WEBSTER OR ANY OF THE REPRESENTATIVES, MEMBERS, MANAGERS, EMPLOYEES, DIRECTORS, OFFICERS, STOCKHOLDERS OR AFFILIATES OF ANY OF THEM HAS MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER . . . OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE TRANSACTION DOCUMENTS AND THE CERTIFICATES CONTEMPLATED HEREBY AND THEREBY AND THE COMPANIES AND ALL SUCH PERSONS HEREBY DISCLAIM ANY SUCH OTHER REPRESENTATIONS AND WARRANTIES.18

To reinforce this intent, the SPA’s parties further agreed:

[N]one of Seller, the Companies, their direct and indirect Subsidiaries or any representatives, members, managers, employees, officers, directors, stockholders or Affiliates of any of them, including, without limitation, Webster Capital II, L.P., Webster Capital II-QP, L.P., Webster Capital III, L.P. and their Affiliates, has made, and shall not be deemed to have made, any representations or warranties in the materials relating to the business of the Companies or their Subsidiaries made available to Buyer, including due

16 SPA § 3.4(b). 17 Id. § 3.4(c). 18 Id. § 3.20(a). 7 diligence . . . and no statement contained in any of such materials or made in any such presentation shall be deemed a representation or warranty hereunder or deemed to be relied upon by Buyer or any of its Affiliates in executing, delivering and performing this Agreement and the transactions contemplated hereby.19

Highlighting the party-specific nature of the SPA’s representations, Article IV—

where Seller made separate representations—repeats this language verbatim.20

To reinforce its disclaimer of extra-contractual reliance, Aveanna expressly

acknowledged the Companies’ and Defendants’ disclaimer of any extra-contractual

representation:

None of Seller, the Companies, their direct and indirect Subsidiaries or any representatives, members, managers, employees, officers, directors, stockholders or Affiliates of any of them, including, without limitation, Webster Capital II, L.P., Webster Capital II-QP, L.P., Webster Capital III, L.P. and their Affiliates and representatives, has made, and shall not be deemed to have made, any representations or warranties in the materials relating to the business of the Companies or their Subsidiaries made available to Buyer, including due diligence . . . or in any presentation concerning the business of the Companies and their Subsidiaries or others in connection with the transactions contemplated hereby or otherwise. . . . Buyer further acknowledges and agrees that, except for the representations and warranties contained herein, in the Transaction Documents and the certificates contemplated hereby and thereby, . . . any cost estimates, projections or other predictions, data, financial information, memoranda or offering materials or presentations, including any offering memorandum or similar materials made available by Seller, the Companies their direct or indirect Subsidiaries or owners or any . . . Affiliates of any of them, are not and shall not be deemed to be or to include representations or warranties of any of the foregoing . . . and are not and shall not be deemed to be relied upon by Buyer or any of its

19 Id. § 3.20(b). 20 Id. § 4.7(a)–(b). 8 Affiliates executing, delivering and performing this Agreement and the transactions contemplated hereby.21

Aveanna also agreed, through an integration clause, that the SPA is a fully-merged

document.22

The SPA’s parties carved contractual fraud liability out from the SPA’s

extensive anti-reliance and integration language. In Article III—where the

Companies alone made representations—the SPA explains:

[N]othing contained in this Agreement shall be construed to limit the recourse of any party in the event of fraud with respect to the representations and warranties set forth in this Agreement. . . .23

This language reappears three times.24 Most notably, the SPA’s parties included this

language in a provision titled “No Recourse.” Under the No Recourse provision, the

SPA’s parties generally agreed they could not sue each other’s non-party

“Affiliates.”25 But they also specifically agreed Affiliates can be pursued on a claim

“with respect to fraud involving the representations and warranties contained in

Article III [i.e., those by the Companies], Article IV [i.e., those by Seller], and

Article V [i.e., those by Buyer], or any certificate.”26

21 Id. § 5.8. 22 Id. § 10.16. 23 Id. § 3.20(c). 24 Id. § 4.7(c) (the Seller’s representations); id. § 9.4(b) (indemnification); id. § 10.17 (remedies). 25 Id. § 10.17. The SPA defines “Affiliate” to include a party’s controlling owner. Id. § 1.1. 26 Id. § 10.17. 9 b. Tax Returns; Tax Refunds

A federal tax refund served as partial consideration for the sale. The SPA’s

parties crafted a reticulated system for filing tax returns, remitting tax refunds, and

defending audits initiated by the Internal Revenue Service (the “IRS” or the

“Government”). First, under Section 6.9(e), Buyer and Seller agreed to “cooperate”

on return filings (the “Cooperation Provision”). The Cooperation Provision states:

Buyer, Seller and the Companies and their Subsidiaries shall cooperate fully, as and to the extent reasonably requested by the other parties, in connection with the filing of Tax Returns, the filing of any amended Tax Return for a Pre- Closing Tax Period (which amended Tax Return may only be filed at the request of Seller), any Tax audits, Tax proceedings or other Tax-related claims, the authorization and execution of any appropriate powers of attorney to accomplish the foregoing, allowing Seller to review Tax Returns to determine or verify the proper amounts payable as refunds hereunder. . . .27

Next, under Section 6.9(f), the SPA’s parties enshrined Epic’s right to any

refund disbursed in connection with the Companies’ transaction-based tax returns

(the “Refund Provision”). The Refund Provision explains:

Seller shall be entitled to receive from Buyer, the Companies or their Subsidiaries all refunds (or credits for overpayments) of Taxes of the Companies and their Subsidiaries (including any interest thereon) attributable to Pre-Closing Tax Periods (including as a result of any Transaction Deductions). . . .28

27 Id. § 6.9(e). 28 Id. § 6.9(f). 10 The Refund Provision charges Aveanna with filing an “IRS Form 1139 for any

eligible carryback periods of the Companies and their Subsidiaries.”29 Once

disbursed, Aveanna must remit the refund to Epic “no later than ten business days

after receipt by” Aveanna.30 The Refund Provision further provides that a remitted

refund must reflect “the net of any [t]axes owed with respect to or as a result of such

refund . . . and net of any expenses incurred in obtaining the refund.”31 If a remitted

refund subsequently is “disallowed or clawed back” by the Government “for any

reason,” the SPA’s parties agreed Epic “shall (or shall cause its equity holders to)

return the full amount of such refund, plus any interest, penalties, and associated

costs and legal fees.”32 Last, the Refund Provision declares:

Notwithstanding anything herein to the contrary, any refund (or credit for overpayment) requested and/or payable to Seller pursuant to the provisions of this Section [] shall only be claimed and/or payable to the extent such refund (or credit for overpayment) is based on Tax positions that are claimed with a minimum “more likely than not” level of comfort, as reasonably determined in consultation with Seller pursuant to the provisions of this Section [] and [the Cooperation Provision].33

Finally, under Section 6.9(b), the SPA’s parties planned for IRS audits (the

“Audit Provision”). Under the Audit Provision, Epic has the power “to control . . .

any audit . . . with respect to the [t]axes or [t]ax [r]eturns of the Companies . . .

29 Id. 30 Id. (capitalization omitted). 31 Id. 32 Id. 33 Id. 11 including, . . . a [t]ax refund or credit to which [Epic] is entitled under [the Refund

Provision].”34 The Audit Provision affords Aveanna the qualified right to

“participate” in an audit “at its own expense.”35 But Epic may exclude Aveanna

from the audit’s defense unless Epic intends to settle the audit in a manner that would

“increase[e] a [t]ax liability of the Companies.”36 Only if Epic intends to do so does

it need Aveanna’s consent.37

c. Indemnification Claims; Indemnification Claim Notices

The SPA articulates the grounds and procedures for making “Indemnification

Claims.” Under SPA Section 9.2(a)(i), Epic must indemnify Aveanna for, among

other things, “the breach or inaccuracy of any representation or warranty made by

the Companies or Seller” in the SPA or its attached documents. To lodge such an

Indemnification Claim, Aveanna must send Epic an “Indemnification Claim

Notice.”38 The SPA defines an Indemnification Claim Notice as “written notice

describing a claim for indemnification under this Agreement, the amount thereof (if

known and quantifiable), and the basis thereof.”39

34 Id. § 6.9(b). 35 Id. 36 Id. 37 Id. 38 Id. § 9.5(a); see id. § 9.4(a)(i) (explaining, in the context of a limitations period, that Indemnification Claim Notices are pre-conditions to coverage). 39 Id. § 1.1. 12 After being notified, Epic may, “upon reasonable notice,” “access . . .

[Aveanna’s] books and records . . . solely for the purposes of evaluating and

responding to [an] Indemnification Claim, resolving any disputes with respect

thereto, or responding to any matters or inquiries raised in [an] Indemnification

Claim Notice.”40 In any event, the SPA observes that Aveanna is not entitled to

indemnification until its losses exceed an “Indemnification Threshold” of $7.125

million—i.e., the sum escrowed from the sale price for Indemnification Claims.41

2. The Escrow Agreement

Buyer and Seller executed the Escrow Agreement contemporaneously with

the SPA. In addition to truing up the sale price, the Escrow Agreement allocates

litigation risk by depositing collateral (the “Escrow Funds”) with a third-party

custodian (the “Escrow Agent”) as security for Indemnification Claims.42 Among

the Escrow Agent’s duties is its agreement to receive and respond to requests to

release the Escrow Funds ahead of their automatic distribution to Seller, which was

40 Id. § 9.5(a). 41 Id. § 9.4(a)(iii). 42 D.I. 46, Ex. A Recitals & § 2 (hereinafter “EA”). The Buyer’s capital contribution comprised (i) $15 million or “Adjusted Escrow Funds”; and (ii) $7.125 million or “Indemnity Escrow Funds”. Id. § 2(a). Both Funds are captured by the EA’s definition of “Escrow Funds”. Id. § 2(a)(ii). As a result, it seems reasonably clear that the entire $22.125 million operates to true up the sale price. The parties, however, do not dilate on the $15 million, focusing instead solely on proper ownership of the $7.125 million. Accordingly, and for simplicity, this decision uses “Escrow Funds” as shorthand for the Indemnity Escrow Funds only. 13 scheduled for March 16, 2018 (the “Final Escrow Release Date”).43 Central to this

dispute is the concept of an early release.

Under Escrow Agreement Section 4(b), Buyer may request that the Escrow

Agent release the Escrow Funds “at any time prior” to the Final Escrow Release

Date.44 To do so validly, Buyer must take two steps. First, Buyer must “make a

claim for indemnification from Seller pursuant to Section 9.2 of the” SPA. 45 As

observed, SPA Section 9.2 describes the grounds for indemnification, not the

procedure for lodging an Indemnification Claim Notice.46 The Escrow Agreement

does not incorporate any other section in Article IX of the SPA. Second, Buyer must

deliver concurrently to the Escrow Agent and Seller a written notice (an "Indemnification Notice") describing the claim, the amount thereof (if known and quantifiable, and which may include the amount of Losses actually suffered by the Buyer Indemnified Party and/or Losses which may in good faith be expected to be suffered by the Buyer Indemnified Party assuming in each case that all of the facts and circumstances forming the basis of the indemnification were true) and the basis of the claim (an "Indemnification Claim").47

Although the Escrow Agreement’s Indemnification Claim is titled and defined

identically in the SPA, the Escrow Agreement’s “Indemnification Notice” is titled

and defined differently than the SPA’s Indemnification Claim Notice.48

43 Id. § 4(f). 44 Id. § 4(b). 45 Id. 46 Compare SPA § 9.2, with id. § 9.5. 47 EA § 4(b). 48 Compare id. (containing a “good faith” element), with SPA § 1.1 (omitting such element). 14 After Buyer takes these steps, Seller has 30 days to exercise one of two

options.49 Seller may choose not to contest Buyer’s Indemnification Notice.

Alternatively, Seller may file a written objection to Buyer’s Indemnification Notice

(a “Dispute Notice”).50 If Seller timely files a Dispute Notice, then the Escrow Agent

may not release the Escrow Funds until the parties resolve the issue.51 But, if Seller

does not object, or if Seller fails to object before the 30-day deadline, then the

Escrow Agent must release to Buyer the sum requested.52

Even in cases of no contest or neglect, however, the Escrow Agreement does

not penalize Seller with a waiver of its right to challenge a release. To the contrary,

the Escrow Agreement provides:

No failure or delay by a party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, and no single or partial exercise thereof shall preclude any right of further exercise or the exercise of any other right, power or privilege.53

This “No Waiver” provision concludes by referencing Section 4, where the notice

and objection procedures reside.

The right of the Parties to receive all or a portion of the Escrow Funds under the circumstances described in Section 4 above is in addition to, and not in lieu of, any other remedies that any Person may have against another Person pursuant to the [SPA] in the event of a breach of, or other liability under, the [SPA].54 49 EA § 4(b). 50 Id. 51 Id. § 4(c). 52 Id. § 4(b). 53 Id. § 15. 54 Id. 15 D. The Post-Closing Discoveries

After the transaction closed, the Companies experienced financial problems

that prompted Aveanna to conduct an internal investigation. The investigation

revealed material inaccuracies in, and undisclosed liabilities masked by, the

Financial Statements.55 Specifically, Aveanna learned the Defendants:

(1) booked phantom returns on the Companies’ enteral assets, inflating earnings with unliquidated or disputed profits while hiding present losses;56

(2) overstated revenue from the Companies’ rehabilitation assets by failing to adjust accounts receivable reserves to a level appropriately reflective of the Companies’ cash streams and by ignoring evidence suggesting a need for adjustments;57

(3) understated the costs of goods sold by the Companies’ enteral lines, resulting in the appearance of minimal production expenses that concealed an unreconciled accounting of inventory-based and other net operating losses;58

(4) understated the Companies’ insurance expenses by declining to record reserves for incurred but unreported malpractice and professional liability claims;59

(5) omitted the extent of the Companies’ exposure to liability under the Affordable Care Act;60 and

(6) omitted the Companies’ breach of a patent license with a third party, which Aveanna was required to settle.61

55 Compl. ¶¶ 22–23. 56 Id. ¶¶ 26–47. 57 Id. ¶¶ 48–51. 58 Id. ¶¶ 52–58. 59 Id. ¶¶ 59–64. 60 Id. ¶¶ 65–68. 61 Id. ¶¶ 69–74. 16 Aveanna contends these misstatements were not mere scrivener’s errors, but

rather were the fruits of a concerted effort to deceive prospective buyers and inflate

the Companies’ sale price. As support for that contention, Aveanna pleads e-mail

messages exchanged by managers on the sell-side during the sale process which

suggest Defendants curated, or at least knew about, the falsity of the Financial

Statements.62 As examples, when Defendants’ managers learned that the Companies

were underperforming before the merger,

(1) Epic’s then-Chief Financial Officer wrote that Defendants would “fix” the Financial Statements so the Statements would “hit the . . . results” Defendants desired;63

(2) a Webster vice president instructed Defendants’ advisors to “scrub” the Financial Statements, and to “remove[]” “anything . . . detrimental”;64 and

(3) Epic’s former Chief Financial Officer exclaimed to another Epic officer that “[e]very $10K” of artificial earnings added to the Financial Statements would generate “$1,200–1,500” more in sale profits for the sell-side’s managers “at a 10X [EBITDA] multiple!”65

At the pleadings stage, these messages and others make it reasonably conceivable

that Defendants knew the Companies suffered considerable reversals, were overly

leveraged, and could not be advertised credibly at the EBIDTA multiples

Defendants’ analysts projected and buyers were expected to match. These messages

62 Id. ¶¶ 31, 33–39, 41–47. 63 Id. ¶¶ 39, 41. 64 Id. ¶ 46. 65 Id. ¶ 47. 17 also support a reasonable inference that Defendants knew erasing detrimental entries

from the Companies’ Financial Statements would hew the Companies’ EBIDTA to

the prices Aveanna’s model estimated.

