CIBC Bank USA v. JH Portfolio Debt Equities, LLC

• Court: Superior Court of Delaware
• Decided: June 2, 2021
• Docket: N18C-07-130 EMD CCLD
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

CIBC BANK USA F/K/A THE ) PRIVATEBANK AND TRUST ) COMPANY, AS ADMINISTRATIVE ) AGENT, ) ) C.A. No. N18C-07-130 EMD CCLD Plaintiffs, ) ) v. ) ) JH PORTFOLIO DEBT EQUITIES, LLC, ) et al., ) ) Defendants. )

Submitted: February 21, 2021 Decided: June 2, 2021

Upon Defendants’ Motion to Dismiss DENIED in part and GRANTED in part

Kevin J. Mangan, Esquire, Nicholas T. Verna, Esquire, Womble Bond Dickinson (US) LLP, Wilmington, Delaware; Edward S. Weil, Esquire, Melanie J. Chico, Esquire, Mark A. Silverman, Esquire, Dykema Gossett PLLC, Chicago, Illinois; Attorneys for Plaintiff CIBC Bank USA f/k/a The PrivateBank and Trust Company, as administrative agent.

Raymond H. Lemisch, Esquire, Sean M. Brennecke, Esquire, Klehr Harrison Harvey Branzburg LLP, Wilmington, Delaware; Michael Granne, Esquire, Provenzano Granne & Bader LLP, New York, New York; Attorneys for Defendants Metropolitan Partners Fund III A, LP, Series F&F of Metropolitan Partners Fund IV, LLC, Series Institutional of Metropolitan Partners Fund IV, LLC, and Metropolitan Partners Fund III, LP.

Matthew B. Lunn, Esquire, Mary F. Dugan, Esquire, Young Conaway Stargatt & Taylor, LLP, Wilmington, Delaware; Attorneys for Atalaya Special Opportunities Fund IV LP.

David E. Wilks, Esquire, Andrea S. Brooks, Esquire, Julie M. O’Dell, Esquire, Wilks, Lukoff & Bracegirdle, LLC, Wilmington, Delaware; Attorneys for JH Portfolio Debt Equities, LLC, JH Portfolio Debt Equities 2, LLC JH Portfolio Debt Equities 4, LLC, JH Reviver LLC Holdings, LLC, COCD Asset Holdings LLC, and CX Asset Holdings, LLC.

DAVIS, J. I. INTRODUCTION

This is a breach of contract and fraud case assigned to the Complex Commercial

Litigation Division of the Court. Plaintiff CIBC Bank USA f/k/a The PrivateBank and Trust

Company (“CIBC”) filed suit against JH Portfolio Debt Equities, LLC (“JH”), Metropolitan

Partners Fund, IIIA LP (Met IIIA), COCD Asset Holdings LLC (“COCD”), CX Asset Holdings

LLC (“CX”); Atalaya Special Opportunities Fund VI LP (“Atalaya”); Series Institutional of

Metropolitan Partners Fund IV, LLC (“Institutional”); Series F&F of Metropolitan Funds IV,

LLC (“Series F&F”); and Metropolitan Partners Fund III, LP (“Met Fund III”). In response,

certain Defendants filed a motion to dismiss (the “Motion”).1

For the reasons set forth below, the Court will DENY the Motion in part and GRANT

the Motion in part.

II. BACKGROUND

As this is a Motion to Dismiss, all information is drawn from the Second Amended

Complaint (the “SAC”) and its attached exhibits.2

A. PARTIES

CIBC is the Administrative Agent for a group of several banks.3 CIBC brought this

action against three groups: JH, the Joint Venture Partners, and the Joint Venture Lenders.

The Joint Venture Partners are:

• Met IIIA • COCD • CX

1 Defendants JH, COCD and CX filed an opening brief while Defendants Met IIA, Met IV and Met III filed a separate brief. 2 Unless otherwise indicated, the following are the facts as alleged in the SAC. When considering a motion under Civil Rule 12(b)(6), the Court must assume the truthfulness of all well-pled allegations of fact in the complaint and draw all reasonable inferences in favor of the plaintiff. See, e.g., Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 227 A.3d 531, 536 (Del. 2011). 3 SAC 1.

2 Each of the Joint Venture Partners is organized in Delaware.4

The Joint Venture Lenders are:

• Atalaya • Institutional • Series F&F • Met Fund III

JH’s principals are Douglas Jacobsen and Norman Kravetz.5 Mr. Jacobsen was a Class

A-2 Representative of Metropolitan Partners Group Management, LLC (“Met Management”)

and his vote was required for all major decisions of Met Management.6 Mr. Kravetz is a

principal and the managing member of Pacific Capital Holdings, which is a member of Joint

Venture Partners, COCD and CX.7 Mr. Kravetz was also a manager for Metropolitan Partners

Holdings, LLC (“Met Holdings”).8 Met Holdings and Met Management managed and controlled

the Joint Venture Partners and Joint Venture Lenders.9

B. THE CREDIT AGREEMENT AND SECURITY AGREEMENT

JH and a group of related non-party entities (collectively and including JH, the

“Borrowers”) purchased portfolios of consumer and merchant loan obligations at a discount and

recovered the amounts due on the accounts associated with the portfolios.10

The Borrowers and CIBC entered into a Second Amended and Restated Credit

Agreement (the “Credit Agreement”) on June 29, 2017.11 The Credit Agreement provided the

Borrowers with a revolving line of credit in an aggregate amount not to exceed the lesser of the

4 Id. ¶ 37 5 Id. ¶ 1. 6 Id. ¶ 4. 7 Id. ¶ 5. 8 Id. 9 Id. ¶ 6. 10 Id. ¶ 7. 11 Id. ¶ 41; Ex. C (Credit Agreement).

3 Aggregate Commitments (totaling $182,000,000) and the Borrowing Base Amount.12 A Security

Agreement (the “Security Agreement”) dated June 29, 2017 secured the loans issued under the

