Channel PES Acquisition Co., LLC v. Heritage-Crystal Clean, Inc.

• Court: Superior Court of Delaware
• Decided: June 30, 2024
• Docket: N23C-08-206 MAA CCLD
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

CHANNEL PES ACQUISITION CO., ) LLC, ) ) C.A. No. N23C-08-206 MAA CCLD Plaintiff, ) ) v. ) ) HERITAGE-CRYSTAL CLEAN, ) INC., ) ) Defendant. )

Submitted: March 28, 2024 Decided: June 30, 2024

Upon Defendant’s Motion to Dismiss the First Amended Complaint: GRANTED in Part, and DENIED in Part.

MEMORANDUM OPINION

Stamatios Stamoulis, Esquire, and Richard C. Weinblatt, Esquire, of STAMOULIS & WEINBLATT LLC, Wilmington, Delaware, and Richard A. Schwartz, Esquire (Argued), of ROSS LLP, Los Angeles, CA, Attorneys for Plaintiff.

John P. DiTomo, Esquire, and Alec F. Hoeschel, Esquire, of MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware, and Brian J. Massengill, Esquire, and Matthew E. Fenn, Esquire (Argued), of MAYER BROWN LLP, Chicago, IL, Attorneys for Defendant.

Adams, J. I. INTRODUCTION

Plaintiff entered into an agreement with defendant to sell an environmental

services company. As part of the purchase agreement, the parties agreed that the

purchase price would be determined at closing based on a post-closing true-up. The

parties also agreed that disputes relating to that calculation would be submitted to

arbitration rather than through litigation. The parties set aside escrow funds for

potential claims, and defendant-buyer agreed to release those funds back to seller

after certain conditions were met. After closing, plaintiff-seller disputes defendant-

buyer’s post-closing calculations, and defendant-buyer’s refusal to release the

escrow funds. The parties have also proceeded through the dispute resolution

process and received a Final Determination from an Arbitrator. Defendant moved

to dismiss all of plaintiff’s claims on both procedural and substantive grounds. For

the reasons that follow, the motion to dismiss is GRANTED in part, and DENIED

in part.

2 II. FACTS1

A. THE PARTIES

Plaintiff, Channel PES Acquisition Co., LLC (“Plaintiff” or “Seller”), filed

suit against Defendant, Heritage-Crystal Clean, Inc. (“Defendant” or “Buyer”), a

Delaware company.2 Seller is a group of hands-on investors with its headquarters

in Santa Monica, California.3 Buyer is a billion-dollar public company.4

B. PLAINTIFF SELLS PATRIOT TO BUYER

In 2014, Seller acquired Patriot Environmental Services Inc. (“Patriot” or “the

Company”), “an environmental services company that specializes in industrial

hazardous and non-hazardous waste management[.]”5 Seller oversaw the day-to-

day operations of Patriot and was thus very familiar with its financial and accounting

functions.6

On June 29, 2022, the parties entered into the Stock Purchase Agreement (the

“SPA”), which facilitated Plaintiff’s sale of its wholly owned subsidiary, Patriot, to

Defendant.7 The sale was for approximately $156 million subject to a post-Closing

1 The facts are drawn from the First Amended Complaint and the Stock Purchase Agreement (Ex. 1 to Defendant’s Opening Brief in Support of Defendant’s Motion to Dismiss) which is incorporated by reference to the Complaint. See In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 169 (Del. 2006). 2 Am. Compl. ¶ 14. 3 Id. ¶¶ 17, 19. 4 Id. ¶ 20. 5 Id. ¶¶ 1, 19. 6 Id. ¶ 19. 7 Id. ¶¶ 1, 21. 3 true-up, “although the SPA provided that adjustments to the purchase price would

be made after the transaction closed based on Patriot’s financial condition as of

August 3, 2022 (“Closing”)[.]”8 Buyer gained control of Patriot on the Closing

date.9

Patriot’s financial condition at Closing was to be based on information within

the Buyer’s exclusive control, so the SPA detailed Buyer’s “affirmative obligation

to conduct and accurately maintain a ‘good faith calculation (in reasonable detail)’

after Closing of all Company accounts.”10 Between the time that the parties signed

the SPA and the Closing (the “Interim Period”), it was crucial that Buyer make good

faith calculations under the SPA because “[b]ooks and records would not be

finalized until several weeks or even months after the Closing[.]”11 In anticipation

of the necessity, the parties stipulated in the SPA that Buyer must produce a broad

range of documents and provide access to Seller to check Buyer’s accounting

practices during the Interim Period.12 The significant revenue earned during the

Interim Period belonged to Seller, but would not be known until Patriot was under

the exclusive control of Buyer.13

8 Id. 9 Id. ¶ 1. 10 Id. ¶ 2. 11 Id. 12 Id. ¶ 4. 13 Id. ¶ 3. 4 Seller estimated Patriot would continue to perform as it had in the months

before the Interim Period, and Seller relayed this estimation to Buyer before

Closing.14 During the weeks leading up to Closing, Patriot executives updated Buyer

on Patriot’s performance, but these updates never included discussions of issues or

substantial drops in Patriot’s performance.15

C. SUPPRESSION OF FINAL REVENUE ACCOUNTING FOR INTERIM PERIOD

Before Buyer delivered the Closing Date Statement, but after Closing, “Buyer

caused Patriot to provide certain credits to Patriot’s customers that would have the

effect of customers paying for obligations incurred during the Interim Period on

invoices that would be recognized during post-Closing periods[.]”16

Buyer neither provided Seller access to Company records nor produced all the

documents that Seller requested, but Seller was able to ascertain that Buyer made

false assertions regarding revenue earnings before Closing.17 Although “Patriot

averaged $10.2 million in revenue for the six months before Closing,” “Buyer claims

that July 2022 revenue fell 26% from the June 2022 level, to $7.7 million.”18

Company performance, however, had been consistent in July 2022, and Buyer’s

issuance of credits to customers after Closing for work performed before Closing

14 Id. ¶ 22. 15 Id. 16 Id. ¶ 23. 17 Id. ¶¶ 5–6. 18 Id. ¶ 6. 5 caused the decline in revenue earnings.19 This accounting practice allegedly violated

the express terms of the SPA.20 Immediately after Closing in August 2022, “Patriot’s

revenue returned to pre-Closing levels, and even exceeded the prior six-month

average.”21 Revenue increased 41% from July 2022 to $10.7 million in August, then

to $11.2 million in September 2022.22

Patriot’s then-CFO confirmed Patriot had not authorized the issuance of

credits during the Interim Period.23 Seller “earned and was entitled to” the revenue

that came in during this period, but Buyer’s accounting enabled Buyer to collect the

revenue after Closing.24 Neither the SPA nor generally accepted accounting

principles (“GAAP”) gave Buyer the right to “issue credits that would apply to

periods when Seller owned the Company or to send customers new invoices post-

Closing that included pre-Closing work.”25 As a result of the credits, Buyer reduced

the purchase price of the Company at Closing.26 The information that Seller

requested and Buyer did not produce “would show Buyer’s misconduct.”27

19 Id. ¶ 7. 20 Id. 21 Id. ¶ 8. 22 Id. 23 Id. ¶ 10. 24 Id. 25 Id. ¶ 11. 26 Id. 27 Id. 6 SPA § 2.4(b) mandates that Buyer make a “good faith calculation” of the