E. The Escrow Dispute

Based on this investigation, Aveanna sent Epic an Indemnification Claim

Notice on December 21, 2017. In that Notice, Aveanna cited its fraud allegations as

the basis for its Indemnification Claim.

[B]ecause Buyer valued the Companies based on the operating results presented by Seller and the Companies in the Financial Statements (and, particularly, based on EBITDA), Buyer’s Losses as a result of these breaches include the diminution in value of the Companies associated with these representation and warranty breaches. Such diminution in value is calculated by taking into account the multiple used by Buyer to determine the enterprise value of the Companies (12.2x [] EBITDA). Accordingly, Buyer suffered Losses in an amount equal to at least $85,644,0001 as a result of these breaches. As such, Buyer demands payment in cash of an aggregate amount equal to the [] Escrow Funds.66

In that last sentence, Aveanna referenced the Escrow Funds obliquely. Aveanna’s

Indemnification Claim Notice did not mention that Aveanna would be seeking an

immediate release of the Escrow Funds under Escrow Agreement Section 4(b).

But on the same day, and at the same time, Aveanna sent an Indemnification

Notice to the Escrow Agent.67 The Indemnification Notice, which is facially shorter

than the Indemnification Claim Notice, did not contain as much granularity as the

66 D.I. 46, Ex. B at 3–4. 67 D.I. 46, Ex. C. 18 latter. To fill the gaps, Aveanna attached the Indemnification Claim Notice it sent

Epic for the Escrow Agent’s review.68 Aveanna, however, did not send the

Indemnification Notice it sent the Escrow Agent to Epic for Epic’s review.

On January 24, 2018—33 days later—Epic responded to the Indemnification

Claim Notice.69 Epic tentatively denied Aveanna’s allegations and noted that it

would continue to assess the Indemnification Claim.70 Epic also reserved its right,

under the SPA, to access Aveanna’s books and records.71 About two months later,

Epic sent Aveanna a follow-up letter. In its follow-up letter, Epic maintained its

view that Aveanna’s fraud allegations were baseless.

Oblivious to Aveanna’s Indemnification Notice, Epic never filed a Dispute

Notice with the Escrow Agent.72 Without a Dispute Notice, the Escrow Agent

treated Aveanna’s request as uncontested, and the Agent released the Escrow Funds

at the end of 30 days. Despite Epic’s challenges to the allegations, Aveanna never

mentioned the Escrow Funds’ release to Epic.

F. The Tax Refund Dispute

In late 2018, the Companies filed their tax returns. Consistent with the

Cooperation Provision, Buyer and Seller collaborated on those returns.73 Buyer and

68 Id. at 2; id. at Attach. 69 D.I. 46, Ex. D. 70 Id. 71 Id. 72 D.I. 2, Defs.’ Ans. & Countercls. ¶ 47. 73 Id. ¶ 50. 19 Seller sought to maximize an eventual refund by taking tax positions that asserted

advantageous tax losses. Buyer and Seller anticipated the Companies’ refund would

be credited in early 2019 and that their work would earn a $7 million payment from

the IRS.

From the Government’s perspective, a refund would belong to the Companies,

not to Epic. As a result, a refund would be disbursed directly to the Companies.

Under the SPA, Aveanna was obliged to intercept the Companies’ refund and remit

it to Epic within ten business days.

In the late spring of 2019, having heard nothing about the refund, Epic

contacted Aveanna for an update. Aveanna replied that it had received the refund,

but that it would not relinquish it.74 As justification for that position, Aveanna

opined that the refund likely would be subject to an IRS audit. Epic objected.75

Weeks later, the Government did initiate an audit.76 When Epic inquired, Aveanna

asserted control over the audit. Epic initially consented to Aveanna’s control over

the audit, but then changed course.77 On August 27, 2020, Epic sent Aveanna a

74 Id. ¶ 51. 75 Id. ¶ 52. 76 Id. ¶ 53. 77 D.I. 32, Pl.’s Ans. to Defs.’ Countercls. ¶ 51. Epic concedes its initial consent. E.g., D.I. 51 at 7–8. 20 demand letter in which Epic claimed that Aveanna’s maneuvering violated the

SPA.78 Aveanna later ceded control of the audit, but it has not remitted the refund.79

G. Procedural History

1. The Initial Superior Court Litigation

On August 6, 2020, Aveanna sued Defendants in this Court, seeking (i)

damages from Defendants for fraudulent inducement and common law fraud

stemming from their alleged knowledge of the misrepresentations and omissions in

the Financial Statements; (ii) damages from Webster for aiding and abetting fraud;

and (iii) a declaratory judgment that Aveanna is entitled to the Escrow Funds.80

On August 28, 2020, Epic filed counterclaims against Aveanna, seeking (i)

specific performance of the tax refund’s release and audit; (ii) advancement of the

formerly-named individual defendants’ expenses; and (iii) declarations that:

Aveanna’s fraud claims are barred by the SPA; Epic is entitled to the tax refund and

to control the audit; and Epic is entitled to the Escrow Funds.81 As to the Escrow

Funds, Epic also alleged a breach of the SPA.82

After filing its counterclaims, Epic moved to transfer the entire case to the

Court of Chancery based on its specific performance and advancement

78 D.I. 3, Ex. C. 79 Pl.’s Ans. to Defs.’ Countercls. ¶ 49. 80 Compl. ¶¶ 82–101. 81 Defs.’ Ans. & Countercls. ¶¶ 77–96. 82 Id. ¶ 95. 21 counterclaims.83 In response, Aveanna moved to dismiss Epic’s counterclaims

under this Court’s Civil Rule 12(b)(1), arguing this Court lacked subject matter

jurisdiction over the specific performance and advancement counterclaims and that

the Court of Chancery would not be the appropriate forum to litigate Aveanna’s legal

claims.84

On October 8, 2020, the Court granted Aveanna’s motion and dismissed

Epic’s specific performance and advancement counterclaims without prejudice to

Epic transferring those claims to the Court of Chancery.85

2. The Court of Chancery Litigation

On October 21, 2020, Epic sued Aveanna in the Court of Chancery for specific

performance of the tax refund’s release and audit, and advancement of the formerly-

named individual defendants’ expenses.86

During the Court of Chancery litigation, the parties resolved two issues. First,

the parties settled the advancement counterclaim.87 Second, Aveanna ceded control

of the tax audit to Epic.88 Those agreements winnowed Epic’s complaint down to

its specific performance claim for the tax refund’s release. Epic moved for summary

83 D.I. 3, Defs.’ Mot. to Transfer. 84 D.I. 5, Pl.’s Opening Br. in Supp. of Mot. to Dismiss at 4–9. 85 D.I. 45, 47. 86 See generally Epic/Freedom, LLC, et al. v. Aveanna Healthcare, LLC (f/k/a BCPE Eagle Buyer, LLC), No. 2020-0980 (hereinafter “Ct. Ch. Dkt. __”). 87 Id. 19. 88 Id. 50. 22 judgment on that relief.89 In response, Aveanna again moved to dismiss on subject

matter jurisdiction grounds, arguing that, though framed as equitable, the claim

really was a legal one over which this Court could exercise jurisdiction.90 Aveanna

also moved under Chancery Court Rule 56(f) for an extension of time to pursue

discovery before opposing Epic’s summary judgment motion.91

On March 19, 2021, the Court of Chancery accepted Aveanna’s arguments

and granted Epic the option to transfer its claim to this Court.92 In doing so, the

Court of Chancery reasoned that this Court could provide adequate legal remedies,

e.g., damages for breach of the SPA, or a declaration that Aveanna has breached the

SPA.93 The Court of Chancery also rejected Epic’s prejudice arguments, which were

based on the fact that Epic had filed a fully briefed summary judgment motion. The

court noted that Epic could have deferred its briefing, and, alternatively, that this

Court likely would not require Epic to re-brief the motion.94 Having concluded that

specific performance would be inappropriate relief, the court did not rule on Epic’s

summary judgment motion or Aveanna’s Rule 56(f) motion.

89 Id. 26. 90 Id. 29. 91 Id. 54. 92 Id. 56; see generally Epic/Freedom, LLC v. Aveanna Healthcare, LLC, 2021 WL 1049469 (Del. Ch. Mar. 19, 2021). 93 Epic/Freedom, 2021 WL 1049469, at *2–4. 94 Id. at *4–5. 23 In light of the court’s decision, Epic requested a transfer of its tax refund claim

to this Court.95 The Court of Chancery granted that request.96 The Court of

Chancery litigation now is closed.

3. The Instant Superior Court Litigation

In addition to Epic’s previously filed summary judgment motion and

Aveanna’s Rule 56(f) motion, the parties have moved for judgment on the

pleadings.97 On April 29, 2021, the Court heard argument on the motions.98

PARTIES’ CONTENTIONS

A. Judgment on the Pleadings

1. Defendants’ Motion

In support of their motion, Defendants argue Aveanna’s fraud claims are

mostly, if not entirely, based on extra-contractual representations and therefore are

barred by the SPA’s anti-reliance language. Defendants further contend they cannot

95 Ct. Ch. Dkt. 57. 96 Id. 59. 97 D.I. 43, 46. 98 D.I. 62 (hereinafter “Hr’g Tr.”). Given Aveanna’s Rule 56(f) motion, the Court did not request oral argument on Epic’s summary judgment motion. At the hearing, however, the Court questioned whether it had jurisdiction to resolve Epic’s summary judgment motion, which is based on equitable relief alone. Hr’g Tr. at 91–93; see Stroud v. Milliken Enters., Inc., 552 A.2d 476, 477 (Del. 1989) (dismissing appeal on subject matter jurisdiction grounds after having raised the issue sua sponte at oral argument); see generally KT4 Partners LLC v. Palantir Techs. Inc., 2021 WL 2823567, at *24 (Del. Super. Ct. June 24, 2021) (observing that “the Court may question its own subject matter jurisdiction sua sponte at any time” (alteration and internal quotation marks omitted)). Given that colloquy, and Epic’s brief, the Court finds it lacks subject matter jurisdiction over the relief on which Epic has moved. See infra Analysis.B.3. Accordingly, and for the procedural reasons discussed below, this decision denies Epic’s motion without prejudice. 24 be liable for contractual fraud because the truth of the Financial Statements was

represented by the Companies, not them. Defendants assert Aveanna inadequately

has “shown” Defendants’ knowledge of the Companies’ alleged misrepresentations,

and that they did not sign any closing certificates assuring Aveanna of the Financial

Statements’ accuracy. As a third alternative basis for dismissal, Defendants contend

Aveanna’s reliance was not justified because it received pre-closing price

adjustments to account for misstatements in the Financial Statements. Finally,

Defendants maintain Aveanna insufficiently has pleaded Webster’s participation in

the sale process, precluding aiding and abetting liability. Because of that, and due

to a lack of contractual means for reaching Webster directly, Defendants contend

Webster must be dismissed from this case.

In opposition, Aveanna cites Defendants’ managers’ messages in arguing its

complaint sufficiently pleads Defendants’ knowledge of the Companies’ alleged

misrepresentations. In Aveanna’s view, these well-pleaded allegations are enough

to support a reasonable inference that both Defendants are liable directly for fraud,

and alternatively, that Webster secondarily is liable for fraud. Similarly, Aveanna

points to the SPA’s fraud carve-outs in contending Defendants cannot escape

liability for intentional fraud. Aveanna also insists the reasonableness of its reliance

is a factual issue not amenable to resolution at this stage.

25 2. Aveanna’s Motion

In support of its motion, Aveanna argues Epic’s tax refund counterclaim is

unripe because Aveanna’s duty to release the refund is subject to unsatisfied

conditions precedent. In Aveanna’s view, the parties must reach a “more likely than

not level of comfort” on the tax positions reflected by the refund before Aveanna is

obliged to remit it. Aveanna also maintains the SPA’s “net of any taxes owed”

language implies Aveanna may withhold a refund until an IRS audit concludes,

which it has not in this case. Separately, Aveanna contends Epic has waived its

escrow release counterclaim by not timely filing a Dispute Notice. Alternatively,

Aveanna argues it has not violated the Escrow Agreement’s notice and objection

procedures because it informed Epic and the Escrow Agent of its Indemnification

Claim at the same time. Aveanna insists a single notice of its intent to access the

Escrow Funds is not required under the Escrow Agreement or the SPA. Aveanna

suggests Epic should have inquired if it were unsure of whether the Escrow Agent

received an Indemnification Notice from Aveanna.

In opposition, Epic argues there are no conditions precedent to Aveanna’s tax

refund release duties. Epic contends the “more likely than not” standard refers to

tax positions taken during the return stage, not the refund stage. Epic also asserts

the “net of any taxes owed” language reflects normal deductions subtracted from

most refunds, and the audit procedures, in being controlled exclusively by Epic,

26 would preclude Aveanna from conferring with Epic on deductions during an audit

anyway. As to the escrow issue, Epic argues the Escrow Agreement’s unambiguous

No Waiver language undermines Aveanna’s waiver arguments. Moreover, Epic

maintains the Escrow Agreement defines a single Indemnification Notice that is

required in addition to the SPA’s Indemnification Claim Notice. Epic asserts

Aveanna’s reading would frustrate the purpose of the Indemnification Notice, which

is to afford Epic an opportunity to dispute control over the Escrow Funds. For that

reason, Epic insists it had no duty to inquire into whether an Indemnification Notice

has been filed.

B. The Rule 56(f) Motion

In support of its motion, Aveanna argues discovery is necessary to prove its

fact-based defenses to Epic’s tax refund counterclaim because Epic alone possesses

evidence suggesting it waived its immediate entitlement to the refund and agreed to

Aveanna holding the refund until the IRS’s audit concludes. As to waiver, Aveanna

asserts any contractual no-waiver provisions may themselves be waived, but

Aveanna requires discovery to satisfy the waiver standard. Aveanna also contends

discovery is necessary to reveal the parties’ mutual intent on how the Refund

Provision, which may be ambiguous, should be construed.

In opposition, Epic contends the SPA prohibits waiver, rendering Aveanna’s

waiver-based discovery requests meritless. Alternatively, Epic contends, to the

27 extent a waiver may be found, Epic unambiguously retracted its waiver. Epic also

asserts a subsequent agreement allowing Aveanna to withhold the refund does not

exist, and if it did, Aveanna should have possession of the relevant material without

discovery. Taken together, Epic insists Aveanna’s motion amounts to nothing more

than a delay tactic that should be rejected.