Credit Agreement.13 The Security Agreement grants CIBC a first priority security interest in all

the collateral described in the Security Agreement, including the certain portfolios described in

Security Agreement Section 2.1 (the “Portfolios”).14

Under the Security Agreement, the Borrowers agreed not to take any actions that would

materially impair the collateral and covenanted that they would not permit any “Subsidiary”

(defined in the Credit Agreement) to amend or modify their organizational documents “in any

way which could reasonably be expected to materially adversely affect the interests of the

Administrative Agent.”15 The Credit Agreement defines “Subsidiary” as any business entities,

including joint ventures, limited liability companies, which are managed or otherwise controlled,

directly or indirectly, by the Borrowers.16

Credit Agreement Section 11.14 is a forum selection clause that provides:

(b) SUBMISSION TO JURISDICTION. THE COMPANY AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT IT WILL NOT COMMENCE ANY ACTION, LITIGATION OR PROCEEDING OF ANY KIND . . . AGAINST THE ADMINISTRATIVE AGENT, ANY LENDER OR ANY RELATED PARTY OF THE FOREGOING IN ANY WAY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN ANY FORUM OTHER THAN THE COURTS OF THE STATE OF ILLINOIS SITTING IN COOK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF ILLINOIS17

12 Id. ¶¶ 42, 43. 13 Id. ¶ 46. 14 Id. Ex. E § 2. 15 Id. ¶ 49; Ex. E § 4.3 16 Id. ¶ 50; Ex. C 27. 17 Id. Ex. C (Credit Agreement § 11.14).

4 Credit Agreement Section 1.01 defines “Company” as JH and “Loan Parties” refer to the

other non-party Borrowers.18

C. THE JOINT VENTURES

JH entered into joint ventures with the Joint Venture Partners.19 The Joint Ventures

were:

• JH Met Asset Entity LLC, a Delaware LLC (“JH Met”). Its members were Met Fund IIA, COCD and JH. JH managed JH Met.20 • JH CX Asset Entity LLC, a Delaware LLC (“JH CX”). Its members were JH and CX. JH managed JH CX.21

The Joint Ventures purchased portfolios which were serviced by JH.22 As servicer, JH

would collect proceeds and make distributions to the Joint Ventures members.23 The Joint

Venture Partners financed their equity contributions with loans from the Joint Venture Lenders.24

The Joint Venture Agreements for JH Met and JH CX required JH to make distributions

based on “Net Collections” generated by the Portfolios owned by each respective Joint

Venture.25 “Net Collections” is defined as:

[A]ll Collections received by or on behalf of the [Joint Venture or its members] in respect of the Portfolio and the applicable monthly period, less all actual costs of collection, including legal and other collection costs, incurred by the [Joint Venture] for the Portfolio and the applicable monthly period less the sum of the Servicing Fees paid in respect of the Portfolio and the applicable monthly period.26

CIBC asserts that the Joint Venture Agreements require JH to make distributions based on “net

actual collections.”27

18 Id. Ex. C (Credit Agreement § 1.01). 19 Id. ¶ 53. 20 Id. ¶¶ 54-55. 21 Id. ¶ 61. 22 Id. ¶¶ 56, 62. 23 Id. 24 Id. ¶¶ 60, 66. 25 Id. ¶ 67; Ex. A §§ 8.1-8.2; Ex. B § 8.1. 26 Id. Ex. A Ex. Z-3; Ex. B Ex. Z-3. 27 Id. ¶ 69.

5 D. THE ACKNOWLEDGMENT AGREEMENTS BETWEEN THE JOINT VENTURE PARTIES AND CIBC

On June 29, 2017, CIBC executed Acknowledgement Agreements with the Joint

Ventures and each of their members.28 Under the Acknowledgement Agreements, the Joint

Venture Partners agreed not to amend their respective Joint Venture Agreements without CIBC’s

written consent.29 JH and the Joint Venture Partners also represented that the Joint Venture

Agreement “constitutes the entire agreement between the members of the [Joint Venture] and

there have been no amendment, modifications or additions to the [Joint Venture Agreement]

(written or oral).”30

E. THE SIDE LETTER AGREEMENTS

i. The COCD Side Letter Agreements

JH and COCD entered into Side Letter Agreements (“COCD Side Letter Agreement”)

dated September 29, 2017, October 30, 2017 and November 28, 2017.31 The Side Agreements

require JH to make distributions based on the “positive difference” between the projected and

actual collections from the Portfolios.32 The Joint Ventures started making distributions based

upon projected collections because JH determined that the Portfolios were underperforming.33 A

January 28, 2018 Side Letter Agreement provided JH with the option of making distributions

based on projected or actual collections.34 The Side Letter Agreements include schedules listing

projected distributions to COCD based on projected collections.35

28 Id. ¶¶ 70-71; Ex. G; Ex. H. 29 Id. ¶ 72; Ex. G § (d); Ex. H § (d). 30 Id. ¶ 73; Ex. G § (b); Ex. H § (b). 31 Id. ¶ 75; Ex. I. 32 Id. ¶ 75; Ex. I. 33 Id. ¶ 76. 34 Id. ¶ 77; Ex. I. 35 Id. ¶ 78; Ex. I.