Interim Period accounts “in reasonable detail” and “based solely on facts and

circumstances as they exist as of the Effective Time or the Closing[.]”28 The SPA

also required Buyer to provide documents supporting its calculations.29 Buyer’s

obligation to produce documents is broad pursuant to § 2.4(c)(i).30 Buyer slowly

produced minimal documents “just five days before the end of the 30-day period

when Seller could object to Buyer’s accounting,” preventing Seller from challenging

Buyer’s accounting practices through arbitration.31 This small amount of Buyer’s

document production allegedly demonstrates Buyer’s fraudulent suppression of

Patriot’s pre-Closing revenue.32

Seller alleges Buyer’s minimal document production shows one of two things.

Either: (1) “Buyer provided credits to customers post-Closing but retroactive to July

31—when Buyer had no right to provide any credits” or (2) “Buyer later reversed

the ‘credits’ and re-billed those customers in the months after Closing.”33 Patriot’s

accounting system uniquely requires that to make any change in an invoice, one must

delete it in its entirety and reissue the old invoice with a new date.34 “Seller believes

28 Id. ¶ 27. 29 Id. 30 See id. ¶¶ 28–29. 31 Id. ¶¶ 30–32. 32 Id. ¶ 33. 33 Id. ¶ 34. 34 Id. 7 that Buyer abused this accounting system software quirk by transferring pre-Closing

revenue to the post-Closing period.”35 In one month, Buyer issued a larger dollar

amount of unauthorized credits than the total amount Seller issued in the eight years

that Seller owned Patriot.36 Patriot’s then-CFO, Geoffrey Milbrandt, had not been

aware of Buyer’s issuance of these unauthorized credits, distinguishing this instance

from Patriot’s previous adjustment of accrued revenue totals.37 In that instance, the

totals pertained to a one-off Huntington Beach/Amplify Energy oil spill in October

2021 and resulted from negotiated settlements with insurance companies and other

involved parties.38

Milbrandt “refused to comply with Buyer’s request to engage in the unusual

accounting that harmed Seller,” and lost his job shortly after.39 The Corporate

Controller of Buyer, Carol Okamoto, testified that she “collaborated with Jeff

Vejselli at Buyer to issue improper credits for pre-Closing jobs.”40 Seller asserts

those “revenue manipulations” violate several GAAP accounting rules and the SPA,

amounting to fraud as a matter of law.41 Buyer “under-accrued revenue by several

35 Id. 36 Id. ¶ 35. 37 Id. ¶¶ 35, 37. 38 Id. ¶ 35. 39 Id. ¶ 37. 40 Id. ¶ 36. 41 Id. ¶ 38. 8 million dollars” and violated its duty to make “good faith calculation[s]” by “billing

revenue to customers for periods when [Buyer] did not control Patriot.”42

D. ARBITRATION

The SPA provides in Section 2.4(c)(ii) that the “arbitration is ‘limited to

resolving such objections and determining the correct calculations to be used on only

the disputed portions of the Closing Date Statement as set forth in the Dispute Notice

(to the extent not otherwise resolved by the parties pursuant to this Section

2.4(c)).’”43 The parties have already arbitrated over post-Closing matters.44 Buyer

contends that the sole purpose of arbitration is for “correct[ing] calculations” and

limited to “what Seller places on the Dispute Notice.’”45 According to the complaint,

the arbitrator refused to arbitrate the purchase price dispute “based on adjustments

that were not contained in Buyer’s dispute notice—which Seller necessarily

formulated in reliance on the fraudulent and insufficient information Buyer provided

to Seller following Closing.”46 The arbitrator only arbitrated the “determination of

the purchase price under the SPA.”47

At issue is the fact that Seller purportedly could not provide an exhaustive list

of items in the Dispute Notice because Buyer failed to produce requested

42 Id. ¶ 39. 43 Id. ¶ 40. 44 Id. 45 Id. ¶ 41. 46 Id. ¶ 42. 47 Id. 9 documents—an act which constitutes a breach of the SPA.48 Buyer also inhibited

Seller from “discovering and including the bogus credits (and other improper actions

by Buyer) in the accounting-arbitration.”49 Seller did include in the Dispute Notice,

however, Buyer’s failure to produce documents and that Seller “reserved its rights

under the SPA to seek redress outside of [a]rbitration for these breaches by Buyer.”50

The arbitration was limited to the determination of “the validity of the

numbers included on the ‘Dispute Notice,’ which is a defined term under the SPA.”51

Seller, thus, asserts that adjudication in this Court is appropriate, and the SPA does

not limit remedies for fraudulent claims.52 Seller also alleges Buyer further violated

the SPA’s requirement to arbitrate credits because Buyer failed to produce credit-

related documents in a timely manner.53

E. ESCROW

The SPA required Buyer to release the representations-and-warranties escrow

one year after Closing, and Buyer refused to do so.54 Sections 8.1 and 8.2 of the

SPA provide that Seller’s “representations and warranties contained in the SPA” and

“indemnification obligations . . . with respect to such representations and warranties