STANDARD OF REVIEW

A party may move for judgment on the pleadings under Superior Court Civil

Rule 12(c).99 In deciding a motion under that rule, the Court accepts the truth of all

well-pleaded facts and draws all reasonable factual inferences in favor of the non-

moving party.100 The Court accords the party opposing a Rule 12(c) motion the same

benefits as a party defending a motion to dismiss under Rule 12(b)(6).101

Accordingly, this Court will grant a motion for judgment on the pleadings only if,

after drawing all reasonable inferences in favor of the non-moving party, there is no

material fact in dispute and the moving party is entitled to judgment as a matter of

law.102

99 Del. Super. Ct. Civ. R. 12(c). 100 Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund II, L.P., 624 A.2d 1199, 1205 (Del. 1993). 101 Alcoa World Alumina LLC v. Glencore Ltd., 2016 WL 521193, at *6 (Del. Super. Ct. Feb. 8, 2016), aff’d sub nom., Glencore Ltd. v. St. Croix Alumina, LLC, 2016 WL 6575167 (Del. Nov. 4, 2016); see Silver Lake Off. Plaza, LLC v. Lanard & Axilbund, Inc., 2014 WL 595378, at *6 (Del. Super. Ct. Jan. 17, 2014) (“The standard for a motion for judgment on the pleadings is almost identical to the standard for a motion to dismiss.” (internal quotation marks omitted)). 102 V&M Aerospace LLC v. V&M Co., 2019 WL 3238920, at *3 (Del. Super. Ct. July 18, 2019). 28 ANALYSIS

Resolution of the parties’ motions turns on the proper interpretation of various

provisions in the SPA and the Escrow Agreement. A contract’s proper interpretation

is a question of law.103 In construing a contract, the Court strives “to fulfill the

parties’ shared expectations at the time they contracted.”104 “[B]ecause Delaware

adheres to an objective theory of contracts,” the Court also must interpret the

contract in a manner that “would be understood by an objective, reasonable third

party.”105 The Court therefore reads the agreement as a whole, giving purpose to

each provision.106 To that end, the Court construes “clear and unambiguous terms

according to their ordinary meaning.”107

“[J]udgment on the pleadings is a proper framework for enforcing

unambiguous contracts,” which only have one reasonable meaning and therefore do

103 Exelon Generation Acquisitions, LLC v. Deere & Co., 176 A.3d 1262, 1266–67 (Del. 2017). 104 Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688, 696 (Del. 2019) (internal quotation marks omitted). 105 Id. (internal quotation marks omitted). 106 E.g., Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393, 396–97 (Del. 2010); see Sonitrol Holding Co. v. Marceau Investissements, 607 A.2d 1177, 1183 (Del. 1992) (“[A] contract should be interpreted in such a way as to not render any of its provisions illusory or meaningless.”); NAMA Holdings, LLC v. World Mkt. Ctr. Venture, LLC, 948 A.2d 411, 419 (Del. Ch. 2007) (“Contractual interpretation operates under the assumption that the parties never include superfluous verbiage in their agreement, and that each word should be given meaning and effect by the court.”), aff’d, 2008 WL 571543 (Del. Mar. 4, 2008). 107 Leaf Invenergy, 210 A.3d at 696 (internal quotation marks omitted); see Salamone v. Gorman, 106 A.3d 354, 368 (Del. 2014) (“Contract terms themselves will be controlling when they establish the parties’ common meaning so that a reasonable person in the position of either party would have no expectations inconsistent with the contract language.” (internal quotation marks omitted)). 29 not create “material disputes of fact.”108 As explained below, none of the provisions

in either agreement is ambiguous. The SPA’s anti-reliance language does not bar

Aveanna’s fraud claims. The SPA’s tax provisions unconditionally require Aveanna

to release tax refunds within ten business days of their receipt. And the Escrow

Agreement’s notice and objection procedures require Aveanna to deliver a single

Indemnification Notice to the Escrow Agent and Epic concurrently. Accordingly,

judgment on the pleadings cannot be granted to any moving party.

A. Defendants can be liable for contractual fraud.

1. Aveanna’s fraud claims are based on contractual representations and therefore fall outside the SPA’s anti-reliance language.

Delaware enforces bilaterally negotiated agreements on their terms “as a

matter of fundamental public policy.”109 The policy promotes commercial

consistency and predictable legal outcomes.110 That policy will, however, yield to

108 Lillis v. AT&T Corp., 904 A.2d 325, 329–30 (Del. Ch. 2006) (alteration omitted); see also VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 615 (Del. 2003) (observing that ambiguity creates a fact dispute and that a court cannot dismiss breach of contract allegations unless the movant’s construction of the disputed term “is the only reasonable construction as a matter of law”); see generally Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012) (observing that a contract term is ambiguous only if it is “fairly or reasonably susceptible to more than one meaning”). 109 NACCO Indus., Inc. v. Applica, Inc., 997 A.2d 1, 35 (Del. Ch. 2009); accord Sycamore Partners Mgmt., L.P. v. Endurance Am. Ins. Co., at *5 (Del. Super. Ct. Feb. 26, 2021). 110 E.g., Change Cap. Partners Fund I, LLC v. Volt Elec. Sys., LLC, 2018 WL 1635006, at *4 (Del. Super. Ct. Apr. 3, 2018) (“With very limited exceptions, Delaware courts will enforce the contractual scheme that the parties have arrived at through their own self-ordering, both in recognition of a right to self-order and to promote certainty of obligations.” (alterations omitted) (quoting Ascension Ins. Holdings, LLC v. Underwood, 2015 WL 356002, at *4 (Del. Ch. Jan. 28, 2015))). 30 “overriding” public policy concerns,111 including Delaware’s “firm public policy

against fraud.”112 In Delaware, contractual freedom ends where attempts to

“immunize” contractual fraud begin.113

Striking a balance of these competing policies, Delaware has developed a

body of law that permits sophisticated parties contractually to shift the risks posed

by post-closing fraud claims.114 One such risk-allocation device is an anti-reliance

provision that cabins “the universe of information” on which an aggrieved party later

may ground a fraud claim.115 Using anti-reliance language, sophisticated

counterparties “are free to limit the possibility of future claims of fraud or

misrepresentation by contractually specifying what representations the parties are

and are not making and relying upon.”116 Through this exchange, parties necessarily

agree that fraud claims are not viable when they are based on representations on

which parties agreed they were not relying, even if the facts underpinning those

111 Unbound Partners Ltd. P’ship v. Invoy Holdings Inc., 251 A.3d 1016, `1032 (Del. Super. Ct. 2021). 112 Infomedia Grp., Inc. v. Orange Health Sols., Inc., 2020 WL 4384087, at *4 (Del. Super. Ct. July 31, 2020). 113 ABRY Partners V, L.P. v. F & W Acquisition LLC, 891 A.2d 1032, 1061 (Del. Ch. 2006). 114 E.g., EMSI Acquisition, Inc. v. Contrarian Funds, LLC, 2017 WL 1732369, at *8–9 (Del. Ch. May 3, 2017). 115 FdG Logistics LLC v. A&R Logistics Holdings, Inc., 131 A.3d 842, 858 (Del. Ch. 2016) (internal quotation marks omitted), aff’d, 2016 WL 5845786 (Del. Sept. 30, 2016). 116 Infomedia, 2020 WL 4384087, at *4. 31 claims are egregious. Put differently, by this arrangement, parties eliminate “extra-

contractual” fraud claims while preserving “intra-contractual” fraud claims.117

Delaware law permits sophisticated counterparties to disclaim reliance on

extra-contractual statements, i.e., representations that are not memorialized in a

fully-integrated agreement, even if those representations induced the agreement’s

acceptance.118 But to eliminate extra-contractual fraud remedies, “the [parties’]

intent to preclude reliance on extra-contractual statements must emerge clearly and

unambiguously from the contract.”119 If the contract’s language, “when read

together, can be said to add up to a clear anti-reliance clause by which the plaintiff

has contractually promised that it did not rely upon statements outside the contract's

four corners,” a fraud claim resting on extra-contractual statements will be barred.120

117 See generally RAA Mgmt., LLC v. Savage Sports Holdings, Inc., 45 A.3d 107, 117 (Del. 2012) (explaining distinction). The term “intra-contractual fraud” is a bit of redundancy; any fraud claim based on false contractual representations is “intra-contractual.” Still, for the sake of clarity, the Court uses this term where appropriate as a helpful tool for drawing sharp distinctions between fraud claims based on extra-contractual representations and those based on contractually memorialized representations. 118 E.g., Pilot Air Freight, LLC v. Manna Freight Sys., Inc., 2020 WL 5588671, at *21 (Del. Ch. Sept. 18, 2020); Anschutz Corp. v. Brown Robin Cap., LLC, 2020 WL 3096744, at *13 (Del. Ch. June 11, 2020); IAC Search, LLC v. Conversant LLC, 2016 WL 6995363, at *6 (Del. Ch. Nov. 30, 2016); Haney v. Blackhawk Network Holdings, Inc., 2016 WL 769595, at *5 (Del. Ch. Feb. 26, 2016); ITW Global Invs. Inc. v. Am. Indus. Partners Cap. Fund IV, L.P., 2015 WL 3970908, at *8 (Del. Super. Ct. June 24, 2015); Great Lakes Chem. Corp. v. Pharmacia Corp., 788 A.2d 544, 551–56 (Del. Ch. 2001). 119 Kronenberg v. Katz, 872 A.2d 568, 593 (Del. Ch. 2004). 120 Id. 32 In contrast, Delaware law prohibits disclaimers of contractual fraud.121

Delaware law does not permit a contract’s parties to insulate themselves from

liability for knowingly false representations memorialized in their agreement.122

Instead, contracting parties only may limit the remedies available for contractual

fraud under certain conditions.123 Accordingly, Delaware courts will enforce

agreements that clearly bar extra-contractual fraud claims but will not enforce

agreements that bar intra-contractual fraud claims no matter the agreements’

clarity.124

The SPA—governed by Delaware law125—maps these boundaries. As a

starting point, Section 3.20 narrows the scope of permissible reliance to the

representations made within the SPA. The accuracy of the Financial Statements and

the completeness of the Companies’ liability disclosures are two such memorialized

121 See ABRY, 891 A.2d at 1062 (“[T]here is little support for the notion that it is efficient to exculpate parties when they lie about material facts on which a contract is premised.”). 122 E.g., Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 136–37 (Del. Ch. 2009) (“Because of Delaware’s strong public policy against intentional fraud, a knowingly false contractual representation can form the basis of a fraud claim, regardless of the degree to which the agreement purports to disclaim or eliminate tort remedies.” (citing ABRY, 891 A.2d at 1061–64)); Surf's Up Legacy Partners, LLC v. Virgin Fest, LLC, 2021 WL 117036, at *11 (Del. Super. Ct. Jan. 13, 2021) (“Delaware courts refuse to enforce contracts purporting to condone—or at least insulate— intentional fraud.”). 123 E.g., Express Scripts, Inc. v. Bracket Holdings Corp., 248 A.3d 824, 830–32 (Del. 2021). Counterparties only can limit remedies for frauds committed with less than an intentional mental state. See id. 124 E.g., RAA, 45 A.3d at 117 (“[F]raud claims based on representations outside of a merger agreement . . . can be disclaimed through non-reliance language . . . [but] fraud claims based on ‘false representations of fact made within the contract itself’ . . . cannot be disclaimed.” (alteration omitted) (quoting ABRY, 891 A.2d at 1059)). 125 SPA § 10.9. 33 representations.126 Next, in Section 5.8, Aveanna expressly affirmed it was not

permitted to rely on any statements made outside the SPA.127 Finally, to close the

circle, the SPA’s parties agreed the SPA is a fully-integrated document that contains

the parties’ complete understanding within its four corners.128 And, in respect for

Delaware’s “abhorrence” of false contractual statements,129 the SPA’s parties carved

out of the SPA’s anti-reliance language any fraud claims based on contractual

representations.130 Taken together, these provisions exclude reliance on extra-

contractual representations and bar fraud claims premised on statements that are not

expressly contained within the SPA.131 Accordingly, the SPA bars Aveanna’s fraud

claims only if they challenge representations external to the SPA.

They do not. Aveanna’s fraud claims challenge the Financial Statements and

disclosed liabilities representations. Aveanna alleges the contractually incorporated

reports that make those representations true or false were whitewashed by

Defendants. As support for that allegation, Aveanna cites the findings from its post-

closing investigation, including Defendants’ managers’ e-mail messages. Aveanna

126 Id. § 3.4(b)–(c). 127 See, e.g., McDonald’s Corp. v. Easterbrook, 2021 WL 351967, at *6 (Del. Ch. Feb. 2, 2021) (observing that anti-reliance provisions are enforceable only if the parties “forthrightly affirm that they are not relying upon any representation or statement of fact not contained [in the contract]” (alteration in original) (internal quotation marks omitted)). 128 SPA § 10.16. 129 ABRY, 891 A.2d at 1058. 130 SPA §§ 3.20 (c), 4.7(c), 9.4(b), 10.17. 131 See Kronenberg, 872 A.2d at 593. 34 did not discover the messages until the SPA already had been executed. Aveanna,

therefore, did not rely on any statements in those messages in deciding to acquire

the Companies. Instead, Aveanna relied only on what it was permitted to rely on:

the Financial Statements. Had Aveanna now asserted reliance on extra-contractual

representations, its fraud claims plainly would be barred by the SPA’s anti-reliance

language. Because it has not, however, Aveanna’s fraud claims are not barred.

In arguing Aveanna’s fraud claims impermissibly are tethered to extra-

contractual representations, Defendants likewise point to their managers’ e-mail

messages. Defendants argue those messages are, in a literal sense, “extra-

contractual,” and they therefore cannot sustain a contractual fraud claim under the

SPA. Defendants, however, mistakenly conflate the question of whether a plaintiff

has relied on extra-contractual representations in the face of valid anti-reliance

language with the question of whether the “evidence” the plaintiff intends to adduce

is sufficient to prove contractual fraud.

Memorialized or not, a representation, by definition, is a statement, usually

one of fact, made to induce a party to enter into a contract with the speaker.132 The

messages, unearthed after Aveanna already had chosen to enter the SPA, cannot be

representations; Aveanna could not have reviewed them in deciding whether to deal

132 See, e.g., Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983); Representation, Black’s Law Dictionary (11th ed. 2019) (“A presentation of fact . . . made to induce someone to act, esp[ecially] to enter into a contract. . . .”). 35 with Epic. Indeed, Aveanna does not contend the messages are false representations.

Instead, Aveanna contends the messages are probative of the Financial Statements’

falsity. Aveanna may point to “external sources of information” to demonstrate the

falsity of contractual representations without running afoul of the SPA’s anti-

reliance language.133

More importantly, Defendants’ reasoning invariably would prevent a plaintiff

from using post-closing discoveries of fraud to establish that a contractual

representation is false—vitiating most fraud claims. In other words, Defendants

invite the Court to collapse the well-established distinction between extra-

contractual and intra-contractual fraud claims. The very precedents on which

Defendants rely, Infomedia Group, Inc. v. Orange Health Solutions, Inc.134 and 3M

Company v. Neology, Inc.,135 contradict that result.

In Infomedia, the plaintiff grounded its fraud claim exclusively on extra-

contractual misrepresentations and omissions.136 The agreement, however,

contained enforceable anti-reliance language that barred fraud claims asserting

reliance on extra-contractual misrepresentations and omissions.137 As a result, this

Court dismissed the complaint. Here, Aveanna has not repeated the Infomedia

133 Prairie Cap. III, L.P. v. Double E Holdings Corp., 132 A.3d 35, 52 (Del. Ch. 2015). 134 2020 WL 4384087 (Del. Super. Ct. July 31, 2020). 135 2019 WL 2714832 (Del. Super. Ct. June 28, 2019). 136 2020 WL 4384087, at *1. 137 Id. at *3–4. 36 plaintiff’s mistake. Aveanna challenges SPA representations that incorporate

statements on which Aveanna contractually was permitted to rely. Moreover,

because of the plaintiff’s theories, the Infomedia court had no occasion to consider

the effect of anti-reliance language on claims alleging false contractual

representations.