6 CIBC was unaware of the Side Letter Agreements until they were provided by

Borrower’s counsel on or about June 12, 2018.36 Moreover, CIBC did not know that JH and the

Borrowers made distributions based on projected collections until CIBC further investigated

prior to filing this action.37 The Joint Venture Partners failed to obtain CIBC’s written consent to

make the Side Letter Agreements.38

ii. The CX Side Letter Agreement

On November 1, 2016, JH, JH CX, Met Fund IIA and CX entered a side agreement (“CX

Side Letter Agreement”).39 In the Side Letter Agreement, JH agreed that if Met Fund IIIA failed

to earn an internal rate of return of at least 30% by November 1, 2019, then Met Fund IIA may

require that JH purchase the CX Asset Loan at an amount that would result in Met Fund IIIA

earning a 30% rate of return.40 JH received no consideration as part of the Side Letter

Agreement and JH is not a party to the CX Asset Loan.41

iii. The Participation Agreement

Met Fund IIIA and JH executed a Participation Agreement (“Participation

Agreement”).42 The Participation Agreement has JH selling “a portion of the collections owed to

[JH] . . . such that [Met Fund IIIA] will be entitled to receive 74%” of the interest in collections

while the Joint Venture Agreement specified that Met Fund IIIA would receive a 60% interest in

net collections.43 The Joint Venture Partners and JH did not disclose to CIBC of the existence of

36 Id. ¶ 80-81. 37 Id. ¶ 80-81. 38 Id. ¶ 82. 39 Id. ¶¶ 84-85; Ex. L. 40 Id. ¶¶ 84-85; Ex. L. 41 Id. ¶ 86. 42 Id. ¶ 88. 43 Id. ¶ 88.

7 the CX Side Letter Agreement or the Participation Agreement when they executed the

Acknowledgement Agreements.44

F. DAMAGES

The Participation Agreement resulted in a transfer of 35% of JH’s interest in collections

to Met Fund IIA and the distribution based on projected, rather than actual, collections resulted

in substantial overpayments by JH to the Joint Venture Partners.45 Met Fund IIIA, as of January

31, 2019, received at least $1,919,167.87 in Portfolio distributions while it was only entitled to

$1,179,623.85 resulting in an overpayment of $739,544.02 and a corresponding depletion of

CIBC’s collateral by that amount.46 COCD received at least $35,571,475.31 in Portfolio

distributions while it was actually entitled to $33,354,659.29 resulting in an overpayment of

$2,216,816.02 and a corresponding depletion of CIBC’s collateral by that amount by January 31,

2019.47 As of January 31, 2019, CX Asset received at least $13,807,950.00 in Portfolio

distributions while it was actually entitled to $10,182,116.35 resulting in an overpayment of

$3,625,834.65 and a corresponding depletion of CIBC’s collateral by that amount.48

G. THE NORTHERN DISTRICT OF ILLINOIS LITIGATION

CIBC brought suit against the Borrowers in the Northern District of Illinois (the “Illinois

Action”) alleging multiple defaults by the Borrowers under the Credit Agreement and Security

Agreement.49 CIBC accelerated all amounts due and owing under the Credit Agreement and

demanded immediate repayment because of the Borrowers’ defaults.50 CIBC seeks recovery of

44 Id. ¶¶ 90-91 45 Id. ¶¶ 92-93. 46 Id. ¶ 94. 47 Id. ¶ 95 48 Id. ¶ 96. 49 Id. ¶ 100. 50 Id. ¶ 104.

8 at least $172,500,000.00 together with interest, attorneys’ fees, costs, and expenses from the

Borrowers in the Illinois Action.51

H. PROCEDURAL HISTORY

CIBC filed its initial complaint on July 16, 2018 and its First Amended Complaint on

April 30, 2019. On November 26, 2019, CIBC filed the Second Amended Complaint alleging

(1) actual and constructive fraudulent transfers against JH, the Joint Venture Partners and the

Joint Venture Lenders, (2) breach of contract against the Joint Venture Partners, (3) breach of

implied covenant of good faith and fair dealing against the Joint Venture Partners, (4) tortious

interference with contractual relations against the Joint Venture Partners and the Joint Venture

Lenders, (5) in the alternative, unjust enrichment against the Joint Venture Partners and Joint

Venture Lenders and (6) a declaratory judgment that the Acknowledgement Agreements between

the Joint Venture Partners and CIBC are valid and enforceable contracts while the Side Letter

Agreements, CX Side Letter Agreement and the Participation Agreement are invalid and

unenforceable.

On January 31, 2020, the Defendants filed the Motion. The Motion seeks dismissal of

all counts asserted by CIBC in the SAC.

III. PARTIES’ CONTENTIONS

A. PERSONAL JURISDICTION

JH argues that the Court does not have personal jurisdiction over JH because (1) JH is a

California corporation with its principal place of business in California, (2) the SAC does not

allege that JH conducted activities that subject JH to Delaware’s long arm statute and (3) CIBC

does not allege that JH has any personnel or has a place of a business, telephone number, mailing

51 Id. ¶ 105.

9 address or advertisements in Delaware. JH further argues that CIBC’s purported basis for

Delaware exercising personal jurisdiction—causing Delaware LLCs to make fraudulent

transfers—is insufficient to form the basis of personal jurisdiction. Furthermore, JH argues that

the SAC does not allege minimum contacts such that exercising personal jurisdiction comports

with due process.

JH also contends that it is a necessary and indispensable party because it is the link

between CIBC and the Joint Venture Partners. Joinder is not feasible because there is no personal

jurisdiction, therefore the case should be dismissed.

CIBC claims that JH’s allegations that JH amended the Joint Venture Agreements and

managed the Joint Ventures are sufficient to establish personal jurisdiction in Delaware. CIBC

then argues that JH’s management of the Joint Ventures satisfies both Delaware’s long arm

statute and the International Shoe due process requirements.

CIBC asserts that JH is neither necessary nor indispensable because it is seeking to

collect from the transferees, not JH.