48 Id. ¶¶ 43–44. 49 Id. ¶ 44. 50 Id. ¶ 43. 51 Id. 52 Id. ¶ 47. 53 Id. ¶ 48. 54 Id. ¶ 12. 10 expired on August 3, 2023, i.e., twelve months after the Closing Date (as defined in

the SPA) and the date of the Escrow Agreement.”55 Buyer deposited the Indemnity

Escrow Amount into the Indemnity Escrow Account.56 This deposit satisfied the

indemnification payment obligations enumerated in Section 8.6 of the SPA.57 On

the expiration date, August 3, 2023, Seller requested that Buyer release the funds “in

accordance with the terms of the Escrow Agreement by executing and delivering to

the Escrow Agent the Joint Release instructions.”58 Although Seller complied with

all representations and warranties, Buyer refused to release the funds.59

Buyer instead made a claim against Seller about a dormant matter over ten

years old, but Buyer never mentioned the allegation in any of its SEC filings,

disclosures to shareholders, or to its representations-and-warranties insurance

carrier.60 Buyer claimed that it “provide[d] notice of a third party claim that might

be satisfied from the Indemnity Escrow.”61 Seller asserts Buyer’s claim is invalid

because Buyer did not “comply with the express provisions of the SPA to make such

a claim valid or a proper basis to refuse to release the Indemnity Escrow.”62 Such

provisions are in Section 8.7 of the SPA, providing that in order to make a successful

55 Id. ¶ 50. 56 Id. ¶ 51. 57 Id. 58 Id. 59 Id. ¶ 52. 60 Id. ¶¶ 12–13. 61 Id. ¶ 53. 62 Id. 11 claim against the Indemnity Escrow, the claimant must “provide (a) a written notice

(b) setting forth reasonable detail of the facts and circumstances giving rise to such

claim for indemnification, and (c) identifying the amount of losses that would

result.”63 Buyer did not comply with any of these express conditions.64

Seller, in contrast, argues it has complied with all obligations under the SPA.65

During Seller’s control of Patriot, Seller met all SPA requirements, including those

in Section 5.2 and 5.1(b)(i)–(ii).66 Those require that Seller “continue its operations

at Patriot ‘in the Ordinary Course’ during the Interim Period and not to ‘transfer any

tangible assets except for the sale, transfer, or disposition of finished goods inventory

in the Ordinary Course.’”67

III. PROCEDURAL HISTORY

On August 21, 2023, Seller filed a Complaint alleging seven counts.68 On

November 7, 2023, Seller filed an Amended Complaint alleging six counts: (1)

Breach of Contract;69 (2) Breach of Contract;70 (3) Fraudulent Misrepresentation;71

63 Id. 64 Id. 65 Id. ¶ 54. 66 Id. 67 Id. 68 D.I. 1. 69 Am. Compl. ¶¶ 56–67. 70 Id. ¶¶ 68–80. 71 Id. ¶¶ 81–98. 12 (4) Intentional Breach of Contract;72 (5) Breach of Contract;73 and (6) Breach of the

Implied Covenant of Good Faith and Fair Dealing.74 On December 6, 2023, Buyer

filed a Motion to Dismiss Seller’s First Amended Complaint and an Opening Brief

in Support of Buyer’s Motion to Dismiss the First Amended Complaint.75 On

January 10, 2024, Seller filed its Opposition to Buyer’s Motion to Dismiss the First

Amended Complaint.76 On January 31, 2024, Buyer filed its Reply Brief in Further

Support of Buyer’s Motion to Dismiss the First Amended Complaint.77 The Court

held oral argument on March 28, 2024 and reserved decision.

IV. STANDARD OF REVIEW

A defendant may move to dismiss for lack of subject matter jurisdiction

pursuant to Superior Court Civil Rule 12(b)(1). In deciding the party’s motion, “the

Court ‘need not accept [the plaintiff’s] factual allegations as true and is free to

consider facts not alleged in the complaint.’”78 The plaintiff has the burden to prove

there is jurisdiction79 and thus “‘bears the ‘far more demanding’ burden.”80

72 Id. ¶¶ 99–116. 73 Id. ¶¶ 117–121. 74 Id. ¶¶ 122–130. 75 D.I. 19, 20, Def.’s Opening Br. in Supp. of Mot. to Dismiss [hereinafter “Def.’s Br.”]. 76 D.I. 25, Pl.’s Answering Br. in Opp’n to Def.’s Mot. to Dismiss [hereinafter “Pl.’s Opp’n”]. 77 D.I. 30, Def.’s Reply Br. in Supp. of Mot. to Dismiss [hereinafter “Def.’s Reply”]. 78 In re Proton Pump Inhibitors Prods. Liab. Litig., 2023 WL 5165406, at *5 (Del. Super. Aug. 11, 2023) (quoting Appriva S’holder Litig., Co., LLC v. EV3, Inc., 937 A.2d 1275, 1284 n.14 (Del. 2007)). 79 See, e.g., Payne v. Samsung Elecs. Am., Inc., 2024 WL 726907, at *3 (Del. Super. Feb. 21, 2024). 80 Proton Pump Inhibitors, 2023 WL 5165406, at *5 (quoting Appriva, 937 A.2d at 1284 n.14). 13 Superior Court Civil Rule 12(b)(6) allows a party to move to dismiss a

complaint for failure to state a claim. When deciding on a motion to dismiss, “‘(i)

all well-pleaded factual allegations are accepted as true; (ii) even vague allegations

are ‘well-pleaded’ if they give the opposing party notice of the claim; (iii) the Court

must draw all reasonable inferences in favor of the non-moving party; and (iv)

dismissal is inappropriate unless the ‘plaintiff would not be entitled to recover under

any reasonably conceivable set of circumstances susceptible of proof.’”81 The Court

is limited to the matters in the pleadings, with the exception of “where an extrinsic

document is integral to a plaintiff’s claim and is incorporated into the complaint by

reference[.]”82 The Court may not consider any conclusory allegations without

factual support.83

81 In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d at 168 (quoting Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002)). 82 Furman v. Delaware Dep’t of Transp., 30 A.3d 771, 774 (Del. 2011) (citing Vanderbilt Income & Growth Assocs. v. Arvida/JMB Managers, 691 A.2d 609, 613 (Del. 1996)). 83 Proton Pump Inhibitors, 2023 WL 5165406, at *6 (citing Ramunno v. Crawley, 705 A.2d 1029, 1034 (Del. 1998)) (“[T]he Court must ‘ignore conclusory allegations that lack specific supporting factual allegations.’”). 14 V. ANALYSIS84

A. SUBJECT MATTER JURISDICTION OVER COUNTS I, II, III, IV, AND VI.85

1. The Parties’ Contentions Buyer asserts Counts I, II, III, IV, and VI all are within the parties’

contractually agreed-to arbitration clause, and thus the Court lacks subject matter

jurisdiction over them.86 The SPA states: “‘adjustments to the Estimated Purchase

Price and the dispute resolution provisions provided for in Section 2.4(c) shall be the

exclusive remedies for the matters addressed herein.’”87 Buyer claims that all of

Seller’s aforementioned claims fall within the exclusive scope of the arbitration

clause because they are encompassed by Section 2.4(c) of the SPA.88

Buyer presents three separate reasons why the arbitration clause governs.