Unlike the Infomedia plaintiff, the Neology claimant brought both extra-

contractual and intra-contractual fraud claims.138 Like the Infomedia agreement, the

Neology agreement contained enforceable anti-reliance language.139 Given that

language, the Neology court dismissed the extra-contractual fraud claims, but

permitted the intra-contractual fraud claims to proceed.

[The agreement’s fraud carve-out] . . . confines [fraud] claim[s] to the representations and warranties in Article 3 and Article 4 of the APA and excludes reliance on any extra[-]contractual representations as required by the Non-Reliance Clause. Neology's fraud claims are permitted under the APA because they focus on an alleged misrepresentation in APA Section 3.5. To the extent, however, that Neology is relying on extra[-]contractual representations to support its fraud claims, reliance on those representations is barred by the Non-Reliance Clause. . . .140

Here, SPA Section 3.20(c), the parties’ fraud carve-out, “confines” Aveanna’s

possible claims to the representations contained in the SPA. And, as discussed, the

representations concerning the Financial Statements are contained in SPA Section

138 Neology, 2019 WL 2714832, at *13–14. 139 Id. at *2. 140 Id. at *13. 37 3.4. Aveanna’s intra-contractual fraud claims thus “focus[]” on Section 3.4. As a

result, Aveanna’s intra-contractual fraud claims bypass the SPA’s anti-reliance

language.

Undeterred, Defendants argue Neology stands for the proposition that “a broad

anti-reliance provision—even with a fraud carve-out—prohibits a sophisticated

buyer from relying on extra-contractual statements to support essential elements of

its fraud claim.”141 Putting aside their flawed premise (i.e., that Aveanna’s fraud

claims are extra-contractual), Defendants suggest the mere pleading of extra-

contractual information infects otherwise permissible intra-contractual fraud claims

and renders them extra-contractual. Neither Neology’s facts nor its reasoning

permits this extreme inference. To the contrary, Delaware courts distill extra- and

intra-contractual representations, and have deployed the same analysis Neology

undertook in doing so.142 Properly understood, Neology simply stands for the

proposition that parties may not disguise an extra-contractual fraud claim as an intra-

contractual fraud claim to avoid anti-reliance language. As explained, however,

Aveanna’s fraud claims do not so masquerade. Accordingly, they are not barred by

the SPA.

141 D.I. 57 at 6 (emphasis omitted). 142 E.g., Novipax Holdings LLC v. Sealed Air Corp., 2017 WL 5713307, at *12–13 (Del. Super. Ct. Nov. 28, 2017) (dismissing extra-contractual fraud claims but allowing intra-contractual fraud claims to proceed despite existence of anti-reliance language); accord CLP Toxicology, Inc. v. Casla Bio Holdings LLC, 2020 WL 3564622, at *17, *19 (Del. Ch. June 29, 2020). 38 2. That the Companies made the challenged representations is of no moment because Aveanna adequately has alleged Defendants knew about the Companies’ false contractual representations.

Moving beyond their anti-reliance arguments, Defendants alternatively

contend they cannot be liable for contractual fraud because the Companies

represented the truth of the Financial Statements, not Defendants. As their principal

authority for this contention, Defendants offer ABRY Partners V, LP v. F & W

Acquisition LLC.143 Defendants do not dispute ABRY’s prohibition on intentional

fraud disclaimers.144 Defendants also do not seem to dispute ABRY’s “knowledge

exceptions”—e.g., that a seller can be liable for the false contractual representations

of “the company” if the buyer adequately pleads the seller’s knowledge of the

company’s misrepresentations.145 Nonetheless, Defendants insist ABRY’s holding

hinged on the seller’s endorsement of the company’s representations through signed

“officer” or closing certificates, providing a contractual mechanism for suing the

seller that Defendants avoided here. ABRY, however, was not so limited, and

decisions following ABRY undercut Defendants’ efforts to constrain ABRY’s reach.

143 891 A.2d 1032 (Del. Ch. 2006). 144 See, e.g., id. at 1064 (“To the extent that the Stock Purchase Agreement purports to limit the Seller’s exposure for its own conscious participation in the communication of lies to the Buyer, it is invalid under the public policy of this State.”). 145 See, e.g., id. (“[T]he public policy of this State will not permit the Seller to insulate itself from [fraud] if the buyer can show . . . the Seller knew that the Company’s contractual representations and warranties were false.”). 39 a. Signed closing certificates were not essential to ABRY’s holding.

The ABRY case involved a buyer’s acquisition of a seller’s146 portfolio

company that was memorialized in a “carefully negotiated” purchase agreement.147

“Before discussing the [agreement’s] particular terms,” the court contextualized the

sale as one in which the seller, primarily a hedge fund and its affiliates, would have

an “intense interest” in generating returns.148 Given that context, the court found it

“not surprising” that the agreement “recognized a distinction between the seller and

the company . . . in addressing questions relating to liability.”149 One way the

agreement recognized that distinction was by “carefully delineating what party is

responsible for which representations and warranties.”150 The court found “the most

important representation[]” in the agreement was one made “by the company and

not by the seller”—a representation that the company’s financial statements,

disclosed during the diligence phase, were accurate.151 The buyer expressly

acknowledged that this representation was one “of the company alone.”152

146 The court’s definition of “seller” comprised an asset management conglomerate of investment funds and affiliates together with the selling stockholder that owned the acquisition vehicle that contained the underlying asset. Id. at 1037. The acquisition vehicle and the asset collectively were “the company.” Id. As discussed below, the ABRY sell-side’s composition and managerial style bear a meaningful resemblance to the sell-side’s operations in this case. 147 Id. at 1063. 148 Id. at 1038, 1040. For clarity, capitalization of ABRY umbrella terms (e.g., “buyer”) that are identical to ones used in this decision has been omitted throughout. 149 Id. at 1041. The court also assumed that the seller was not familiar with the company’s management intimately, making separate representations doubly important. Id. at 1040–41. 150 Id. at 1041. 151 Id. at 1042. 152 Id. at 1043. 40 Still, the seller “back[ed] up the company’s representations” in two ways.153

First, the seller signed an “officer’s certificate” that, among other things, affirmed

the accuracy of the company’s representations.154 The court characterized the use of

a certificate as not “novel” and “rudimentary” to “anyone familiar[]” with stock

acquisitions.155 Second, and more importantly, the seller “put its wallet behind the

company’s representations and warranties” by agreeing to indemnify the buyer “if

the company’s representations and warranties were incorrect.”156 The

indemnification provision was the crux of the case. It purported to limit the buyer’s

recourse for future claims of intentional, contractual fraud solely to exhaustion of an

indemnity account.157 The court explained the seller had negotiated for this

limitation to control its exposure to the “broadly-defined” liabilities it had assumed

earlier, including a duty to indemnify the company’s representations without regard

to “materiality qualifiers” that elsewhere were imposed by the agreement’s bring-

down clause.158

After the transaction closed, the buyer “uncover[ed] a host of serious financial

problems” with the company that could not have been concealed absent intentional

153 Id. 154 Id. 155 Id. at 1041. 156 Id. at 1043. 157 Id. at 1044–45. 158 Id. at 1043–44. 41 fraud.159 Specifically, the buyer contended the company and the seller “working in

concert, schemed together to manipulate the company’s financial statements in order

to fraudulently induce the buyer into purchasing the company at an excessive

price.”160 As support for that theory, the buyer pointed to communications

exchanged between the sell-side parties during the sale process in which the seller’s

and the company’s managers seemed to misrepresent the company’s financial

statements intentionally.161 The court held those conversations supported a

reasonable inference that the seller “had the opportunity and the motive to work with

[the company’s] management to influence the financial statements and the operating

decisions to achieve desired numbers.”162 The buyer therefore sued to rescind the

agreement “largely on the basis that the company made false representations . . . and

the seller provided a false officer’s certificate.”163 The seller moved to dismiss the

complaint because the buyer sought recission rather than damages from the

indemnity account.

The parties’ arguments did not turn on, let alone prioritize, the certificates.

The seller argued that even if the seller committed intentional fraud, the buyer could

159 Id. at 1038. 160 Id. 161 Id. at 1051. 162 Id. 163 Id. at 1045. 42 not “hold the seller responsible for representations and warranties made by the

company” because

the parties carefully set forth which representations and warranties were made by the Company and which were made by the Seller. . . . In addition, the Buyer agreed to the Exclusive Remedy Provision stating that the only remedy that it had against the Seller for contractual misrepresentations was limited to . . . an Indemnity Claim. And, in that event, the Seller's liability is capped at the extent of the Indemnity Fund. . . . [T]he Seller only agreed to back Company representations to the extent of the Indemnity Fund.164

In opposition, the buyer responded with textual arguments that the court rejected as

neither “linguistically [n]or logically appealing.”165 The court then summarized the

buyer’s alternative argument this way.

[T]he Buyer contends that even if the Stock Purchase Agreement does limit the Seller's liability for misrepresentation to an Indemnity Claim by the Buyer, public policy overrides that aspect of the Agreement. According to the Buyer, a provision limiting in any manner the liability of a contracting party for misrepresentation is void. The public policy interest in deterring fraudulent conduct[,] says the Buyer, . . . prevents even sophisticated private equity firms from shaping acquisition agreements in which parties trade off price for limitations on liability.166

The buyer thus pitted the commercial inefficiency of contractual fraud against the

commercial efficiency of enforcing voluntarily-negotiated contracts as written.

In considering the buyer’s argument, the court did not focus its analysis on

the closing certificates. Instead, the court identified policy considerations that

164 Id. at 1052. 165 Id. at 1053–55. 166 Id. at 1052–53. 43 counseled against importing wholesale fraud exceptions into the realm of mergers

and acquisitions. The court questioned whether “judicial decisions” are “the only

way that commercial norms of fair play are instilled,” since other factors, such as

notoriety, could cause buyers “to discount the value of the tainted seller's portfolio

companies” and “to demand greater remedial flexibility.”167 Similarly, the court

observed that “[p]ermitting a party to sue for relief that it has contractually promised

not to pursue” could “create the possibility that buyers will face . . . uncompensated

costs,” e.g., zero-sum litigation that increases expenses inversely with monetary

relief from the fraudulent transaction.168 The court also worried that holding a seller

liable for its portfolio company’s contractual wrongdoing could blur the distinctness

inherent to the corporate form.169

Against that conceptual framework, the court nevertheless acknowledged that

“a concern for commercial efficiency does not lead ineluctably to the conclusion that

there ought to be no public policy limitations on the contractual exculpation of

misrepresented facts.”170 In line with this reasoning, the court found “little support

for the notion that it is efficient to exculpate parties when they lie about the material

facts on which a contract is premised.”171 Using the word “lie,” the court drew on a

167 Id. at 1061. 168 Id. at 1062. 169 Id. at 1063. 170 Id. at 1062. 171 Id. 44 “moral difference” dividing intentional and “unintentional misrepresentations of

fact.”172 Using that distinction, the court held if a seller “knew that the company’s

contractual representations were false,” the seller cannot “insulate” itself from

contractual fraud by hiding behind the company’s representations.173 To

demonstrate the requisite knowledge, the court crafted a disjunctive test under which

the buyer must prove the seller “acted with an illicit state of mind, [i.e.,] that the

seller knew that the representation was false and either [(i)] communicated it to the

buyer directly itself or [(ii)] knew that the company had.”174

The closing certificates reappeared toward the end of the court’s analysis.

In this case, that distinction [between speakers] is largely of little importance because of the Officer's Certificate provided by the Seller. In that certificate, the Seller certified that (1) each representation and warranty of the Company and Seller was true and correct as of the closing date; (2) the Seller and Company performed and complied in all material respects with the agreements and covenants required to be performed or complied with; and (3) between the date of signing the Stock Purchase Agreement and closing, there had been no change, event or condition of any character which had or would

172 Id. The court held that liability for unintentional misrepresentations of fact may be relegated to an indemnity account consistent with public policy. Id. at 1035 (“Delaware law permits sophisticated commercial parties to craft contracts that insulate a seller from a rescission claim for a contractual false statement of fact that was not intentionally made.”); id. at 1064 (“If the Company's managers intentionally misrepresented facts to the Buyer without knowledge of falsity by the Seller, then the Buyer cannot obtain rescission or damages, but must proceed with an Indemnity Claim subject to the Indemnity Fund's liability cap.”); see also id. at 1062 (“The level of self-investigation expected from a seller . . . seems to be a more legitimate subject for bargaining than whether the seller can insulate itself from liability for lies.”); id. at 1064 n.85 (“[I]t is not unrealistic to assume that the contracting parties knew that there were public limitations that would come into play, to the extent the contract attempted to exculpate the Seller for lies about contractual representations.”). 173 Id. at 1064. 174 Id. (emphasis added). 45 reasonably be expected to constitute a material adverse effect for the Company.175

In other words, the seller “knew that the [company’s] representation was false” and

both “communicated it to the buyer directly itself” and “knew the company had.”176

Having alleged facts that conceivably could satisfy the court’s knowledge test, the

buyer was permitted to seek remedies outside the indemnity account.

ABRY’s facts bear meaningful resemblance to those alleged here. Both cases

involve sophisticated parties who executed carefully negotiated stock purchase

agreements that memorialize an acquisition of a private equity firm’s portfolio

company. Both agreements differentiate the seller and the company’s

representations. Both agreements contain indemnity caps (though the SPA carves

fraud out from them). Both sets of sellers contractually agreed to indemnify the

company’s representations. And both buyers discovered post-closing management

messages indicating the controllers’ knowledge of the companies’ falsely

represented financial statements. The only obvious difference is the ABRY seller

signed an officer’s certificate, whereas Defendants did not.

But the logic that animated ABRY neither hinges on nor requires the existence

of signed closing certificates. Rather, ABRY’s logic can be distilled to the following

175 Id. (emphasis added) 176 Id. 46 principles, which, given the factual similarities, fairly can be transplanted into this

case mutatis mutandis.

In portfolio company acquisitions, there are particularly “intense” incentives

for sellers to distance themselves from fraud claims. Those claims may have the

counterproductive effect of increasing transaction costs in a sale conceived to

reorganize a portfolio without depreciating the value of the seller’s other assets under

management. To avoid or limit those losses, sellers frequently (i) push litigation

risks onto the companies they sell by “carefully delineating” their own

representations from their companies’ representations; and (ii) cap recourse for

misrepresentations with indemnification provisions. Delaware will respect these

risk allocation techniques as a matter of commercial deference unless these

techniques “insulate” sellers from liability for their knowledge of, or participation

in, false contractual representations. Conversely, however, those limitations will not

protect a non-representing seller when the buyer adequately pleads the seller was

conscious of the company’s lies.

Using these principles, the ABRY court treated the certificates as direct

evidence of the seller’s knowledge of the company’s fraudulent representations,

finding the seller communicated its knowledge personally through the certificates.177

177 E.g., id. at 1051 (“Moreover, Dominguez signed the Officer's Certificate required for the transaction to close in his capacity at both the Company and the Seller and certified that the Company's representations as to the financial statements were correct at the closing. . . . The Buyer 47 The court accordingly assigned “little importance”178 to its distinction between the

speakers. The fact that the seller and the company communicated the same

fraudulent knowledge satisfied both disjunctive prongs of the court’s test. Given the

blatancy of the seller’s knowledge, the court found the seller not only could be liable

for its own communications, but also for its knowledge of the company’s

communications. Necessarily, then, the seller would have been liable for the

company’s fraudulent communications regardless of whether the seller had made its

affirmations in signed closing certificates.