B. DAMAGES

JH argues that all of CIBC’s claims fail because CIBC failed to establish damages and

even if adequately pled, CIBC already seized the collateral.

CIBC counters by contending that the damages it seeks are overpayments that depleted

JH’s collateral.

C. FRAUDULENT TRANSFERS

JH asserts that the fraudulent transfer claims must fail because there was no transfer from

a debtor of the plaintiff. The Joint Ventures, not JH, made the distributions at issue. JH also

argues that CIBC did not state facts showing actual intent to hinder, delay or defraud any creditor

10 and that CIBC did not reach the higher pleading standard for fraud claims. In addition, JH

claims that there was no constructive fraud because the distributions were made to satisfy an

antecedent debt and CIBC does not allege that JH was insolvent at the time the Joint Ventures

made the distributions.

CIBC argues that the conduct of using the distributions to satisfy the antecedent debts is

the wrongful act and that JH was insolvent because it defaulted on the Credit Agreement. CIBC

contends that JH made the distributions by amending the Joint Venture Agreements with the

Joint Venture Partners. Moreover, CIBC argues that it only needs to show that the Joint Venture

Partners and Lenders received fraudulent transfers to recover from them.

D. BREACH OF CONTRACT

JH argues that CIBC fails to allege a breach of the contract because the Side Letter

Agreements and Participation Agreement do not “amend” the Joint Venture Agreements.

CIBC states that the Side Letter Agreements and Participation Agreement amend the

Joint Venture Agreements by modifying distributions.

E. IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

JH claims that there is no breach of the implied covenant of good faith and fair dealing

because the complained of conduct is covered by the Acknowledgement Agreements.

CIBC opposes JH’s claim and provides that it has alleged a specific implied contractual

obligation. Moreover, CIBC argues that, unless the Court finds that the subject terms are

unambiguous, dismissal would be inappropriate at this early stage of the proceedings.

F. TORTIOUS INTERFERENCE

JH contends that there is no claim for tortious interference against the Joint Venture

Partners. JH notes that CIBC’s only alleged intentional act with respect to the Joint Venture

11 Partners is receiving payments. The Met Defendants make a similar argument for CIBC’s claims

with respect to the Joint Venture Lenders.

CIBC claims that JH and the Met Defendants focus on the wrong conduct. CIBC asserts

that the intentional act is not receiving the payments but entering agreements to modify the rate

of distributions to deplete JH’s collateral not receiving the payments.

G. UNJUST ENRICHMENT

JH first argues that there can be no unjust enrichment claim because there is a contract

between the parties. JH also contends that there is no impoverishment because any claim for

damages are unripe.

CIBC states that the unjust enrichment claim is pled in the alternative. Accordingly, if

the Court finds that there is no enforceable contract and that damages are ripe, then there would

be a cognizable impoverishment.

H. DECLARATORY JUDGMENT

JH assert that declaratory judgment is inappropriate because: (i) CIBC has not adequately

alleged a contract breach or that it suffered damages; and (ii) the declaratory judgment is

duplicative of CIBC’s breach of contract claim.

CIBC claims that it has alleged a contract breach and suffered damages. In addition,

CIBC argues that the declaratory judgment claim is not duplicative because it is meant to prevent

future litigation if JH’s obligations to CIBC conflict with JH’s obligations under the Side Letter

Agreements and the Participation Agreement.

I. STAYING THIS ACTION

JH also moves to stay the proceedings, arguing this case should be stayed in favor or the

Illinois Action because the Credit Agreement has a forum selection clause designating Illinois as

12 the appropriate forum. Furthermore, JH contends that the Court should stay the action under

McWane because this action involves the same issues and substantially the same parties.

CIBC argues that: (i) the forum selection clause is unilateral and only limits JH to Illinois;

and (ii) this action does not involve the same issues or same parties. CIBC notes that the Illinois

Action involves a breach of contract claim based on the Credit Agreement against JH and

non-party Borrowers while this action involves a claim for fraudulent transfers to deplete JH’s

collateral.

IV. STANDARD OF REVIEW

Upon a motion to dismiss, the Court (i) accepts all well-pled factual allegations as true,

(ii) accepts even vague allegations as well-pled if they give the opposing party notice of the

claim, (iii) draws all reasonable inferences in favor of the non-moving party, and (iv) only

dismisses a case where the plaintiff would not be entitled to recover under any reasonably

conceivable set of circumstances.52 However, the court must “ignore conclusory allegations that

lack specific supporting factual allegations.”53

In considering a motion to dismiss under Rule 12(b)(6), the court generally may not

consider matters outside the complaint.54 However, documents that are integral to or

incorporated by reference in the complaint may be considered.55 “If . . . matters outside the

pleading are presented to and not excluded by the Court, the motion shall be treated as one for

summary judgment and disposed of as provided in Rule 56, and all parties shall be given

reasonable opportunity to present all material made pertinent to such a motion by Rule 56.”56

52 See Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 227 A.3d 531, 536 (Del. 2011); Doe v. Cedars Academy, No. 09C-09-136, 2010 WL 5825353, at *3 (Del. Super. Oct. 27, 2010). 53 Ramunno v. Crawley, 705 A.2d 1029, 1034 (Del. 1998). 54 Super. Ct. Civ. R. 12(b). 55 In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 70 (Del. 1995). 56 Super. Ct. Civ. R. 12(b).