First, Buyer notes that Seller conceded this by actively participating in the arbitration

proceedings, and raising the same arguments as it now raises in this Court,

84 The Court notes that Seller asserted in its Opposition Brief that “if and to the extent the Court concludes that any aspect of Seller’s claims are insufficiently or erroneously pled, leave to amend should be granted to allow Seller to assert claims for rescission and rescissory damages.” Pl.’s Opp’n at 29–30. The Court declines to grant any leave to amend. This is Seller’s second complaint, having filed an amended complaint after Buyer already filed its first Motion to Dismiss, and doing so without seeking leave of the Court beforehand. This request is insufficiently justified, and the Court declines to consider it further. 85 Buyer also moved to dismiss for lack of subject matter jurisdiction over Count V, but withdrew that motion at oral argument so the Court will not address it for purposes of subject matter jurisdiction. Channel PES Acq. Co. v. Heritage-Crystal Clean, Inc., C.A. No. N23C-08-206 MAA CCLD, at 18:22–19:4 (Del. Super. Mar. 28, 2024) (TRANSCRIPT). 86 Def.’s Br. at 17. 87 Id. at 18–19 (quoting Ex. 1 [hereinafter “the SPA”] § 2.4(d)(iv)) (emphasis added). 88 Id. at 19–20. 15 impermissibly seeking a “second bite at the apple.”89 Second, Buyer claims

“[Seller’s] allegations raise questions of procedural arbitrability that are questions

for the Arbitration Firm to decide.”90 Third, Seller “cannot now make an end-run

around the arbitration process through artful pleading just because it does not like

how the arbitration has proceeded.”91

Seller argues the Court should first determine whether the arbitration clause

here is narrow “because it sharply limits the types of disputes that fall within its

ambit.”92 Seller then asserts the Court must determine if the challenged conduct falls

within the scope of the narrow provision, which Seller claims it does not “because

Seller’s claims stem from Buyer’s misconduct in disabling Seller from learning or

raising the true issues requiring resolution through the accounting-arbitration.”93

Seller points to the language in the arbitration provision that “calculation of the

amount” suggests “that the scope of the arbitrable matters is limited to those in which

the parties both have access to the same source data and merely differ as to their use

of that source data to calculate Closing Net Working Capital or other salient

values.”94

89 Id. at 20. 90 Id. at 21. 91 Id. at 22. 92 Pl.’s Opp’n at 17 (citing Milton Inves., LLC v. Lockwood Bros., II, LLC, 2010 WL 2836404, at *6 (Del. Ch. July 20, 2010)). 93 Id. 94 Id. at 18 (emphasis added). 16 As an alternative argument, Seller argues the Court “[s]hould [a]ssume

[j]urisdiction to [a]void [s]anctioning [f]raud and [u]njust [r]esults[.]”95 Seller

claims that “Buyer’s interpretation of the SPA effectively would constitute an

advance release for breaches of certain future contractual obligations, which the law

abhors.”96

In response, Buyer argues that the narrow-ness of the clause does not matter—

though Buyer also disputes that it is narrow—because “the only question that matters

is whether the claims concern issues that the [p]arties contractually agreed to

arbitrate.”97 Buyer also disagrees with Seller’s interpretation of the phrase

“calculation of” because the “SPA’s arbitration provision governs the entire process

of resolving ‘disputed portions of the Closing Date Statement,’ which under the SPA

must be properly detailed in Seller’s Dispute Notice.”98 Buyer also notes that Seller

failed to address procedural arbitrability in its brief.99 Buyer lastly disagrees with

Seller’s policy argument, stating that “Buyer argues that the claims [Seller] has

asserted all fall within the arbitration clause” not that all possible claims are limited

to the arbitrator.100

95 Id. at 22. 96 Id. at 22–23. 97 Def.’s Reply at 4–5. 98 Id. at 6 (emphasis in original). 99 Id. at 8. Buyer is correct, Seller did not sufficiently brief the substantive/procedural arbitrability issue, but did rely on cases interpreting arbitrability such that the Court will not find a waiver as to the issue. 100 Id. at 12 (emphasis in original). 17 2. Delaware Law on Arbitrability

Delaware courts “lack subject matter jurisdiction to resolve disputes that

litigants have contractually agreed to arbitrate.”101 More precisely, Delaware courts

respect contractual agreements to arbitrate even in cases where sovereign authority

grants the court the right to hear a case.102 Consequently, if a claim “on its face, falls

within the arbitration clause of the contract” the Court will grant a motion to

dismiss.103 “A strong presumption exists in favor of arbitration, and, accordingly,

contractual arbitration clauses are generally interpreted broadly by the courts.”104

“Delaware courts will compel a party to arbitrate only if the contract reflects that the

parties clearly and intentionally bargained for whether and how to arbitrate.”105

The Supreme Court of Delaware’s seminal case of Parfi Holding AB v. Mirror

Image Internet, Inc.106 provides guidance on a trial court’s handling of arbitration

disputes:

101 NAMA Hldgs., LLC v. Related World Mkt. Ctr., LLC, 922 A.2d 417, 429 (Del. Ch. 2007) (citing Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 295 (Del. 1999)). 102 See Gandhi-Kapoor v. Hone Cap. LLC, 307 A.3d 328, 339 (Del. Ch. 2023) (quoting Ingres Corp. v. C.A., Inc., 8 A.3d 1143, 1145 (Del. 2010)) (“The court does not dismiss the case because it lacks the power to hear it, but because ‘where contracting parties have expressly agreed upon a legally enforceable forum selection clause, a court should honor the parties’ contract and enforce the clause.’”). 103 NAMA Hldgs., LLC, 922 A.2d at 429 (quoting SBC Interactive, Inc. v. Corp. Media P’rs, 714 A.2d 758, 761 (Del. 1998)). 104 Id. at 430 (citing Majkowski v. Am. Imaging Mgmt. Servs., LLC, 913 A.2d 572, 581–82 (Del. Ch. 2006)). 105 CLP Toxicology, Inc. v Casla Bio Hldgs. LLC, 2021 WL 2588905, at *9 (Del. Ch. June 14, 2021) (citing Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393, 396 (Del. 2010)). 106 817 A.2d 149 (Del. 2002). 18 When the arbitrability of a claim is disputed, the court is faced with two issues. First, the court must determine whether the arbitration clause is broad or narrow in scope. Second, the court must apply the relevant scope of the provision to the asserted legal claim to determine whether the claim falls within the scope of the contractual provisions that require arbitration. If the court is evaluating a narrow arbitration clause, it will ask if the cause of action pursued in court directly relates to a right in the contract. If the arbitration clause is broad in scope, the court will defer to arbitration on any issues that touch on contract rights or contract performance.107