The linchpin of ABRY’s analysis, therefore, was the seller’s knowledge, not

its assurances. The ABRY court did not hold that the seller contractually must vouch

for the company’s representations through a signed closing certificate to be a proper

fraud defendant. Instead, the court ruled broadly that a seller may be liable for

intentional fraud whenever the seller knows the company’s contractual

representations are false.179 That explains why the court wrote “in this case” when

pleads, and the Seller does not refute, that Dominguez is a principal of the Seller, which is being sued for fraudulent representation.”); id. at 1051–52 (“I . . . will accept two of the Buyer's primary contentions as true for the sake of argument: (1) . . . that the Company made misrepresentations in its financial statements, the accuracy of which was represented and warranted in the Stock Purchase Agreement by the Company and in the Officer's Certificate by the Seller; and (2) that the [undisclosed liabilities] could have constituted a material adverse effect under . . . the Stock Purchase Agreement, thereby triggering a contractual duty to disclose the underlying facts to the Buyer on the Company's part, and on the Seller's part in the context of the Officer's Certificate.”). 178 Id. at 1064. 179 Id. at 1064. 48 reintroducing the closing certificates.180 In the appropriate case, signed closing

certificates may lighten the plaintiff’s pleading burden. Whether the seller

communicated a false contractual representation, or the company did, is of “little

importance” when the seller knowingly signed for both.

This conclusion is not a new interpretation of ABRY’s scope. Post-ABRY

decisions confirm that a seller can be liable for its knowledge of the company’s fraud

regardless of closing certificates.

b. Post-ABRY decisions make clear that signed closing certificates are not prerequisites for holding a seller liable for the company’s fraud.

The Supreme Court often has cited ABRY approvingly.181 It has declared

ABRY “accurately states Delaware law and explains Delaware’s public policy” of

enforcing agreements that circumscribe some fraud liability.182 Still, the Supreme

Court positively has cited ABRY’s knowledge exception only in passing.183

Similarly, most lower courts have discussed ABRY in connection with choice-of-law

analyses, breach remedies, and anti-reliance jurisprudence, but not for the

180 Id. 181 E.g., RSUI Indem. Co. v. Murdock, 248 A.3d 887, 904–05 & n.85 (Del. 2021); NGL Cap., LLC v. NGL Energy Partners LP, 249 A.3d 77, 96–97 & n.152 (Del. 2021); Hazout v. Tsang Mun Ting, 134 A.3d 274, 293 n.68 (Del. 2016); NAF Holdings, LLC v. Li & Fung (Trading) Ltd., 118 A.3d 175, 180 n.14 (Del. 2015); EV3, Inc. v. Lesh, 114 A.3d 527, 529 n.3 (Del. 2014); SIGA Techs., Inc. v. PharmAthene, Inc., 67 A.3d 330, 341–42 & nn.34–35 (Del. 2013). 182 RAA, 45 A.3d at 119; see Express Scripts, 248 A.3d at 830. 183 See Express Scripts, 248 A.3d at 831 n.30. 49 knowledge exception.184 Many others have examined the knowledge exception with

respect to the seller’s own fraud, but not the company’s.185 But the cases that have

visited a seller’s knowledge of the company’s wrongdoing hold that, even “absent a

contractual portal,”186 a fraud claim may be maintained against a seller for the

company’s false contractual representations if the buyer successfully pleads the

seller “‘knew that the [c]ompany’s representations and warranties were false.’”187

In Prairie Capital III, L.P. v. Double E Holding Corp.,188 the Court of

Chancery confronted a fraud challenge to a portfolio company transaction. The

buyer alleged, among other things, that the seller knew the company falsely had

represented the truth of its financial statements.189 The seller, who neither

represented the truth of the financial statements, nor provided a signed officer’s

certificate, countered that it could not be liable for the company’s misrepresentations

above the parties’ contractual indemnification ceiling.190

184 E.g., Focus Fin. Partners, LLC v. Holsopple, 250 A.3d 939, 962–69 (Del. Ch. 2020) (choice of law); Pilot Air, 2020 WL 5588671, at *21–23 (anti-reliance); Firmenich Inc. v. Nat. Flavors, Inc., 2020 WL 1816191, at *10 (Del. Super. Ct. Apr. 7, 2020) (remedies). 185 E.g., Swipe Acquisition Corp. v. Krauss, 2020 WL 5015863, at *11 (Del. Ch. Aug. 25, 2020); Anschutz, 2020 WL 3096744, at *15; Addy v. Piedmonte, 2009 WL 707641, at *20–21 (Del. Ch. Mar. 18, 2009). 186 EMSI, 2017 WL 1732369, at *9. 187 Id. (quoting ABRY, 891 A.2d at 1064). 188 132 A.3d 35 (Del. Ch. 2015). 189 Id. at 59. 190 Id. 50 In rejecting the seller’s argument, the court first observed that a speaker may

sustain vicarious liability for a false representation the speaker makes to a third

person “[i]f the misrepresentation is made for the purpose of having it

communicated” by that third person to the intended listener.191 Under those

circumstances, the court reasoned that agency law principles would undermine the

speaker’s attempt to escape wrongdoing by using a mouthpiece.192 Turning to

ABRY, the court noted that ABRY grappled with how to apply this guidance “to

representations made by ‘the Company’ in stock purchase agreements.”193 After

working through ABRY’s reasoning, the court held “the scope of a contractual fraud

claim swe[eps] [] broadly” enough to capture a seller for its knowledge of the

company’s false contractual representations.194 In so holding, the court observed

that when a seller causes the Company to “repeat” through contractual

representations “false sales numbers” the seller “affirmatively encouraged,” the

seller “sp[eaks] for the Company” and therefore can be liable for its “participat[ion]”

in the Company’s fraud.195 With this understanding, the court permitted the buyer’s

191 Id. (internal quotation marks omitted). 192 Id. at 59–60. 193 Id. at 60. 194 Id. at 60–61 (citing ABRY, 891 A.2d at 1064). 195 Id. at 61 (internal quotation marks omitted); see also id. (“At the pleadings stage, it is reasonably conceivable that [non-representing sell-side parties] can be held liable for fraudulent contractual representations made by the Company. . . . [T[hey approved all documents and reports before anything was sent to [the buyer]. In other words, [they] were the brains behind the Company’s business activities and the voice that relayed the details of those activities to the world.”). 51 contractual fraud claims to proceed against the seller. More critically, the court

allowed the buyer’s claims to proceed even though the seller did not provide a signed

closing certificate.

The relative unimportance of signed closing certificates was brought into

sharper focus by this Court’s decision in ITW Global Investments Inc. v. American

Industrial Partners Capital Fund IV, L.P.,196 which adopted ABRY’s reasoning. In

ITW, the buyer argued it did not need to plead the seller’s knowledge of the

company’s misrepresentations because, in the buyer’s view, the seller’s signed

closing certificates established the seller’s knowledge conclusively.197 This Court

rejected that argument as “unavailing.”198 In doing so, this Court observed that the

ABRY seller signed a closing certificate, but the Prairie Capital seller did not.199

Harmonizing both decisions, this Court held closing certificates are “one factor”

“among many” that could lead to a finding that the seller knew the company’s

contractual representations were false.

The execution of Officer’s Certificates constitutes one factor, to be considered among many, that could support a showing of knowledge. In [ABRY] and Prairie Capital, the Court of Chancery looked at numerous facts and circumstances which could, if proven, support the conclusion that the [seller] knew of [the company’s] misrepresentations.200

196 2017 WL 1040711 (Del. Super. Ct. Mar. 6, 2017). 197 Id. at *8. 198 Id. 199 Id. at *7. 200 Id. at *8 (first citing ABRY, 891 A.2d at 1051; and then citing Prairie Cap., 132 A.3d at 60–62, 65). 52 ITW makes clear that a closing certificate neither is necessary nor sufficient to

sustain a fraud claim against the seller based on the company’s contractual

Recent decisions issued by the Court of Chancery retreat even further from

reliance on closing certificates. For example, in LVI Group Investments, LLC v.

NCM Group Holdings, LLC,201 the seller did not issue a closing certificate, but the

Court of Chancery held the buyer could maintain a fraud claim against the seller for

knowing about the company’s alleged misrepresentations.202 The same was true in

ChryonHego Corp. v. Wight203 and Roma Landmark Theaters, LLC v. Cohen

Exhibition Company LLC.204 Neither case involved signed closing certificates. Yet,

both cases implemented ABRY’s knowledge exception to find a fraud claim

satisfactorily pleaded against a seller for knowing about the company’s alleged

misrepresentations.205 Collectively, these cases observe that knowledge may be

derived from a variety of sources. No single source is dispositive.

In sum, ABRY and its progeny teach that a seller can be liable for the

company’s false contractual representations—even without a closing certificate—as

201 2018 WL 1559936 (Del. Ch. Mar. 28, 2018). 202 Id. at *13 (As the [seller] point[s] out, the representations and warranties in the agreement were made by [the company], not the [seller]. But that is not fatal to [the buyer’s] fraud claims.” (first citing ABRY, 891 A.2d at 1064; and then citing Prairie Cap., 132 A.3d at 61)). 203 2018 WL 3642132 (Del. Ch. July 31, 2018). 204 2020 WL 5816759 (Del. Ch. Sept. 30, 2020). 205 Roma Landmark, 2020 WL 5816759, at *10–14; ChryonHego, 2018 WL 3642132, at *10. 53 long as the buyer adequately pleads the seller knew the company’s contractual

representations were false. Accordingly, the viability of Aveanna’s fraud claims

turns on whether Aveanna’s complaint adequately pleads Defendants’ knowledge of

the Companies’ alleged contractual fraud. It does.

c. Under Rule 9(b), Aveanna sufficiently has pleaded knowledge.

Aveanna has brought common law fraud and fraudulent inducement claims

against Defendants. These claims have the same elements,206 specifically:

(i) a false representation, usually one of fact, made by the defendant; (ii) the defendant's knowledge or belief that the representation was false, or was made with reckless indifference to the truth; (iii) an intent to induce the plaintiff to act or to refrain from acting; (iv) the plaintiff's action or inaction taken in justifiable reliance upon the representation; and (v) damage to the plaintiff as a result of such reliance.207

Relatedly, to hold a non-contract party liable for aiding and abetting contractual

fraud, a plaintiff must allege “(i) underlying tortious conduct; (ii) knowledge; and

(iii) substantial assistance.”208

Under Superior Court Civil Rule 9(b), fraud claims must satisfy a heightened

pleading standard.209 Rule 9(b) requires that “the circumstances constituting fraud”

206 See Maverick Therapeutics, Inc. v. Harpoon Therapeutics, Inc., 2020 WL 1655948, at *26 & n.339 (Del. Ch. Apr. 3, 2020); see also Surf’s Up, 2021 WL 117036, at *12 (“[A]ll fraud claims require proof of the same or nearly the same elements.”). 207 Metro Commc’n Corp. BVI v. Advanced Mobilecomm Techs. Inc., 854 A.2d 121, 144 (Del. Ch. 2004) (formatting added) (quoting Stephenson, 462 A.2d at 1074). 208 Agspring Holdco, LLC v. NGP X US Holdings, L.P., 2020 WL 4355555, at *20 (Del. Ch. July 30, 2020) (internal quotation marks omitted). 209 Del. Super. Ct. Civ. R. 9(b). 54 be pleaded with particularity.210 “The factual circumstances that must be stated with

particularity refer to the time, place, and contents of the false representations; . . . the

identity of the person(s) making the misrepresentation; and what that person(s)

gained from making the misrepresentation.”211 “Essentially, . . . the plaintiff must

allege circumstances sufficient to apprise the defendant of the basis of the claim.”212

Knowledge, in contrast, “may be averred generally.”213 The same is true for

an accomplice’s knowledge.214 In either case, allegations “that give rise to an

inference of knowledge on the part of the pleader need not be pleaded with

particularity.”215 Given this liberal standard, pleading knowledge in the contractual

fraud context “is relatively easy.”216 “[A]n allegation that a contractual

representation is knowingly false typically will be deemed well pled (even if

210 Avve, Inc. v. Upstack Techs., Inc., 2019 WL 1643752, at *5 (Del. Super. Ct. Apr. 12, 2019) (internal quotation marks omitted); see generally Mooney v. E.I. du Pont de Nemours & Co., 2017 WL 5713308, *6 (Del. Super. Ct. Nov. 28, 2017) (“Rule 9’s particularized pleading requirement ensures that a plaintiff cannot pursue a fraud claim merely because business plans did not pan out.”). 211 Trenwick Am. Litig. Tr. v. Ernst & Young, L.L.P., 906 A.2d 168, 207–08 (Del. Ch. 2006), aff’d sub nom., Trenwick Am. Litig. Tr. v. Billett, 2007 WL 2317768 (Del. Aug. 14, 2007). 212 H–M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 145 (Del. Ch. 2003). 213 Del. Super. Ct. Civ. R. 9(b). 214 E.g., Agspring, 2020 WL 4355555, at *20 (“Like the pleading requirements for fraud, the knowledge element of an aiding and abetting claim under Delaware law may be averred generally. . . .”). 215 Kahn Bros. & Co., Inc. Profit Sharing Plan & Tr. v. Fischbach Corp., 1989 WL 109406, at *5 (Del. Ch. Sept. 19, 1989); see Desert Equities, 624 A.2d at 1208 (“Intent and state of mind . . . may be averred generally because any attempt to require specificity in pleading a condition of mind would be unworkable and undesirable.” (internal quotation marks omitted)). 216 Prairie Cap., 132 A.3d at 62. 55 ultimately difficult to prove).”217 Still, when a fraud claim, “at its core,” charges a

defendant with knowing something, “there must, at least, be sufficient well-pleaded

facts from which it can be reasonably inferred that this ‘something’ was knowable

and that the defendant was in a position to know it.”218 This “position to know”

requirement governs fraud claims that charge a seller with knowing the company’s

contractual representations were false.219

Aveanna’s allegations satisfy Rule 9(b). After the transaction closed,

Aveanna alleges it discovered the Companies had undisclosed operational and

financial impairments. Those discoveries prompted Aveanna to retain forensic

analysts who, after investigating the Companies, concluded the Financial Statements

were not compiled in compliance with GAAP and did not truthfully represent the

Companies’ financial health. Following that investigation, Aveanna uncovered

electronically-stored messages shared privately among Defendants’ managers

during the sale process that indicated Defendants knew the Companies had

misrepresented the Financial Statements. For example,

(i) in September 2016, one of Seller’s consultants reported that its analysis of “lagged cash collections” did not support the revenues reported in the Financial Statements. In response, Seller’s former Chief Financial Officer wrote that one of Webster’s partners “direct[ed]” the consultant to rewrite the analysis such that a buyer could “find[] no changes to the . . . EBIDTA” the 217 Pilot Air, 2020 WL 5588671, at *24 (citing ABRY, 891 A.2d at 1050). 218 Metro Commc’n, 854 A.2d at 147 (internal quotation marks omitted). 219 See, e.g., LVI, 2018 WL 1559936, at *13 (“The question is whether [the buyer] has pleaded facts suggesting that the falsity of the financial statements ‘was knowable and that [the seller was] in a position to know it.” (alterations omitted) (quoting Metro Commc’n, 854 A.2d at 147)). 56 Companies had boasted. Webster had written the same on its own behalf in July 2016.220