13 On a motion to dismiss for lack of personal jurisdiction under Civil Rule 12(b)(2), the

plaintiff bears the burden to present “a prima facie case establishing jurisdiction over a non-

resident.”57 The “plaintiff[ ] must show that an exercise of personal jurisdiction . . . would be

consistent with Delaware statutory law and federal constitutional law.”58 The Court may look

beyond the pleadings to determine whether it has personal jurisdiction, viewing all factual

inferences in the light most favorable to the plaintiff.59

V. DISCUSSION

A. DELAWARE HAS PERSONAL JURISDICTION OVER JH.

Delaware courts apply a two-part analysis to determine whether personal jurisdiction

exists over nonresident defendants. “First, the Court must determine whether Delaware’s long-

arm statute is applicable. Second, the Court must determine whether subjecting a nonresident

defendant to jurisdiction would violate due process.”60

Delaware’s long-arm statute permits the exercise of personal jurisdiction over a

nonresident defendant in a cause of action arising from the following specifically enumerated

acts required of that defendant:

(1) Transacts any business or performs any character of work or service in the State;

(2) Contracts to supply services or things in this State;

(3) Causes tortious injury in the State by an act or omission in this State;

(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if the person regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State;

57 Crescent/Mach I Partners, L.P. v. Turner, 846 A.2d 963, 974 (Del. Ch. 2000). 58 Chandler v. Ciccoricco, 2003 WL 21040185 at *8 (Del. Ch. May 5, 2003). 59 Amaysing Techs. Corp. v. Cyberair Commc’ns, Inc., 2005 WL 578972 at *3 (Del. Ch. Mar. 3, 2005). 60 Id. (citing Matthew v. Fläkt Woods Group SA, 56 A.3d 1023, 1027 (Del. 2012)). See also Sessoms v. Richmond, 2017 WL 6343548, at *2 (Del. Super. Dec. 8, 2017); see also Hoechst Celanese Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 1991 WL 190313, at *1 (Del. Super. Sept. 10, 1991).

14 (5) Has an interest in, uses or possesses real property in the State; or

(6) Contracts to insure or act as surety for, or on, any person, property, risk, contract, obligation or agreement located, executed or to be performed within the State at the time the contract is made, unless the parties otherwise provide in writing.61

To establish specific jurisdiction, CIBC must show that “(1) the nonresident transacted

some sort of business in the state; and (2) the claim being asserted arose out of that specific

transaction.”62 As such, CIBC must establish a nexus between its claims and the nonresident’s

forum-related conduct.63

i. JH transacted business in Delaware, satisfying Section 3104(c).

CIBC argues that Delaware has personal jurisdiction over JH under 10 Del. C. §

3104(c)(1). Section 3104(c)(1) is a “single act statute” that enables the Court to exercise

jurisdiction over nonresidents based on a single act or transaction engaged in by the

nonresident within the state.64 The plaintiff’s cause of action, however, must have a

nexus with the forum-related contact, i.e., the claim must arise from at least one act that

legally constitutes the transacting of business in Delaware.65 Furthermore, an aggregate

of contacts may satisfy the Section 3104(c) requirements.66

In RJ Associates, Inc. v. Health Payors Organization Limited Partnership, one of

the limited partners of a Delaware limited partnership alleged that the other limited

partner and the general partner breached contractual and fiduciary duties.67 The Court of

61 10 Del. C. § 3104(c). 62 Maloney-Refaie v. Bridge at School, Inc., 958 A.2d 881, 878 (Del. Ch. 2008); EBP Lifestyle Brands Holdings, Inc. v. Boulbain, 2017 WL 3328363, at *3 (Del. Ch. Aug. 4, 2017). 63 See Mobile Diagnostic, 972 A.2d at 804. 64 See Eudaily v. Harmon, 420 A.2d 1175, 1180 (Del. 1980). 65 See RJ Assoc.’s, Inc. v. Health Payors’ Org. Ltd. P’ship., 1999 WL 550350 at *4 (Del. Ch. July 16, 1999). 66 See id. at *5 (“In the aggregate these allegations are sufficient to establish (for personal jurisdiction purposes) that [Defendant] transacted business in Delaware and that RJA’s claims . . . arise from these alleged transactions”). 67 Id. at *1.

15 Chancery held that it could exercise personal jurisdiction over the other limited partner—

an Ohio corporation with its principal place of business in Ohio. The Court of Chancery

noted that (i) the general partner had formed the partnership and had “at least indirect

control” over the general partner, and (ii) the plaintiff alleged that the limited partner

unilaterally caused the Partnership Agreement to be amended to the plaintiff’s

detriment.68

Similarly, CIBC alleges sufficient contacts with Delaware to satisfy the Section

3104(c) requirements. CIBC contends that JH participated in the formation and solely

managed the Joint Ventures.69 CIBC alleges that JH also amended the Joint Venture

Agreements to decrease its distributions and increase distributions to the Joint Venture

Partners.70 These contacts, “in aggregate” are sufficient for the Court to find that JH

transacted business in Delaware.71 Furthermore, CIBC bases its claim on the Joint

Venture’s distributions.72 Therefore, this claim has a nexus with Delaware.73

ii. Exercising personal jurisdiction over JH comports with due process.

Delaware may exercise jurisdiction over JH only if JH has “certain minimum

contacts with [the forum] such that the maintenance of the suit does not offend

‘traditional notions of fair play and substantial justice.’”74 The Court must focus on the

relationship between JH, Delaware and the litigation to determine whether a particular

exercise of state court jurisdiction is consistent with due process.75 The Court notes that a

68 Id. at *1, *5. 69 Pl.’s Ex.’s A and B. 70 SAC ¶¶ 74-91. 71 RJ Assoc.’s, 1999 WL 550350 at *5 (Del Ch. July 16, 1999). 72 Pl.’s Response in Opp. To Defs.’ Mots. To Dismiss Pl.’s Second Amend. Compl. or in the Altern., to Stay. 4. 73 RJ Assoc.’s, 1999 WL 550350 at *4 (Del Ch. July 16, 1999). 74 International Shoe Co. v. State of Wash., Office of Unemployment Compensation and Placement, 326 U.S. 310, 316 (1945). 75 Shaffer v. Heitner, 433 U.S. 186, 204 (1977).