Courts differentiate between substantive and procedural arbitrability.108

Substantive arbitrability refers to “gateway questions about the scope of an

arbitration provision and its applicability to a given dispute” and is presumed to be

decided by a court.109 “When examining substantive arbitrability, the underlying

question is ‘whether the parties decided in the contract to submit a particular dispute

to arbitration.’”110 Procedural arbitrability “concerns ‘whether the parties have

complied with the terms of an arbitration provision’”111 including “‘whether

prerequisites such as time limits, notice, laches, estoppel, and other conditions

107 Id. at 155. See also Legend Nat’l Gas II Hldgs., LP v. Hargis, 2012 WL 4481303, at *4 (Del. Ch. Sept. 28, 2012) (citing McLaughlin v. McCann, 942 A.2d 616, 620–21 (Del. Ch. 2008)) (“In considering a motion to compel arbitration, a court must consider: (1) whether the issue of arbitrability should be decided by the court or the arbitrator; and if by the court, (2) whether the claims should be resolved in arbitration (the issue of arbitrability).”). 108 See, e.g., Hargis, 2012 WL 4481303, at *4 (citing James & Jackson, LLC v. Willie Gary, LLC, 906 A.2d 76, 80 (Del. 2006)). 109 Willie Gary, 906 A.2d at 79. 110 Hargis, 2012 WL 4481303, at *4 (quoting Julian v. Julian, 2009 WL 2937121, at *4 (Del. Ch. Sept. 9, 2009)). 111 Gandhi-Kapoor, 307 A.3d at 349 (quoting Viacom Int’l, Inc. v. Winshall, 72 A.3d 78, 82 (Del. 2013)) (cleaned up). 19 precedent to an obligation to arbitrate have been met.’”112 Issues of procedural

arbitrability are decided by an arbitrator.113 To overcome the presumption of a court

deciding substantive arbitrability, there must be “clear and unmistakable evidence”

that the parties agreed to do so.114

The parties’ arguments focus primarily on two cases from the Court of

Chancery regarding arbitration provisions, CLP Toxicology, Inc. v. Casla Bio

Holdings LLC115 and Darling Ingredients Inc. v. Smith.116

In CLP Toxicology, Inc. v. Casla Bio Holdings, LLC,117 the Court of Chancery

dealt with claims for breach of a purchase agreement wherein the parties contracted

to a dispute resolution process if the parties disagreed on the Closing Net Working

Capital Amount.118 After review of a party’s Dispute Notice, if the parties were

unable to resolve the conflict, the agreement provided that “either party shall have

the right to refer such disputes to the Designated Accounting Firm.”119 The parties

proceeded to the independent accounting firm where sellers raised several arguments

that buyers noted were not raised in the Dispute Notice.120 The independent

112 Id. (quoting Viacom, 72 A.3d at 82). 113 See id. (citing Fairstead Cap. Mgmt. LLC v. Blodgett, 288 A.3d 729, 751 (Del. Ch. 2023)). 114 Hargis, 2012 WL 4481303, at *4 (quoting Willie Gary, 906 A.2d at 79). 115 2021 WL 2588905 (Del. Ch. June 14, 2021). 116 2023 WL 8533204 (Del. Ch. Dec. 11, 2023). 117 2021 WL 2588905 (Del. Ch. June 14, 2021). 118 Id. at *3. 119 Id. (internal citation omitted). 120 Id. at *5. 20 accountant declined to rule on an issue both because it was not raised in the Dispute

Notice and because “[a]dditional disputes arising from or pertaining to adherence to

the SPA, or lack thereof (i.e., providing reasonable access to documents, etc.) likely

requires a legal interpretation which would have to be addressed outside of this

dispute process.”121

When noting the differences between substantive and procedural arbitrability,

CLP Toxicology emphasized that “[t]he only question a court should decide is

whether the subject matter in dispute falls within an arbitration provision.”122 The

court declined to consider whether breaching the contract by “divert[ing] funds away

from ABS and avoid[ing] meeting the Gross Profit required to trigger the Contingent

Payments” because those issues were clearly “unresolved disputes that arise in the

process of the calculation and payment of the Contingent Payments”—a

determination reserved for the arbitrator.123 The court further declined the

defendants’ argument that “they were relieved of their obligation to issue a Dispute

Notice due to the doctrine of futility” because even if futile, “the subject matter of

the issue . . . still falls within” the arbitration provision “and as such, is an issue of

121 Id. (internal citation omitted). “An assessment of this nature is outside the bounds of my engagement as an Arbitrator at the Designated Accounting Firm.” Id. (internal citation omitted). 122 Id. at *9. “If the subject matter to be arbitrated is the calculation of an earn-out, or the amount of working capital, or the company’s net worth at closing, then all issues as to what financial or other information should be considered in performing those calculations are to be decided by the arbitrator.” Id. 123 Id. at *10. 21 procedural arbitrability left for an arbitrator to decide.”124 In contrast, the court

found that the contractual obligation to provide books and records was not within

the arbitration provision and “the subject matter of the dispute is a gateway question

relating to the scope of an arbitration provision.”125

Darling Ingredients Inc. v. Smith126 likewise dealt with a dispute resolution

process set out in a stock purchase agreement.127 When a dispute arose between

sellers and buyers over a tax benefit calculation, the sellers had 30 days under the

agreement to issue a protest notice challenging the calculation. 128 “Although the

stock purchase agreement permitted the sellers to send Darling an information

request and toll the 30-day deadline, the sellers instead sent Darling a formal protest

notice” launching the contractual dispute resolution process.129 The accountant gave