(ii) In May 2016, Epic’s then-CFO wrote to one of the Companies’ financial officers, explaining he was “very concerned” that the revenue earned by Seller’s enteral accounts receivable would show a shortfall for Q1 and Q2 2016.221

(iii) In June 2016, Epic’s then-CFO wrote to the same financial officer that Seller likely would need to “write-off” the accounts receivable, which showed a $2 million deficit.222

(iv) In July and August 2016, Epic’s then-CFO wrote that he anticipated Seller’s efforts to collect receivables would be “futile,” putting Epic in a “$4 million hole” “on an aggregate basis.” That loss projection would rise to $5.2 million by September.223

(v) Speaking about those deficits, Epic’s then-CFO planned to “get [them] fixed.” In October 2016, he wrote that Seller’s reported EBITDA was “set in stone,” requiring Defendants to manipulate Seller’s balance sheets to “hit the . . . results” Defendants’ advisors forecasted.224

(vi) By late October 2016, Defendants, using accounting gambits like “pickups,” wrote that they (artificially) had achieved the results its advisors had forecasted.225

(vii) Shortly before Buyer and Seller reached their December letter of intent, one of the Companies’ executives wrote to another of the Companies’ executives that the Companies had been missing their net-revenue targets “for many months.” In response, the receiver cautioned that further communications with Seller should take place over the phone, as e-mails would be “discoverable if the new owners take action.”226

220 Compl. ¶¶ 31, 45. 221 Id. ¶ 33. 222 Id. ¶¶ 34–35. 223 Id. ¶¶ 36–37. 224 Id. ¶¶ 39, 41. 225 Id. ¶ 42. 226 Id. ¶ 43. 57 (viii) At the same time, Epic’s then-CFO explained that it would be “disruptive” to disclose these losses during the sale process, noting further that key members of Defendants would not “raise [their] hand[s] to say” the Financial Statements were inaccurate.227

(ix) Finally, approximately one month before disclosing the Financial Statements, a Webster vice president wrote to one of Defendants’ consultants that Epic’s “databooks” should be “scrub[bed]” “to give buyers only what they really need to get to the revenue and EBIDTA” Defendants had set. The same officer added that the consultant should be “mindful of anything that could be detrimental to Epic,” as Webster would “want that removed.”228

These well-pleaded allegations support a reasonable inference that

Defendants colluded to conceal many of the Companies’ material liabilities and to

manipulate the Financial Statements in a manner that unnaturally achieved the

projections Defendants had advertised. Plainly, therefore, these well-pleaded

allegations also support a reasonable inference that Defendants were “in a position

to know” that the Companies’ Financial Statements would be false if the Statements

were not revised before disclosure.229 Accordingly, Aveanna’s fraud claims may

proceed beyond the pleadings stage.

In opposition, Defendants press two unpersuasive arguments. First,

Defendants emphasize repeatedly that Aveanna has not “shown” the Defendants’

knowledge of fraud. This refrain ignores Rule 9(b). Under Rule 9(b), a claimant’s

227 Id. ¶ 44. 228 Id. ¶ 46. 229 Metro Commc’n, 854 A.2d at 147. 58 knowledge allegations need only be averred generally, not with trial-ready proof.230

And, on a pleadings-stage motion, Aveanna is entitled to benefit from favorable

inferences, e.g., that Defendants contrived the Financial Statements to meet their

EBIDTA targets and induce a misleadingly-priced deal. Second, Webster insists,

because it is not a party to the SPA, it cannot be snared in direct fraud liability.

Under the SPA, however, the parties carved fraud perpetrated by Affiliates out from

the No Recourse provision.231 Webster is an Affiliate of Epic, its majority-controlled

portfolio company.232 The parties unambiguously agreed that Affiliates like Webster

could not avoid direct liability for their knowledge of the Companies’ false

contractual representations.

4. Defendants’ remaining challenges present factual issues not amenable to resolution on a motion for judgment on the pleadings.

Separate from their legal arguments, Defendants minimize Webster’s

involvement in the sale process, fault Aveanna for expecting fluid GAAP principles

and an EBITDA model to produce trustworthy data, and stress that certain pre-

closing disclosures rectified the errors Aveanna bemoans. These fact-intensive

230 Del. Super. Ct. Civ. R. 9(b); see Surf’s Up, 2021 WL 117036, at *15 (rejecting challenge to fraud claim that would have required claimant to prove fraud at the pleadings stage). 231 SPA § 10.17. 232 Id. § 1.1. 59 critiques cannot be resolved at the pleadings stage.233 The undisputed facts in the

record do not support judgment in Defendants’ favor.

A complaint sufficiently pleads substantial assistance if it alleges “the

secondary actor . . . provided assistance . . . or participation in aid of the primary

actor’s allegedly unlawful acts.”234 As explained, Aveanna alleges Webster partners

and officers “direct[ed]” Defendants’ advisors to fabricate the Financial Statements

so as to legitimize Defendants’ asking price. Aveanna also alleges a Webster vice

president instructed one of Defendants’ consultants to “scrub” detrimental liabilities

from the Financial Statements. At the pleadings stage, these allegations are more

than sufficient to apprise Webster of its “participation in” fraud235 and of its “position

to know” of the misrepresentations.236

Moreover, it is reasonable, at this stage, to conclude Aveanna was justified in

evaluating the Companies using an EBIDTA model and GAAP principles.

Defendants based the Companies’ financials on an EBIDTA analysis and the

233 E.g., McDonald’s, 2021 WL 351967, at *9 (“[T]he reasonableness of a plaintiff’s reliance is a factual inquiry that is typically resolved with the benefit of discovery rather than at the pleadings stage.” (internal quotation marks omitted)); id. at *9 n.60 (collecting authority); NACCO, 997 A.2d at 32 (The line between reasonable and unreasonable reliance “is difficult to draw and not something [courts ordinarily] address on” a challenge to the pleadings.); see also Wilmington Tr. Co. v. Aetna Cas. & Sur. Co., 690 A.2d 914, 916 (Del. 1996) (“Whether . . . reliance on a misrepresentation was reasonable is a question for the jury.”). 234 Agspring, 2020 WL 4355555, at *21 (internal quotation marks omitted); see Restatement (Second) of Torts § 876 cmt. d (1977). 235 Agspring, 2020 WL 4355555, at *21 (internal quotation marks omitted). 236 Metro Commc’n, 854 A.2d at 147; see Agspring, 2020 WL 4355555, at *20 (observing that the “position to know” requirement applies to accomplices as well as principals). 60 Companies themselves represented that the Financial Statements were prepared “in

accordance” with GAAP.237 A buyer justifiably may rely on contractual

representations.238 Finally, Defendants’ claim that a pre-closing, $6 million

downward adjustment corrected misstatements about the Companies’ enteral assets

is unresponsive to Aveanna’s allegations. According to Aveanna, the enteral assets

were overvalued by $6.9 million, not $6 million.239 Defendants’ reactive, and

incomplete, attempt to avoid a post-closing fraud claim with last-minute diligence

further supports the reasonable inference that the price had been adjusted to throw

Aveanna farther from their trace.

To reiterate, the SPA’s anti-reliance language is inapplicable to Aveanna’s

fraud claims. Defendants directly may be liable for their alleged knowledge of the

Companies’ false contractual representations. Direct liability aside, the complaint

supports a reasonable inference that Webster may have aided and abetted fraud.

Defendants are free to pursue their fact-based challenges, and to clarify their role in

the diligence process, with discovery. Their motion is denied.

237 SPA § 3.4(c). 238 See, e.g., FdG Logistics, 131 A.3d at 858 (“Delaware law enforces clauses which identify specific information on which a party has relied and foreclose reliance on other information.”). 239 Compl. ¶ 29. 61 B. Aveanna’s withholding of Epic’s tax refund amounts to breach of the SPA unless Aveanna can establish a fact-based defense to breach. 1. Under the SPA, Aveanna plainly was required to remit Epic’s tax refund no later than ten business days after receiving it.

Turning to Aveanna’s motion, the Court begins with the parties’ tax refund

dispute. SPA Section 6.9 details a sequential procedure for filing returns and

remitting refunds. First, under the Cooperation Provision, Aveanna and Epic

collaborate on tax positions likely to minimize regulatory scrutiny and to maximize

a refund. Second, Aveanna directs the Companies to file a return that embodies

those positions. Third, under the Refund Provision, Aveanna intercepts, on Epic’s

behalf, any refund disbursed to the Companies. Finally, Aveanna remits the refund

to Epic no later than ten business days after Aveanna intercepts it.

Aveanna admits it intercepted a refund from the collaborative return the

Companies filed. Aveanna, however, did not remit the refund to Epic within the ten-

day deadline. Under the SPA’s plain language, therefore, Aveanna violated the

parties’ refund procedures. Accordingly, Aveanna is not entitled to judgment as a

matter of law.

2. There are no conditions precedent in the Refund Provision.

Aveanna’s unwillingness to remit the refund puts it in breach of the SPA.

Recognizing this, Aveanna tries to graft two “conditions precedent” onto its refund

release duties. In Aveanna’s view, the Refund Provision’s “more likely than not

62 level of comfort” language is a condition that requires the parties to confer on the

tax positions expressed in the refund before Aveanna releases it. Aveanna explains,

without such a conference, Aveanna might remit a refund imperiled by an IRS

clawback claim, leaving Aveanna responsible for a delta while Epic receives a

windfall. As support for this reading, Aveanna identifies a second condition in the

Refund Provision: the “net of any taxes owed” language. Aveanna insists, by

including this language, the parties tacitly agreed that no refund may be released

until an IRS audit is initiated and ultimately concludes. Aveanna’s reasoning is

difficult to follow and, more importantly, is not supported by the SPA.

The existence of a condition precedent is a question of contract interpretation,

and therefore, of law.240 A condition precedent is “an act or event, other than a lapse

of time, that must exist or occur before a duty to perform something promised

arises.”241 Although “[t]here are no particular words that must be used to create a

condition precedent,”242 a condition precedent must be expressed clearly and

240 See, e.g., Casey Emp. Servs., Inc. v. Dali, 1993 WL 478088, at *4 (Del. Nov. 18, 1993). 241 Thomas v. Headlands Tech Principal Holdings, L.P., 2020 WL 5946962, at *5 (Del. Super. Ct. Sept. 22, 2020) (emphasis added) (internal quotation marks omitted); see Restatement (Second) of Contracts § 224 (1981) (hereinafter the “Restatement of Contracts”) (same). Delaware trial courts have followed the Restatement of Contracts when analyzing issues related to conditions precedent. E.g., S’holder Rep. Servs. LLC v. Shire US Holdings, Inc., 2020 WL 6018738, at *18–19 (Del. Ch. Oct. 12, 2020); SJM Soft.Com, Inc. v. Cross Country Bank, 2003 WL 1769770, at *12–13 (Del. Super. Ct. Apr. 2, 2003). The Supreme Court likewise has looked to the Restatement of Contracts for guidance on conditions precedent. E.g., Williams Cos., Inc. v. Energy Transfer Equity, L.P., 159 A.3d 264, 273 & n.34 (Del. 2017) (“Williams II”); id. at 277–78 & n.56 (Strine, C.J., dissenting). The Court, therefore, invokes the Restatement of Contracts where appropriate. 242 Thomas, 2020 WL 5946962, at *5 (internal quotation marks omitted); see also Shire, 2020 WL 6018738, at *18 (“[T]he difference between a condition precedent and a condition subsequent ‘is 63 unambiguously.243 If the Court finds a condition precedent, then the burden is on

the party claiming breach to demonstrate that the condition on which the underlying

obligation is contingent has been satisfied.244 An unexcused and unsatisfied

condition keeps a dependent duty from accruing, thwarting an otherwise ripe breach

claim.245

The first of Aveanna’s conditions concerns the Refund Provision’s “more

likely than not level of comfort” language.246 “More likely than not” is a term of art

under federal tax regulations.247 It is one of three degrees of certainty measured by

one of substance and not merely of the form in which the provision is stated.’” (quoting Restatement of Contracts § 230 cmt. a)). 243 E.g., Voltaire Contractors, Inc. v. Coastal Mech., Inc., 1986 WL 13982, at *1 (Del. Super. Ct. Dec. 1, 1986); accord Thomas, 2020 WL 5946962, at *5; see also QC Holdings, Inc. v. Allconnect, Inc., 2018 WL 4091721, at *7 (Del. Ch. Aug. 28, 2018) (“For a condition to effect a forfeiture, it must be unambiguous. If the language does not clearly provide for a forfeiture, then a court will construe the agreement to avoid causing one.” (internal quotation marks and citation omitted)). 244 E.g., Shire, 2020 WL 6018738, at *17; see also Williams II, 159 A.3d at 273 (“[O]nce a breach of a covenant is established, the burden is on the breaching party to show that the breach did not contribute materially” to the non-occurrence of the condition. (citing Restatement of Contracts § 245 cmt. b)). 245 See, e.g., Lennox Indus. Inc. v. All. Compressors LLC, 2020 WL 4596840, at *3 & n.15 (Del. Super. Ct. Aug. 10, 2020) (dismissing claim as unripe because claimant failed to undertake compulsory pre-litigation dispute resolution, which was a “condition precedent to litigation” (internal quotation marks omitted)); cf. Brazen v. Bell Atl. Corp., 1997 WL 153810, at *2 (Del. Ch. Mar. 19, 1997) (“[The] claim is not dependent on occurrence of [a] condition precedent, and is, therefore, ripe for adjudication.”); see generally Restatement of Contracts § 235(2) (“When performance of a duty under a contract is due any non-performance is a breach.” (emphasis added)). 246 See SPA § 6.9(f). 247 See 26 C.F.R. § 1.6694–2(b) (describing penalties for “understat[ed]” tax returns “due to an unreasonable position” and discussing the “more likely than not” standard); see also Williams Cos., Inc. v. Energy Transfer, L.P., 2016 WL 3576682, at *11 (Del. Ch. June 24, 2016) (“Williams I”), aff’d, Williams II, 159 A.3d 264; see generally Michael B. Lang & Jay A. Soled, Disclosing Audit Risk to Taxpayers, 36 Va. Tax Rev. 423, 427–30 (2017) (explaining “audit risk” in connection with tax positions filed during the return phase). 64 a “should” opinion in which a tax professional advises a client on whether the IRS

is likely to challenge a tax position the client seeks to take.248 A tax professional

renders a “more likely than not” recommendation when the client’s proposed

positions have at least a “51%” chance of earning regulatory imprimatur.249

Temporally, then, the client must be advised on the “more likely than not” standard

before a return is filed.250 Given the inclusion of other technical tax language in the

Refund Provision, the only reasonable reading of the “more likely than not” phrase

is one that is consistent with its technical meaning.251

Aveanna’s proffered reading is not reasonable. The Refund Provision

declares that a refund is “payable to the extent such refund . . . is based on [t]ax

positions that are claimed with a ‘more likely than not’ level of comfort, as

reasonably determined in consultation with Seller pursuant to the provisions of this

Section [] and Section 6.9(e) [i.e., the Cooperation Provision].”252 An organic

reading of the Refund Provision’s cross-reference to the Cooperation Provision is

248 Williams I, 2016 WL 3576682, at *11. 249 Id. 250 See Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd., 177 A.3d 1, 40–41 (Del. 2017) (observing, in the context of creating reserves for potential “tax benefits,” that the payor first must “recognize[] the financial statement effects of a tax position when it is more likely than not . . . the position will be sustained upon examination” (emphasis and internal quotation marks omitted)); see also LSVC Holdings, LLC v. Vestcom Parent Holdings, Inc., 2017 WL 6629209, at *7–8, *12 (Del. Ch. Dec. 29, 2017) (finding reading of “more likely than not” standard that would govern tax positions during the return phase the most “consistent with ordinary business practice”). 251 See, e.g., In re Verizon Ins. Coverage Appeals, 222 A.3d 566, 572–74 (Del. 2019) (interpreting the “plain meaning” of contractual term “securities claim” in reference to meaning the term “securities” has under federal and state securities statutes and rules). 252 SPA § 6.9(f) (emphasis added). 65 that the parties must have “determined” a “more likely than not level of comfort” on

the “[t]ax positions” “claimed” during the Cooperation stage. In other words, the

“more likely than not level of comfort” must have been reached before the

Companies’ tax returns were filed, not after Aveanna received the refund. Similarly,

the Refund Provision’s self-reflexive reference (“reasonably determined . . .

pursuant to this Section []”) connects the comfort level to Aveanna’s duty to file an

“IRS Form 1139.”253 Consistent with the Cooperation Provision, Aveanna must

“consult[]” with Epic before filing that return form so the parties can take “tax

positions” with a “more likely than not” comfort level.