16 single contact between JH and Delaware may be sufficient, especially when there is a

nexus between the contact and the cause of action. The Court must ask whether the

defendant should have reasonably anticipated that its actions “might result in the forum

state asserting personal jurisdiction over him in order to adjudicate disputes arising from

those actions.”76

The Court of Chancery held that the RJ Associates defendant had sufficient

contacts when it took an active role in establishing a Delaware partnership, owned an

interest in the partnership’s general partner, received significant cash flow distributions

from the partnership, benefitted directly from Delaware law by operating the

partnership’s provider network, controlling the partnership’s management, causing the

partnership agreement to be amended under Delaware law to change cash flow

distributions and agreeing to a Delaware choice of law provision in its partnership

agreement.77

Similarly, JH took an active role in establishing the Joint Ventures (which are

Delaware LLCs); received distributions through the Joint Venture Agreements; managed

the Joint Ventures; and amended the Joint Venture Agreements to change cash flow

distributions.78 Furthermore, the parties to the Joint Venture Agreements agreed to be

governed by Delaware law.79 Therefore, exercising personal jurisdiction over JH

comports with due process.

76 In re USA Cafes, L.P. Litigation, 600 A.2d 43, 50-51 (Del. Ch. 1991). 77 RJ Assoc.’s, 1999 WL 550350 at *6 (Del. Ch. July 16, 1999). 78 Pl.’s Ex.’s A and B; SAC ¶¶ 74-91. 79 See e.g. Pl. Ex. B § 16.3.

17 B. CIBC ADEQUATELY PLEAD DAMAGES

JH argues that CIBC did not adequately plead damages because CIBC collected

the collateral that secured the loans under the Credit Agreement and there is no allegation

that the collateral does not satisfy the loan amount.80 CIBC, however, alleges that JH’s

transfers depleted CIBC’s collateral in excess of $6,582,193.69.81 CIBC furthermore,

contends that it is seeking $172,500,000.000, interest, attorneys’ fees, costs and expenses

after it accelerated amounts due under the Credit Agreement because JH and the

non-party borrowers defaulted on the loan.82 The Court therefore finds that CIBC has

adequately pled damages in excess of the collateral it already possesses.

C. CIBC’S FRAUDULENT TRANSFER CLAIMS AGAINST JH AND THE JOINT VENTURE PARTNERS (COUNTS I AND II)

CIBC’s Counts I and II allege actual fraudulent transfers against JH and the Joint

Venture Partners.83 Chapter 13 of Title 6 controls.84 Section 1304 relates to fraudulent

transfers as to present and future creditors. Section 1304(a) provides:

Transfers fraudulent as to present and future creditors.

(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(1) With actual intent to hinder, delay or defraud any creditor of the debtor; or

(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

a. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

80 JH Mot. 16. 81 SAC ¶ 24. 82 Id. ¶¶ 104-05. 83 Id. ¶¶ 110, 124. 84 6 Del. C. § 1301, et seq.

18 b. Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.85

First, JH argues that the Joint Venture Partners did not receive a transfer from

CIBC’s “debtor” because they received distributions from the Joint Ventures who are not

CIBC’s debtors.86 Second, JH argues that CIBC states conclusory allegations and does

not state sufficient facts to demonstrate JH’s intent to defraud or that JH was insolvent at

the time of transfer.

The Court notes that JH only focuses on one type of transfer—the transfer of

funds—and not JH’s transfer of its interest in distributions from the Portfolios to the Joint

Venture Partners made without consideration.87 The Court finds that, by definition, this

type of transfer supports a claim under Section 1304. In addition, the Court finds that

CIBC has pled enough non-conclusory facts to satisfy Civil Rule 9.

i. The Transfer of an Interest in the Distributions constitutes a Transfer.

Transfer is defined in Chapter 6. Under Section 1301(12), “Transfer” means

…every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease and creation of a lien or other encumbrance but excludes, without limitation, any disposition of or parting with property or an interest in property described in paragraph (2) of this section.88

As defined, therefore, “Transfer” is broad is scope and meaning.

CIBC pled a transfer. The Court notes that. reading SAC Paragraphs 112 and 113

together, CIBC alleged a “transfer” of an interest in property that satisfies Section 1304.

85 6 Del. C. § 1304(1). 86 JH Mot. 17. 87 SAC at ¶¶ 112-13. 88 6 Del. C. š 1301(12).

19 CIBC alleges the transfer of actual funds or “a portion of its interest in distributions”

made by JH when it agreed, under the CX Side Letter Agreement and the Participation

Agreement, to transfer its interest in those funds.89

ii. Whether CIBC has plead facts that indicate actual intent to hinder, delay or defraud any creditor of the debtor.

CIBC alleges that JH committed an actual fraudulent transfer under Section

1304(a)(1).90 Claims for actual fraudulent transfer under Section 1304(a)(1) “must meet

the heightened pleading standard of Superior Court Civil Rule 9(b).”91 Under Rule 9(b),

CIBC must include “specific supporting facts describing the circumstances of the

transfer.”92 Allegations based “upon information and belief” are not enough to satisfy

Rule 9(b)’s requirements.93

CIBC’s allegations satisfy Rule 9(b)’s particularity requirements. Under Section

1304(a), CIBC must plead JH actual intended to hinder, delay, or defraud CIBC.94 At

first reading, CIBC’s allegations seem conclusory;95 however, Section 1304(b) provides

otherwise.