124 Id. 125 Id. at *10–11. “Looking at the Agreement’s language itself (aided by Grant Thornton’s arbitration determination), it’s clear that the question of whether CLP failed to grant reasonable access to ABS’s books and records doesn’t fall within any arbitration provision. Because the parties did not contractually agree to arbitrate disputes related to reasonable access to books and records, arbitration provides no adequate legal remedy.” Id. at *11. The section detailing the Calculation of the Gross Profit included the requirement that From and after the delivery of the 2018 Audited Financials, Buyer and the Company shall provide the Company Seller and any Representatives, accountants or advisors retained by the Company Seller with reasonable access to the books and records of the Group Companies for the purpose of enabling the Company Seller and its accountants and advisors to calculate, and to review Buyer’s calculation and preparation of Gross Profit as set forth on the 2018 Audited Financials and the aggregate Contingent Payment payable to Sellers in connection therewith (if any). Id. at *2. 126 2023 WL 8533204 (Del. Ch. Dec. 11, 2023). 127 Id. at *1. 128 Id. 129 Id. 22 the parties an engagement letter “confining the scope of its work to the issues it

raised in the sellers’ protest notice.”130 The sellers were unwilling to sign the

engagement letter until the accountant added issues that sellers put forth in a second

dispute notice.131 The accountant declined to interpret how the contract defined its

role.132 The parties requested the accountant to “resolve as a prefatory issue the

scope of what [the accountant] may consider under the Agreement in resolving the

dispute and provide that scope determination to the parties.”133 The accountant

refused stating that the parties were asking for a legal determination outside the

accountant’s scope.134

On cross-motions for summary judgment, the Court of Chancery interpreted

the dispute resolution provision as limiting sellers to filing one Protest Notice, not

multiple, nor amended notices.135 The court also noted that sellers did not invoke

their right to toll and request pre-protest information, instead filing the protest notice

was a choice and “[a]lthough the Sellers might now regret their hasty choice, the

130 Id. 131 Id. 132 Id. The agreement stated that the accountant’s review “must be ‘based solely on the [Closing Tax Benefit Amount] and Protest Notice, together with all relevant supporting documentation, and any other clarifying presentations and submissions by [Darling] and Sellers’ Representative as [Deloitte] may reasonably request[.]’” Id. at *4. 133 Id. at *7. 134 Id. 135 Id. at *9. The provision of the agreement states that “[w]ithin thirty (30) days following delivery of the [Closing Tax Benefit Amount], [Sellers] may deliver written notice (the ‘Protest Notice’) to [Darling] of any disagreement that Sellers [] . . . may have as to the [Closing Tax Benefit Amount].” Id. 23 Agreement does not grant them a protest notice do-over.”136 The court therefore

held that the accountant’s engagement letter was accurate as per the interpretation

of the agreement, and sellers were obligated to comply with the dispute resolution

process without their subsequent notice claim or additional issues considered.137

3. Overview of the SPA Arbitration Provision

The SPA’s Section 2.4 deals with the “Purchase Price Adjustment.”138

Pursuant to Section 2.4, Buyer was required to prepare and deliver a “Closing Date

Statement” “together with reasonably detailed supporting documentation, setting

forth in reasonable detail Buyer’s good faith calculation[s].”139 The SPA delineates

a dispute resolution provision for any disputes arising from the calculation of the

Closing Date Statement.140 Upon receipt of the Closing Date Statement, Seller has

thirty days to object to any of Buyer’s included calculations by delivering to Buyer

[A] written notice (a “Dispute Notice”) describing in reasonable detail Seller’s objections to Buyer’s calculation of the amounts set forth in such Closing Date Statement and containing a statement setting forth the calculation of the amount of Closing Net Working Capital, Closing Company Cash, Closing Company Indebtedness, and Company Transaction Expenses, or the resulting calculation of the Purchase 136 Id. at *12. “The Sellers’ remorse over the November Protest Notice they cast does not allow them to unilaterally expand the universe of what Deloitte may consider.” Id. 137 Id. at *13. 138 SPA at 18–22. 139 Id. § 2.4(b). The calculations consisted of the “(i) Closing Net Working Capital and the resulting Working Capital Increase or Working Capital Decrease, as the case may be, (ii) the amount of each of (A) Closing Company Cash, (B) Closing Company Indebtedness and (C) Closing Company Transaction Expenses, and (iii) using the amounts in the foregoing clauses (i) and (ii), the resulting calculation of the Purchase Price under Section 2.3(a).” Id. (emphasis in original). 140 Id. § 2.4(c). 24 Price, in each case determined by Seller to be correct, as well as any relevant supporting documentation.141 Anything Seller does not object to in the Dispute Notice will “be deemed to

have [been] agreed with” and “such calculations shall be binding and conclusive on

the Parties and shall not be subject to review in accordance with Section

2.4(c)(ii).”142 The parties then had have thirty (30) days after a valid Dispute Notice

is filed to resolve their issues “in good faith” otherwise “Buyer and Seller shall

jointly engage the firm of Marcum LLP (the ‘Arbitration Firm’) to resolve such

dispute.”143 The SPA provided:

[The] Arbitration Firm’s role shall be limited to resolving such objections and determining the correct calculations to be used on only the disputed portions of the Closing Date Statement as set forth in the Dispute Notice . . . and the Arbitration Firm shall not make any other determination, including any determination as to whether any other items on the Closing Date Statement are correct, whether the Target Net Working Capital Range is correct, and with respect to the timeliness of delivery or receipt of any Dispute Notice.144

The written determinations of the Arbitration Firm are “conclusive and

binding on the Parties, absent manifest error.”145 Finally, Section 2.4 (d)(iv) states

“Buyer agrees that the adjustments to the Estimated Purchase Price and the dispute

141 Id. § 2.4(c)(i) (emphasis in original). 142 Id. (emphasis in original). 143 Id. § 2.4(c)(ii) (emphasis in original). 144 Id. 145 Id. 25 resolution provision provided for in Section 2.4(c) shall be the exclusive remedies

for the matters addressed herein.”146

4. The Court Lacks Subject Matter Jurisdiction over Counts I, II, III, IV and VI.

Delaware respects valid arbitration provisions. Neither party argues the

arbitration provision here is invalid; rather, the parties dispute whether the valid

arbitration provision encompasses the claims at issue. The parties also do not dispute

that the arbitration clause is the “exclusive remedy” for those issues encompassed

by Section 2.4. Seller only disputes that Seller’s claims are fully encompassed by

that Section. The Court, therefore, need not analyze whether the provision is

mandatory or permissive:147 Section 2.4 is unambiguously mandatory.

The Court agrees with Seller’s argument that the arbitration clause is “narrow”

as opposed to “broad.”148 A broad provision uses language such as “any dispute

controversy, or claim arising out of or in connection with” the contract at issue.149

A narrow provision limits arbitration to “specific types of disputes.” 150 Buyer

disputes that the provision is narrow in its brief,151 but concedes the provision is

146 Id. § 2.4(d)(iv). 147 See, e.g., Maloney-Refaie v. Bridge at Sch., Inc., 958 A.2d 871, 885 (Del. Ch. 2008) (analyzing whether an arbitration clause was mandatory or permissive). 148 Pl.’s Opp’n at 16–17. 149 See, e.g., Parfi, 817 A.2d at 155. 150 Specialty Dx Hldgs., LLC v. Lab’y Corp. of Am. Hldgs., 2020 WL 5088077, at *6 (Del. Super. Jan. 31, 2020) (citing Lockwood Bros, II, 2020 WL 2836404, at *6)). 151 Def.’s Reply at 4–5. 26 limited to issues arising only from Section 2.4, rather than the entire SPA.152

Although the exact narrow-ness of the provision need not be determined, the Court

is satisfied the provision is limited to those issues within Section 2.4 of the SPA.