The Refund Provision’s treatment of clawback claims further underscores that

Aveanna must release the return unconditionally. Under the Refund Provision, if

the IRS claws back a refund “for any reason,” Epic (or its investors) pays the

Government, not Aveanna.254 Put differently, if the IRS concludes the Companies

were wrong to think their tax return positions had been “more likely than not”

passable, Epic faces disgorgement, not Aveanna.255 Although it is true that, in this

situation, the Government would pursue Aveanna (via the Companies) until Epic

253 Id. 254 Id. 255 This part of the Refund Provision brings the “more likely than not” language closer to a condition subsequent, assuming it can be a condition at all. See, e.g., Shire, 2020 WL 6018738, at *18 (explaining conditions subsequent). If so, proving the condition subsequent had been satisfied would be Aveanna’s burden, not Epic’s. Id. 66 intervenes, Aveanna, a sophisticated counterparty, accepted that reality.256

Accordingly, Aveanna’s leading theory in favor of a condition—i.e., covering a

deficiency judgment while Epic absconds with the original check—is unfounded.

In sum, it makes little sense, as Aveanna has argued, for the parties to

strategize tax positions with a “more likely than not” comfort level during the Refund

stage. Without tax positions, a return never would have been filed. Without a return,

a refund never would have been disbursed. The “more likely than not” language

plainly does not amount to a condition precedent.

In another trip to the well, Aveanna claims the “net of any taxes owed” or “net

of any expenses owed” language in the Refund Provision also is conditional.

According to Aveanna, this language implicitly references the Audit Provision,

allowing Aveanna to guard the refund until an IRS audit is complete. This assertion,

made elliptically in a paragraph in Aveanna’s opening brief,257 was not expanded

meaningfully until Aveanna’s reply258 and only then most strenuously at oral

argument.259 An argument raised for the first time at a motion’s hearing, or in a

256 See W. Willow-Bay Ct., LLC v. Robino-Bay Ct. Plaza, LLC, 2007 WL 3317551, at *9 (Del. Ch. Nov. 2, 2007) (“The presumption that the parties are bound by the language of the agreement they negotiated applies with even greater force when the parties are sophisticated entities that have engaged in arms-length negotiations.”), aff’d, 2009 WL 4154356 (Del. Nov. 24, 2009). 257 D.I. 46 at 28–29. 258 D.I. 55 at 12–14. 259 Hr’g Tr. at 54, 58, 60, 62–64; e.g., id. at 62 (“[Counsel for Aveanna]: ‘I think [the Court] can give us judgment just on the net of any taxes owed [language].’”). 67 reply brief, fairly may be deemed waived.260 But even if not waived, this argument

would fail on the merits.

As an initial matter, Aveanna’s analysis presupposes that an IRS audit is

inevitable. But Aveanna offers nothing in the SPA—or from commercial practice

or experience generally—that suggests the Government always audits refunds.261

More importantly, Aveanna does not explain why the Court should imply a reference

to the Audit Provision when the parties clearly knew how to cross-reference tax

provisions explicitly when they wanted to do so.262 Indeed, courts routinely find the

exclusion of a particular cross-reference is intentional and a byproduct of

negotiation.263 In any event, the “net of any taxes owed” language does not

reasonably signal the Audit Provision. This language most naturally means a proper

260 E.g., Emerald Partners v. Berlin, 726 A.2d 1215, 1224 (Del. 1999); Ethica Corp. Fin. S.r.L v. Dana Inc., 2018 WL 3954205, at *3 & n.37 (Del. Super. Ct. Aug. 16, 2018). 261 But see SPA § 6.9(b) (omitting the likelihood of an audit and instead discussing audit control procedures for “any audit”); but see also Hr’g Tr. at 63 (“The Court: ‘But, again, the net of any taxes owed [language] assumes an automatic audit that is not referenced in the contractual language.’” “[Counsel for Aveanna]: ‘It’s there for a reason, and the reason is an automatic audit. . . . You don’t need to know the ins and outs of audits. . . . It has a purpose.’”); but see generally Lang & Soled, supra note 247, at 427 (describing the “probability” of an IRS audit as “low”). 262 See SPA § 6.9(f) (explicitly referencing § 6.9(e)). 263 See, e.g., McDonald’s, 2021 WL 351967, at *5 (“If the parties intended to incorporate [a separate provision], they would have been explicit, just as they were when incorporating other provisions. . . . Without this clear expression of intent, the Court has no cause to rewrite [the agreement] to include commitments the parties themselves chose not to incorporate.” (citation omitted)); Active Asset Recovery, Inc. v. Real Est. Asset Recovery Servs., Inc., 1999 WL 743479, at *11 (Del. Ch. Sept. 10, 1999) (finding that omission of a specific term in a contract “speaks volumes” about the parties’ intent when construing included terms (citing 3 Corbin on Contracts § 552 (1960))); see also Fortis Advisors LLC v. Shire US Holdings, Inc., 2017 WL 3420751, at *8 (Del. Ch. Aug. 9, 2017) (analogizing counterparties’ omission of specific terms to the statutory canon of expresio unius est exclusio alterius, which provides that an omission presumptively is intentional when other terms are included instead). 68 refund reflects subtractions for ordinary “taxes owed” to federal or state authorities,

such as when a taxpayer underpays her taxes during an income year.

Finally, even if the Court implied a reference to the Audit Provision, it would

not lend Aveanna interpretive assistance. Under the Audit Provision, Epic

presumptively controls an IRS audit. Epic may exclude Aveanna from an audit’s

defense entirely, preventing an opportunity mutually to recalculate for deductions.264

A compulsory audit, therefore, still would not permit Aveanna to withhold a refund.

There are no conditions precedent in the Refund Provision. Aveanna

unconditionally was obliged to remit the refund to Epic within ten business days of

intercepting it. It did not. Accordingly, Aveanna is not entitled to judgment as a

matter of law. To the contrary, Aveanna has violated the SPA by withholding the

refund unless it can prevail on one of its fact-based affirmative defenses.

3. Aveanna is entitled to discovery on its defenses.

While this case still was pending in the Court of Chancery, Aveanna moved

in the Court of Chancery under Rule 56(f) for an extension of time to respond to

Epic’s separately-pending summary judgment motion. Aveanna has argued

discovery is necessary (i) to obtain extrinsic evidence of the parties’ intent in drafting

the Refund Provision; (ii) to prove Epic waived its right to challenge an immediate

release of the refund; and (iii) to establish the existence of a post-closing

264 SPA § 6.9(b). 69 modification to the SPA through which the parties agreed Aveanna could withhold

the refund until the IRS’s audit concludes. As set forth above, the Refund Provision

is unambiguous, and Aveanna’s request to discover extrinsic evidence of the parties’

intent therefore is moot, leaving Aveanna’s request to obtain discovery regarding its

waiver and modification defenses.

Court of Chancery Rule 56(f) is identical to this Court’s Civil Rule 56(f).265

A motion under Rule 56(f) is directed to a court’s “broad discretion.”266 “[A] party

opposing summary judgment may, pursuant to . . . Rule 56(f), request limited

discovery if it cannot present facts essential to oppose the summary judgment

motion.”267 To invoke Rule 56(f), the requesting party must provide an affidavit

stating the scope of proposed discovery.268 The requesting party bears the burden of

demonstrating the discovery proposed is specific and relevant “in light of applicable

265 Compare Del. Super. Ct. Civ. R. 56(f), with Ch. Ct. R. 56(f). 266 Brick v. Retrofit Source, LLC, 2020 WL 4784824, at *3 (Del. Ch. Aug. 18, 2020) (internal quotation marks omitted); see Schillinger Genetics, Inc. v. Benson Hill Seeds, Inc., 2021 WL 320723, at *16 (Del. Ch. Feb. 1, 2021) (“The Rule 56(f) opportunity to present affidavits or engage in discovery . . . is necessarily circumscribed by the discretion of the trial court. . . .” (second ellipsis in original) (alteration omitted) (quoting Malpiede v. Townson, 780 A.2d 1075, 1091 (Del. 2001))). 267 Corkscrew Mining Ventures, Ltd. v. Preferred Real Est. Fund Invs., Inc., 2011 WL 704470, at *3 (Del. Ch. Feb. 28, 2011). 268 Id. at *3; see Ch. Ct. R. 56(f). 70 law.”269 An extension is appropriate where the core facts needed to oppose summary

judgment “are within the exclusive knowledge” of the movant.270

Aveanna has complied with Rule 56(f)’s affidavit requirement.271 Through

the affidavits, Aveanna’s Vice President of Tax has declared that Aveanna incurred

significant expense in defending the IRS’s audit solely because Epic had agreed to

Aveanna’s withholding of the refund.272 Epic’s agreement may express or imply a

waiver—a fact-based inquiry.273 A waiver or a modification may defeat a breach

argument. But evidence of waiver or an agreement is not in the record or in

Aveanna’s possession. A scarce record on these questions, coupled with Aveanna’s

lack of possession and the specificity and relevance of its limited, fact-based

requests, warrants an extension of time. Accordingly, discovery is appropriate

before the Court considers summary judgment on Epic’s tax refund counterclaim.

269 Schillinger Genetics, 2021 WL 320723, at *16 (internal quotation marks omitted); see Brick, 2020 WL 4784824, at *3 (“[T]he onus is on the non-moving party to state with some degree of specificity . . . the additional facts sought by the requested discovery.” (internal quotation marks omitted)). 270 Corkscrew Mining, 2011 WL 704470, at *3. 271 Ct. Ch. Dkt. 54, Exs. A & B; cf. Comet Sys., Inc. S’holders’ Agent v. MIVA, Inc., 980 A.2d 1024, 1033 (Del. Ch. 2008) (denying Rule 56(f) motion that had not been presented with an accompanying affidavit). 272 E.g., Ct. Ch. Dkt. 54, Ex. B ¶¶ 6–8. 273 E.g., Topspin Partners, L.P. v. RockSolid Sys., Inc., 2009 WL 154387, at *2 (Del. Ch. Jan. 21, 2009) (deferring waiver as a jury question); see also Realty Growth Invs. v. Council of Unit Owners, 453 A.3d 450, 456 (Del. 1982) (observing that the facts surrounding waiver must be “unequivocal in character”). As a result, the Court rejects Epic’s contractual anti-waiver arguments, as contractually afforded protections against waivers themselves may be waived if facts so indicate. See Amirsaleh v. Bd. of Trade of City of N.Y., Inc., 27 A.3d 522, 529–30 (Del. 2011). 71 This case’s procedural posture further supports that conclusion. Epic sought

summary judgment in the Court of Chancery for specific performance of the tax

refund. That motion has been transferred in its original form, and Epic intends to

submit it that way. This Court, however, lacks subject matter jurisdiction to grant

specific performance. The Court therefore cannot rule on Epic’s unedited motion.

That in mind, the Court of Chancery found Epic’s “specific performance” claim truly

presents a damages or declaratory claim. As a result, the motion is not doomed.

Instead, Epic must brief its motion anew with legal, rather than equitable,

arguments.274 Accordingly, Epic’s motion is denied without prejudice to it renewing

that motion once the contemplated discovery is complete.

C. Under the Escrow Agreement’s plain language, Aveanna wrongfully withdrew the Escrow Funds.

The final issue raised by Aveanna’s motion involves the Escrow Funds.

Through its motion, Aveanna seeks a judgment that it is not violating the Escrow

Agreement by continuing to hold the Escrow Funds while the parties’ dispute

continues.275 To support that request, Aveanna first argues Epic has waived its right

274 The Court is mindful of the Court of Chancery’s correct observation that this Court ordinarily does not require a transferred litigant to re-brief motions submitted in a sister court. Epic/Freedom, 2021 WL 1049469, at *4–5 (citing 10 Del. C. § 1902). Epic, however, has not explained how the Court workably can reduce its unchanged equitable arguments to legal judgment. Given the unique litigation history of this case—and the administrative problems a second transfer undoubtedly would cause—it is appropriate to order Epic to file a new motion, should it decide that summary judgment remains a prudent course. For these reasons, this order should be deemed exceptional. 275 At oral argument, Aveanna clarified that it does not seek a judgment that it “owns” the Escrow Funds. Hr’g Tr. at 69. Instead, Aveanna seeks a judgment that it rightfully may hold the Escrow 72 to challenge the Escrow Funds’ early release by failing to file a Dispute Notice

within the 30-day objection period. Aveanna then contends that, regardless of

waiver, it properly obtained the Escrow Funds’ early release by notifying Epic and

the Escrow Agent of its Indemnification Claim at the same time. Aveanna’s

assertions call for interpretation of the Escrow Agreement and its interaction with

the SPA. As discussed below, neither agreement validates Aveanna’s non-

conforming notice.

1. Epic did not waive its challenge to the Escrow Funds’ release.

Under Escrow Agreement Section 4(b), Epic has 30 days to object to

Aveanna’s Indemnification Notice. If Epic does not object by that deadline, the

Escrow Agent must release the Escrow Funds to Aveanna. Importantly, Section 4(b)

does not provide that a failure to timely object to an Indemnification Notice

precludes Epic from challenging that Notice by other means (e.g., a breach of

contract claim based on Section 4(b)). In fact, the opposite is true. Under the Escrow

Agreement’s No Waiver provision, a failure to exercise a right under the Agreement

does not operate as a waiver of that unexercised right.276

Funds until it proves an indemnifiable Loss. Id. at 70–71. As a result, the Court does not reach the parties’ arguments on whether a valid release establishes a permanent or temporary interest in the Escrow Funds. 276 EA § 15. 73 On this plain language, Epic’s failure to file a Dispute Notice is not fatal to its

challenge to Aveanna’s possession of the Escrow Funds. Assuming an

Indemnification Notice properly is delivered, a failure to file a Dispute Notice allows

Aveanna to hold the Escrow Funds while its Indemnification Claim is resolved.277

A timely Dispute Notice simply would block an early release; it would not transmit

a claim charging a breach of the Escrow Agreement. A breach claim therefore can

be pursued in addition to, or in spite of, a timely Dispute Notice. Accordingly, the

No Waiver provision saves Epic from an argument that a Dispute Notice is a

prerequisite to suing for breach of the Escrow Agreement.