One of the factors that may be given consideration when determining actual intent

is whether the transfer was to an insider.96 Under Section 1301(7)(d), a person in control

of a corporation or a partnership is an insider.97 CIBC alleges that JH’s principals have

interests in the Joint Venture Partners. For example, Jacobsen was a “Class A-2

89 Id. 90 See SAC § 112 (“JH transferred funds to the Joint Venture Partners with the intent to hinder, delay or defraud Plaintiff . . .”) 91 Ki-Poong Lee v. So, 2016 WL 6806247 at * 3 (Del. Super. Nov. 17, 2016). 92 Id. at *4. 93 See id. 94 See 6 Del. C. § 1304(a). 95 SAC ¶ 120. 96 See 6 Del. C. § 1304(b)(1). 97 See 6 Del. C. § 1301(7)(b)(3) and (c)(5).

20 Representative of Met Management” and Met Management required his vote for all

major decisions.98 CIBC also alleges that Kravetz is a principal and managing member

of Pacific Capital Holdings, which is a member of the Joint Venture Partners, COCD and

CX.99 CIBC also alleges that Kravetz was a manager for Met Holdings.100 These

relationships, at this stage of the proceedings, satisfy “insider” statutory definition under

Section 1301(1) and, therefore, support CIBC’s allegation that the Joint Venture Partners

are JH’s “insiders.”101

In addition, CIBC states that JH failed to disclose the transfer. Another factor to

consider when determining actual intent is whether the transfer was concealed.102 Factual

allegations regarding concealment and insider status are enough to satisfy Civil Rule 9.

CIBC alleges sufficient facts that show the JH was insolvent or became insolvent

shortly after the transfer was made or the obligation was incurred.103 Under Section

1302(b), a “debtor who is generally not paying debts as they become due is presumed to

be insolvent.”104 CIBC accelerated amounts due and demanded repayment which has not

been repaid because JH defaulted on CIBC’s loans,.105 Accordingly, the Court finds that

CIBC alleged sufficient facts to show that the debtor was insolvent or became insolvent

shortly after the transfer was made.

Finally, CIBC also alleges sufficient facts to show that JH retained possession or

control of the property after the transfer. CIBC alleges that JH, by virtue of its ownership

98 SAC ¶ 4. 99 Id. ¶ 5. 100 Id. 101 6 Del. C. § 1304(d)(1). 102 6 Del. C. § 1304(d)(3). 103 See 6 Del. C. § 1304(b)(9). 104 6 Del. C. § 1302(b). 105 SAC ¶¶ 104, 116-118.

21 interest and control in the Joint Ventures and Joint Venture Lenders, retained possession

or control of the property transferred even after the transfers.106 CIBC alleges that JH

formed the Joint Ventures with the Joint Venture Parties and made distributions

according to the side agreements to itself and the other Joint Venture Parties.107 As such,

CIBC plead specific facts with sufficient particularity to support the allegation that JH

retained possession or control of the property after the transfer.

The Court finds that CIBC has alleged facts to satisfy the statute as to actual

intent. Moreover, CIBC alleges with sufficient particularity that JH became insolvent

shortly after the transfers and that JH retained control of the distributions after the

transfer. The Court finds that allegations of actual intent are sufficient for CIBC’s

fraudulent transfer claim to survive. Furthermore, CIBC correctly states it does not need

to plead wrongful intent with regards to the fraudulent transferees.108 CIBC must merely

allege that there was a fraudulent transfer to recover fraudulently transferred funds from

the Joint Venture Partners.109

iii. CIBC pled the elements for constructive fraudulent transfer

Section 1305(a) provides:

(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange.

The Court finds that CIBC pled the elements of a constructive fraudulent transfer.

CIBC pled that the side agreements to change the Joint Venture’s distribution methods

106 Id. ¶ 119. 107 Id. ¶ 53, 75-76. 108 See August v. August, 2009 WL 458778 at *10 (Del. Ch. Feb. 20, 2009). 109 See Dodge v. Wilmington Trust Co., 1995 WL 106380 (Del. Ch. Feb. 3, 1995) (“Once a creditor has sown a transfer was fraudulent, it can recover the property from the initial transferee or any subsequent transferee”).

22 constituted a “transfer or obligation incurred by a debtor.” Unlike claims for actual fraud,

a claim for constructive fraud is “governed by Civil Procedure Rule 8(a).”110

To survive dismissal under Civil Rule 12(b)(6), CIBC must allege facts sufficient

to show that (i) JH was insolvent or made insolvent by the transfer and (ii) JH did not

receive reasonably equivalent value.111

a. JH was insolvent or made insolvent by the transfer

CIBC alleges sufficient facts to show that JH was insolvent or made insolvent by

the transfer. Under Section 1302(b), a “debtor who is generally not paying debts as they

become due is presumed to be insolvent.”112 In this case, CIBC alleges that JH owes

CIBC a debt of at least $172,500,000 because CIBC accelerated amounts JH owed under

the Credit Agreement.113 CIBC accelerated these amounts because of JH’s defaults that

were the subject of the Illinois litigation.114 JH has not paid these debts and therefore,

according to CIBC, JH may be presumed insolvent.

Section 1305 provides that a transfer made without a reasonable equivalent

exchange for value is fraudulent if the debtor was insolvent at that time or the debtor

became insolvent because of the transfer or obligation.115 In this case, CIBC admits that

“most or all of the overpayments were made before [CIBC] accelerated the loan.”116

CIBC relies upon language suggesting that DUFTA anticipates transfers made prior to

110 Ki-Poong Lee, 2016 WL 680247 at *4 (Del. Super. Nov. 17, 2016). 111 See In re Coca-Cola Enterprises, Inc., 2007 WL 3122370 at fn. 28 (“If a complaint were held sufficient simply because it restates the legal elements of a particular cause of action, Rule 8(a) would be rendered meaningless. . . . [P]laintiffs must allege facts sufficient to show that the legal elements of a claim have been satisfied”).; see Ki- Poong Lee, 2016 WL 680247 at *6 (Describing elements of § 1305(a) claim). 112 6 Del. C. § 1302(b). 113 SAC ¶ 105. 114 Id. ¶ 104. 115 6 Del. C. § 1305(a). 116 Pl.’s Response in Opp. To Defs.’ Mots. To Dismiss Pl.’s Second Amend. Compl. or in the Altern., to Stay. at 18.