While the Court does not agree that such a distinction does not “matter” as Buyer

characterizes it,153 the Court does agree that the fact that the clause is narrow does

not end the analysis. The issue for the Court is to determine the scope of Section 2.4

and whether the subject matter of the claims fall within that “narrow” scope.154

The Court does not find Seller’s argument as to interpreting the phrase

“calculation of” persuasive. Seller’s assertion that the words “calculation of”

“signifies that the scope of arbitrable matters is limited to those in which the parties

both have access to the same source data and merely differ as to their use of that

source data to calculate Closing Net Working Capital or other salient values”155 is

too much of a stretch. Seller provides no support for such an extrapolation beyond

a vague case citation that courts assume no language is superfluous.156 This

152 See, e.g., Channel PES Acq. Co., C.A. No. N23C-08-206 MAA CCLD, at 55:5–20 (Del. Super. Mar. 28, 2024) (TRANSCRIPT). 153 Def.’s Reply at 4–5 (“Although [Buyer] disagrees with this analysis, it’s not clear why this characterization matters.”). 154 Viacom, 72 A.3d at 83 (“Once it is determined that the parties are obligated to submit the subject matter of a dispute to arbitration, ‘procedural’ questions that grow out of the dispute and bear on its final disposition should be left to the arbitrator.”) (internal citation and quotation omitted). The Court consequently is unpersuaded by Seller’s assertion that upholding the arbitration provision could unjustly sanction fraud. The arbitration provision is “narrow” and thus is limited to causes of action encompassed within; fraudulent conduct is distinct and thus not sanctioned by the Court upholding a bargained for arbitration provision the parties contracted. 155 Pl.’s Opp’n at 18. 156 Id. (citing NAMA Hldgs., 948 A.2d at 419). 27 conclusion, while true, does not permit a party to read more into a contract than the

parties mutually bargained for. Such an interpretation is also not supported by the

other language in Section 2.4(c), which includes requirements relating to Buyer

providing documentation to Sellers and for the parties to “reasonably

cooperate[.]”157 Reading the language “calculation of” as limited to only that which

the two parties have the same information is not supported by a plain reading of the

contract.

Buyer’s reliance on Darling is similarly unpersuasive. Unlike Darling, the

parties here did not have a separate tolling provision in which Seller could opt into

to seek additional information. Darling bound the sellers in that case to their dispute

notice because they opted to file the notice instead of otherwise filing an information

request to toll their dispute notice deadline.158 The parties here do not sufficiently

argue Seller had an alternative to filing the Dispute Notice. At oral argument, Buyer

suggested “Seller could have said, you know, we don’t have to go to arbitration,

we’re not bound by this provision.”159

The Court finds that CLP Toxicology is more closely aligned with this action.

CLP Toxicology distinguished between issues related to the calculation itself,

157 SPA § 2.4(c)(i). 158 Darling, 2023 WL 8533204, at *8–9. 159 Channel PES Acq. Co., C.A. No. N23C-08-206 MAA CCLD, at 54:14–19 (Del. Super. Mar. 28, 2024) (TRANSCRIPT). 28 including how the buyers allegedly diverted funds such that less would be owed to

sellers, from those related to books and records obligations. The dispute resolution

provisions are very similar between this case and CLP Toxicology, where both the

process of calculating the final amounts is delineated, as well as requirements to turn

over books and records so that the reviewing party can make an informed decision

on a dispute.160

The Court agrees with CLP Toxicology that disputes relating to diverting

funds were “clearly” within the “process of calculation and payment.” Here too, the

act of issuing credits as part of buyer’s conduct, and including those credits in its

calculations, are within the purview of the arbitrator to consider.

This leaves the Court with reviewing Count I regarding books and records.

CLP Toxicology did not deem the obligation to turn over books and records as within

the scope of the arbitration provision, despite the section explicitly detailing buyer’s

obligations to do so.161 Here, although the provisions in CLP Toxicology and this

action are similar, the actions of the two arbitrators (and the parties) regarding the

books and records issue compel a different result. In particular, the Court turns to

the Engagement Letter162 and the parties’ submissions. The Engagement letter states

160 Compare CLP Toxicology, 2021 WL 2588905, at *2–3 (outlining the agreement’s dispute resolution provisions), with SPA § 2.4(c). 161 CLP Toxicology, 2021 WL 2588905, at *10–11. 162 Def.’s Br., Ex. 4. 29 that the Arbitration Firm163 would make an initial determination regarding “the final

list of Disputed Items (and amounts thereof) that are subject to resolution by the

Arbitrator pursuant to Section 2.4(c) of the Agreement, and which (or whether)

additional documents should be produced.”164 This alone could end the inquiry

about whether the Arbitration Firm had the authority to evaluate Seller’s access to

books and records.

Nonetheless, the Court’s review of the First and Second Determination Letters

demonstrate that the Arbitrator analyzed the arbitration provision and the terms of

the SPA to determine the issues that were properly disputed and what was (or was

not) within his power.165 Included in the Arbitrator’s analysis was an analysis of

Seller’s nine outstanding document requests for which it sought the production of

documents.166 In the First Determination Letter, the Arbitrator ordered Buyer to

produce documents in response to six of the nine requests.167 Then, on October 10,

2023, the Arbitrator provided his interrogatories and documents requests to the

Parties.168 On November 3, 2023, the Arbitrator issued supplemental interrogatories

and document requests.169 The parties submitted their responses on November 17,

163 Id. at 1 (defining Richard Lee as the “Arbitrator” of AlixPartners, the “Arbitration Firm”). 164 Id. sched. 1. (emphasis added). 165 Def’s. Br., Exs. 5, 10. 166 Def’s Br., Ex. 5 at 5–8. 167 Def.’s Br. Ex. 5. 168 Id., Ex. 10. 169 Id., Ex. 11. 30 2023 and produced documents.170 The Arbitrator issued a Determination Letter on

December 22, 2023.171 The Arbitrator’s and the parties’ conduct here compels one

result: Count I falls squarely within Section 2.4.172

The Court therefore deems Count I, II, III, IV, and Count VI as issues of

procedural arbitrability, encompassed within the scope of the arbitration provision.