Aveanna’s argument to the contrary relies on cases that did not consider anti-

waiver language. For example, in HC Companies, Inc. v. Myers Industries, Inc.,278

the agreement penalized untimely objections to an escrow release with a waiver.279

The seller missed the deadline. As a result, and without anti-waiver language, the

Court of Chancery ruled that the seller waived a challenge to the release.280

Similarly, in PR Acquisitions, LLC v. Midland Funding LLC,281 the parties

structured their purchase and escrow agreements with two separate indemnification

277 See SPA § 9.4(a)(iii) (providing that “Loss” must be proven before a party is entitled to indemnification). 278 2017 WL 6016573 (Del. Ch. Dec. 5, 2017). 279 Id. at *6. 280 Id. at *6, *8. 281 2018 WL 2041521 (Del. Ch. Apr. 30, 2018). 74 notice procedures.282 The Court of Chancery found that providing an

indemnification notice under the purchase agreement, but not the escrow agreement,

would result in a waiver of the right to challenge an escrow release.283 Citing

“human error,” the buyer did not file a notice under either agreement before the

expiration date.284 By consequence, the court deemed a challenge to the escrow

release waived. In doing so, the court enforced contractual compliance strictly,

finding no exception (e.g., anti-waiver language) to the buyer’s notice duties.285

Finally, in Winshall v. Viacom International, Inc.,286 the parties agreed

indemnification claims would be lost unless they were made within 18 months of

the transaction’s closing. The buyer made its first three claims during that window,

but did not make its last claim until after the window closed.287 As justification for

delaying its fourth claim, the buyer argued that “placeholder” language in its timely

notices had reserved the buyer’s right to bring future claims at any time.288 The

Court of Chancery rejected that unilateral attempt to extend the deadline, explaining

the sellers expressly had bargained for repose in the form of a cut-off date.289 Here,

282 Id. at *6 n.66. 283 Id. at *6–7. The Court of Chancery did not use the term “waiver,” but its ruling is to that effect. 284 Id. at *6. 285 Id. at *7. 286 2012 WL 6200271 (Del. Ch. Dec. 12, 2012), aff’d, 76 A.3d 808 (Del. 2013). 287 Id. at *8. 288 Id. 289 Id. 75 however, Epic expressly bargained for the No Waiver provision. Accordingly, the

Escrow Agreement permits Epic’s challenge.

2. Aveanna failed to deliver “an Indemnification Notice” “to Epic and the Escrow Agent” “concurrently.”

a. The SPA and the Escrow Agreement contemplate different Notices.

SPA Section 9.2(a)(i) authorizes Aveanna to seek indemnification from Epic

for inaccuracies in the SPA’s representations and warranties. To do so, Aveanna

must send Epic an Indemnification Claim Notice. One purpose of an

Indemnification Claim Notice is to inform Epic of an Indemnification Claim. In

context, another purpose of an Indemnification Claim Notice is to provide Epic with

an opportunity to investigate and respond to the claim. That is why, under SPA

Section 9.5, an Indemnification Claim Notice triggers Epic’s inspection rights.

Section 9.5 opens a pathway to Aveanna’s books and records, review of which Epic

may need to mount a defense to an Indemnification Claim. Under the SPA, a books

and records demand may be made at any “reasonable” time. There is no other

concrete deadline for making a books and records demand or for answering an

Indemnification Claim Notice generally.

If Aveanna “makes a claim for indemnification . . . [under] Section 9.2” of the

SPA, and wishes to extract the Escrow Funds early, Aveanna gains an additional

76 duty under the Escrow Agreement.290 To obtain control over the Escrow Funds,

Aveanna must “deliver concurrently to the Escrow Agent and Seller a written notice

(an ‘Indemnification Notice’).”291 As observed previously, the Escrow Agreement’s

Indemnification Notice is titled and defined differently than the SPA’s

Indemnification Claim Notice. An Indemnification Notice also serves different

purposes. An Indemnification Notice (i) alerts the Escrow Agent to an active

Indemnification Claim; (ii) starts the clock on the Escrow Agent’s early release

duties; and (iii) affords Epic an opportunity to lodge a Dispute Notice within 30 days.

As further evidence that the Indemnification Notice is a separate document, the

Escrow Agreement does not incorporate SPA Section 9.5—i.e., where the concept

of an Indemnification Claim Notice resides. It only incorporates SPA Section 9.2—

i.e., where the concept of an Indemnification Claim resides.

That the parties contemplated two separate notices is reasonable in light of

their decision to draft separate objection procedures. Those procedures, in turn, have

distinct purposes. Under the SPA, Epic may object to an Indemnification Claim

Notice at any reasonable time. Epic’s objection goes to a Claim’s merits. Epic’s

inspection rights under the SPA are designed to facilitate Claim resolution between

the parties. The “reasonable” time parameters offer generous latitude for doing so.

290 EA § 4(b). 291 Id. 77 In contrast, under the Escrow Agreement, Epic must object to an

Indemnification Notice within 30 days. Epic’s Dispute Notice does not go to the

merits of an Indemnification Claim. Instead, Epic’s Dispute Notice is designed to

mediate practical control over the Escrow Funds while an Indemnification Claim is

pending. Given the involvement of capital and a third party (the Escrow Agent), a

more rigid timeframe is sensible. The Escrow Agent, who otherwise would be

investing the Escrow Funds,292 must ensure they are liquid by a specific time. And

the Funds’ value, which fluctuates, may be determined more predictably when there

is a specific day on which the Escrow Funds will be released. That is particularly

important because Buyer may choose the exact amount subject to early release,

including the full amount available to Seller on the Final Escrow Release Date.

Looking to each agreement as a whole, an Indemnification Notice and an

Indemnification Claim Notice are not the same, although they may contain much of

the same content. To discharge the parties’ mutual intent, Aveanna must deliver

both Notices to their designated addressees in order to commence the Escrow Funds’

early release process.

b. Epic did not receive an Indemnification Notice.

Aveanna sent Epic an Indemnification Claim Notice when it determined

Defendants may have committed contractual fraud. Epic responded 33 days later,

292 See id. § 3(a). 78 contesting the allegations and invoking its inspection rights. The timing plainly was

reasonable. The response plainly was reasonable. The SPA’s notice and objection

procedures were respected.

At the same time, and on the same day, Aveanna sent the Escrow Agent—but

not Epic—an Indemnification Notice. The Escrow Agreement, however,

unambiguously affords Epic the right to receive an Indemnification Notice, too. The

Escrow Agreement requires delivery of “an Indemnification Notice” “to the Escrow

Agent and Seller.”293 Aveanna attached a copy of Epic’s Indemnification Claim

Notice in its message to the Escrow Agent. But Aveanna did not attach a copy of

the Escrow Agent’s Indemnification Notice in its message to Epic. Without

knowledge that Notice had been sent to the Escrow Agent, Epic could not have been

expected to file a Dispute Notice with the Escrow Agent. Without a proper

Indemnification Notice, Aveanna was prohibited from accessing the Escrow Funds.

Accordingly, Aveanna is not entitled to judgment as a matter of law on its continued

possession of the Escrow Funds.

Aveanna resists this conclusion by advancing a few unreasonable readings of

the parties’ agreements. Aveanna begins by arguing an Indemnification Notice and

an Indemnification Claim Notice are interchangeable. But that position gives no

meaning to two differently-titled and defined terms that exist in two separate

293 Id. § 4(b) (emphasis added). 79 contracts executed with different procedures and transactional aims. Indeed, it is

difficult to imagine the parties engineered their agreements using Aveanna’s

construction. It would not be rational for the parties to execute a $950 million

arrangement by which Seller can learn of a transaction-based Indemnification Claim,

contest it, and then decide to defend it, under the SPA, but still be deemed

uninterested in the fate of the Claim’s funding—which also constitutes sale

consideration—under the Escrow Agreement. Strict compliance with two different

Notices and Notice procedures closes this circle.294

Relatedly, Aveanna insists a single Indemnification Notice is not required by

the Escrow Agreement. But the Escrow Agreement’s plain language expresses

singularity. Section 4(b) declares Aveanna must deliver “a written notice (an

‘Indemnification Notice’).”295 Far from grammatical trifles, the singular articles

evince deliberation. Without “a” single Indemnification Notice, Epic would be

caught unawares by an early release. And, as here, the Escrow Agent incorrectly

would believe that Epic is indifferent to Aveanna’s race toward the Escrow Funds.

Aveanna next cites Black’s Law Dictionary to bolster its view that, even if a

single Notice were required, its two Notices functioned as one because both Epic

294 See PR Acquisitions, 2018 WL 2041521, at *6–7 & n.66 (observing that strict compliance with a purchase agreement’s notice procedures, without more, does not amount to strict compliance with a contemporaneously executed escrow agreement’s separate notice procedures as well). 295 EA § 4(b). 80 and the Escrow Agent learned of the Indemnification Claim “concurrently”—i.e.,

“at the same time.” This effort fails at its inception because notice of an

Indemnification Claim is not equivalent with notice of a request for the Escrow

Funds’ early release. Even so, in attempting to redefine the two Notices, Aveanna

redefines “concurrent,” too. Black’s defines concurrent not as “at the same time,”

but rather as “operating at the same time.”296 Black’s elsewhere defines “operate”

as “to function properly.”297 Similarly, generic dictionaries define operate as “to

produce an appropriate effect.”298 Taken together, an Indemnification Notice only

“function[s] properly” if it “produce[s]” the “appropriate” effect of notifying the

Escrow Agent and Epic “at the same time” of Aveanna’s intent to obtain an early

release of the Escrow Funds.

Notice delivered “at the same time” would be “simultaneous,” not concurrent.

“Simultaneous” describes an event’s timing only.299 “Concurrent” describes an

296 Concurrent, Black’s Law Dictionary (11th ed. 2019) (emphasis added); but see D.I. 46 at 16 (noting the word “operating” but then omitting it to focus only on the phrase “at the same time”). 297 Operate, Black’s Law Dictionary (2d online ed.), https://www.thelawdictionary.org/operate (last visited July 9, 2021). 298 Operate, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/operate (last visited July 9, 2021). The Supreme Court has compared Merriam-Webster with Black’s in construing undefined terms. E.g., Spintz v. Div. of Fam. Servs., 228 A.3d 691, 700 (Del. 2020); USAA Cas. Ins. Co. v. Carr, 225 A.3d 357, 360 (Del. 2020). Accordingly, the Court follows that example. See Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del. 2006) (“Under well-settled case law, Delaware courts look to dictionaries for assistance in determining the plain meaning of terms which are not defined in a contract.”); accord In re Solera Coverage Appeals, 240 A.3d 1121, 1132 n.67 (Del. 2020). 299 Simultaneous, Merriam-Webster.com, https://www.merriam-webster/dictionary/simultaneous (last visited July 9, 2021) (“existing or occurring at the same time; exactly coincident”). 81 event’s timing and its effect.300 To illustrate the difference, Black’s uses “concurrent

interest,” with a reference to “concurrent estate,” as an example.301 A concurrent

interest in land, such as a joint tenancy, is a property right owned by “two or more

persons at the same time.”302 Joint tenants have the right to occupy the land

“simultaneously,” but they need not do so. A unified conveyance of ownership

rights “at the same time” in the same title is enough to make their “concurrent”

interest “operate.”303 Stated negatively, the joint tenancy right is ineffective unless

granted pursuant to a single instrument.304 By analogy, the same is true for an

Indemnification Notice. It is ineffective unless it is singular (i.e., the same Notice),

transmits the same content, is addressed to Epic and the Escrow Agent, and is

delivered to them at the same time.

For completeness, Black’s also defines concurrent as “covering the same

matters,”305 which likewise is a contextually apt definition.306 A single

300 See supra notes 295–98 & accompanying text. 301 Concurrent, Black’s Law Dictionary (11th ed. 2019). 302 Concurrent Estate, in id.(using joint tenancy as an example). 303 See, e.g., Banks v. Banks, 135 A.3d 311, 317–18 (Del. Ch. 2016) (applying the four “unities” of a joint tenancy, of which same “title” and “time” are two (internal quotation marks omitted)). 304 See 2 Tiffany on Real Property § 418 (3d ed. 2015) (“Joint tenants have one and the same interest, accruing by one and the same conveyance, commencing at one and the same time, and held by one and the same undivided possession.” (emphasis added)). 305 Concurrent, Black’s Law Dictionary (11th ed. 2019). 306 See Tetragon Fin. Grp. Ltd. v. Ripple Labs Inc., 2021 WL 1053835, at *4 (Del. Ch. Mar. 19, 2021) (explaining that “the mere existence of multiple definitions does not itself create ambiguity” where context suggests one definition is more appropriate than others); E.I. du Pont de Nemours & Co. v. Admiral Ins. Co., 711 A.2d 45, 59 (Del. Super. Ct. 1995) (“If the mere existence of different dictionary definitions constitutes an ambiguity, drafting unambiguous contractual 82 Indemnification Notice addressed both to the Escrow Agent and Epic that “cover[s]

the same matter[]”—the Escrow Funds’ early release—delivered “at the same time”

plainly is what the parties meant by “concurrently.” Properly construed, then,

Aveanna sent an Indemnification Notice—which covers one matter—to the Escrow

Agent, and an Indemnification Claim Notice—which covers another matter—to

Epic, simultaneously. Aveanna failed to send an Indemnification Notice to the

Escrow Agent and Epic concurrently.

As a last resort, Aveanna departs from its plain meaning analysis and

speculates that Aveanna or the Escrow Agent would have told Epic about the

Indemnification Notice if Epic just had asked. But Escrow Agreement Section 4(b)

contains no duty to inquire. Rather, the parties bargained for a single

Indemnification Notice that informs all parties of the same claim at the same time.

The Court will not insert contractual obligations that Aveanna, a sophisticated entity,

willingly chose to omit.307

Once Aveanna made an Indemnification Claim, it did not need to pursue the

Escrow Funds’ immediate release.308 When it did, however, it plainly was required

language would be impossible without defining almost every word. Standing alone, multiple dictionary definitions do not prove all differing definitions are reasonable.” (citation omitted)). 307 See W. Willow-Bay, 2007 WL 3317551, at *9 (observing that sophisticated parties especially are bound by the contract language they voluntarily choose); cf. NAMA Holdings, 948 A.2d at 419 (observing that the inclusion of a certain term is intentional and must be given effect). 308 Compare D.I. 46, Ex. B (Indemnification Notice dated Dec. 21, 2017), with EA § 4(f) (scheduling Escrow Final Release Date for Mar. 16, 2018), and EA § 4(b) (permitting the Buyer to request an early release at “any time prior” to the Final Escrow Release Date). 83 to send Epic an Indemnification Notice. It did not. Accordingly, Aveanna is not

entitled to judgment as a matter of law as to its continued possession of the Escrow

Funds.

CONCLUSION

For the foregoing reasons, the parties’ motions for judgment on the pleadings

are DENIED, Aveanna’s Rule 56(f) motion is GRANTED, and Epic’s summary

judgment motion is DENIED WITHOUT PREJUDICE.

IT IS SO ORDERED.