As such, they are all matters for the Arbitrator to decide. The Court therefore

dismisses Counts I, II, III, IV, and VI for lack of subject matter jurisdiction.

B. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR BREACH OF CONTRACT AS TO COUNT V.173 1. The Parties’ Contentions

As to Count V, Buyer indicates “it is not clear whether [Seller] is alleging that

Buyer breached the SPA or the Escrow Agreement” nor what terms of either

agreement were breached.174 Buyer also notes that Buyer served a valid Claim

170 Def’s Br. at 12–13. 171 Pl.’s Opp’n, Ex. 1. The Arbitrator concluded that: My Final Determination described above is 50.82% in favor of Seller and 49.18% in favor of Buyer. The total fees of the Accounting Expert are $421,721, half of which has been invoiced to and paid by each Party. The allocation of the fees and expenses based on the terms of the SPA is $207,394 to be borne by Seller ($421,721 x 49.18%) and $214,327 to be borne by the Buyer ($421,721 x 50.82%). Id. at 26. 172 The Court notes that Chambers Belt Co. v. Tandy Brands Accessories, Inc., 2012 WL 3104396 (Del. Super. July 31, 2012), relied upon by Seller, does not apply here. In Chambers Belt did not review issues of procedural or substantive arbitrability. Rather, in Chambers belt, the court determined whether “a Court of Chancery decision in a prior proceeding between Chambers and Defendant Tandy Brands Accessories, Inc….concerning the same contract dispute at issue[] here[] should be accorded res judicata or collateral estoppel effect.” Id. at *1. 173 Buyer also sought to dismiss Counts I, II, III, IV, and VI for failure to state a claim. The Court declines to address the substance of these arguments for lack of subject matter jurisdiction. 174 Def.’s Br. at 29. 31 Notice in compliance with the SPA which has not been resolved, proving Count V

is unfounded.175

Seller argues Count V is sufficient because “the First Amended Complaint

states that Buyer does not (and could not) have a basis to withhold the funds that

Seller deposited for the representation-and-warranty escrow pursuant to the Escrow

Agreement because the underlying representations and warranties expired prior to

Buyer asserting any compliant claim.”176 Seller further asserts that any

consideration of the merits of the underlying claim is not appropriate at the motion

to dismiss stage.177

Buyer responds that Seller’s Opposition fails to explain the facts Seller relies

on, instead, Seller only asserts conclusions.178 As to the merits of the Claim Notice,

Buyer notes that Seller “has not pleaded any facts regarding its response to the Claim

Notice—because there was no response—or regarding [Seller]’s compliance with

Article VIII of the SPA’s clearly delineated process by which objection to Claim

Notices must be made and resolved—because [Seller] did not comply with Article

VIII.”179

175 Id. at 29–30. 176 Pl.’s Opp’n at 27. 177 Id. at 27–28. 178 Def.’s Reply at 15. 179 Id. at 17–18 (emphasis in original). 32 2. The Law

The pleading standards on a motion to dismiss are minimal.180 “[T]he

governing pleading standard in Delaware to survive a motion to dismiss is

reasonable ‘conceivability.’”181 All that is required is that the complaint “alleges

that it provided adequate notice to [defendant] and that [plaintiff’s] claim, if proven,

would entitled [plaintiff] to relief under a reasonably conceivable set of

circumstances.”182 To survive a breach of contract claim, the plaintiff “must allege:

(1) the existence of a contract; (2) that the contract was breached; and (3) damages

suffered as a result of the breach.”183 “In other words, ‘[d]ismissal is proper only if

the defendant[’s] interpretation is the only reasonable construction as a matter of

law.’”184 For the following reasons, the Court deems the breach of contract claim is

sufficiently pled.

Seller’s Count V asserts Buyer “breached the SPA by refusing to release the

representations-and-warranties escrow notwithstanding the lack of any proper claim

notice as required to continue to maintain the representations-and-warranties

escrow.”185 Seller here has not specifically alleged what provision of the SPA, or

180 Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011) (citing Savor, 812 A.2d at 896). 181 Id. at 537 (internal citations omitted). 182 Id. at 538. 183 Khushaim v. Tullow Inc., 2016 WL 3594752, at *3 (Del. Super. June 27, 2016) (citing eCommerce Indus., Inc. v. MWA Intel., Inc., 2013 WL 5621678, at *13 (Del. Ch. Sept. 30, 2013)). 184 Id. (quoting Vanderbilt Income & Growth Assocs., 691 A.2d at 613) (emphasis in original). 185 Am. Compl. ¶¶ 118–120. 33 the Escrow Agreement, Buyer is alleged to have breached. Seller also fails to

explain why the claim notice was improper.

The Court acknowledges these allegations are vague, but nonetheless will

allow the claim to proceed at this stage noting its skepticism. Buyer asks the Court

to “simply take note” of the Claim Notice to indicate that Seller’s allegation should

fail because there is a valid claim notice.186 The Court agrees the Claim Notice is

fairly incorporated into the Complaint by reference, but the existence of the Notice

does not alone preclude Seller’s claim since Seller alleges that the notice was not

“proper.”187 Buyer’s request that the Court determine the existence of the Claim

Notice “which was served within twelve months after Closing and set forth in

reasonable detail a Third Party Claim”188 is not enough to overcome the minimal

pleading standard Seller has.189 Seller could have pled more detail as to how the

Claim Notice was improper, but is not required to. At this stage, it is “reasonably

conceivable” that Seller could prove the Notice Claim was improper and thus failed

to satisfy the Escrow Agreement, therefore, the Court declines to dismiss the claim

at this point.

186 Def.’s Reply at 17–18. 187 Am. Compl. ¶ 119. 188 Def.’s Reply at 18. 189 See Channel PES Acq. Co., C.A. No. N23C-08-206 MAA CCLD, at 39:10–19 (Del. Super. Mar. 28, 2024) (TRANSCRIPT) (stating the claim notice was insufficient because “the original notice failed to provide any actual notice of any valid basis for any claim for indemnification, it didn’t include any supporting details as to what the basis, the underlying liability might have been such that indemnification would be required”). 34 VI. CONCLUSION

In conclusion, Buyer’s motion to dismiss is GRANTED as to Counts I, II, III,

IV, and VI for lack of subject matter jurisdiction, and DENIED as to Count V

because Seller has sufficiently stated a claim for breach of contract.

IT IS SO ORDERED.