23 the vesting of a creditor’s claim.117 Seiden, however, involves an actual fraudulent

inducement claim under Section 1304(a)(2) which is about fraudulent transfers with

respect to present and future creditors. Section 1305(a), by contrast, only applies to

present creditors. At this stage, however, CIBC has alleged that the transfers under the

Side Agreement rendered JH unable to meet its obligations.

b. CIBC has pled that JH did not receive fair consideration for the transfers.

JH argues that value is given if “in exchange for the transfer or obligation . . . an

antecedent debt is secured or satisfied.”118 JH argues that the payments were required

under the Side Agreements and therefore, the payments satisfied an antecedent debt.

CIBC alleges, however, that the Side Agreements are the fraudulent transfer and alleges

that JH entered the Side Agreement without consideration. Under the applicable legal

standard, the Court finds that CIBC pled that JH did not receive fair consideration for the

transfers. Discovery should resolve this issue.

D. CIBC’S FRAUDULENT TRANSFER CLAIMS AGAINST THE JOINT VENTURE LENDERS (COUNTS III AND IV)

i. CIBC’s properly pled actual fraudulent transfer claim against the Joint Venture Lenders

Count III against the Joint Venture Lenders survives for the same reason that

Count I survive. Accepting a fraudulently transferred asset “is all that is required to create

transferee liability” under DUFTA.119 If CIBC can prove that a fraudulent transfer

occurred, CIBC may recover fraudulently transferred funds from the Joint Venture

117 See id. (citing Seiden v. Shu Kaneko, 2015 WL 7289338 at *14 (Del. Ch. Nov. 3, 2015)). 118 6 Del. C. § 1303(a). 119 August, 2009 WL 458778 at *12 (Del. Ch. Feb. 20, 2009).

24 Lenders.120 Therefore, CIBC actual fraudulent transfer claim survives against the Joint

Venture Lenders.

ii. CIBC’s properly pled a constructive fraudulent transfer claim against the Joint Venture Lender.

The Court finds that CIBC’s constructive fraudulent transfer claim against the

Joint Venture Lender survive for the same reasons the claims survives with respect to JH

and the Joint Venture Partners.

E. CIBC’S BREACH OF CONTRACT CLAIMS AGAINST THE JOINT VENTURE PARTNERS (COUNT V)

To survive a motion to dismiss for failure to state a breach of contract claim,

CIBC must demonstrate: “first, the existence of the contract, whether express or implied;

second, the breach of an obligation imposed by that contract; and third, the resultant

damage to the plaintiff.”121 JH does not contest that a contract exists; but contends that

CIBC failed to adequately plead breach or damages.122

The contracts at issue are the Acknowledgment Agreements between CIBC and

the Joint Venture Partners. Under those Acknowledgement Agreements, the Joint

Venture Partners agreed not to amend their Joint Venture Agreements without CIBC’s

written consent.123

i. CIBC has adequately pled that the Joint Venture Partners breached the Joint Venture Agreements by amending the Joint Venture Agreements.

Accepting well-pled allegations as true and drawing all reasonable inferences in

favor of the plaintiff, CIBC pled sufficient facts to show a breach of the

120 See infra Section D(i) and Section D(ii). 121 VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003). 122 JH Mot. 23. 123 SAC ¶ 72.

25 Acknowledgement Agreements. Under the Acknowledgement Agreements, the Joint

Venture Partners agreed not to amend their Joint Venture Agreements without CIBC’s

written consent.124 The Joint Venture Partners also represented that there were no

amendments, modifications or additions to the LLC Agreement.125 Under the JH Met

Joint Venture Agreement, the Joint Venture would make distributions according to actual

net collections generated.126 The COCD Side Agreement allows for the Joint Venture to

make distributions based on Projected Net Collections to the Joint Venture Lenders via

JH and COCD. 127 These changes in distribution calculation function to amend the Joint

Venture Agreement and therefore CICB stated sufficient facts to show a breach of the

Acknowledgement Agreement with respect to JH Met.

On the other hand, the CX Side Letter Agreement states that it is being entered in

connection with the JH CX Joint Venture.128 The CX Side Letter Agreement permits Met

Fund IIIA to exercise a put requiring JH to buy the CX Asset Loan at a rate of 30% if

Met Fund IIIA does not earn an internal rate of return of 30%.129 Although this may alter

“the economic interests and benefits of the members as set forth in the Joint Venture

Agreement,” CIBC does not allege any particular facts showing that this is a modification

of the Joint Venture Agreement. Therefore, the Court grants the Motion with respect to

the CX Side Letter Agreement.

Finally Met Fund IIIA and JH executed the Participation Agreement, where JH

sold a portion of the collections such that Met Fund IIIA would be entitled to 74% of the

124 See id. 125 See id. Exs. G, H. 126 See id. Ex. A §§ 8.1, 8.2. 127 See id. Ex. I. 128 Id. Ex. L. 129 Id. ¶ 85, Ex. L.

26 distributions from the JH Met Joint Venture.130 Changing the distribution percentages

under the Joint Venture Agreement is an amendment, modification or addition to the

Joint Venture Agreement and therefore, constitutes a breach of the Acknowledgement

Agreement by the Joint Venture Partner Met Fund IIIA.

Therefore, CIBC pleaded sufficient facts to establish a breach of the

Acknowledgement Agreements with respect to the COCD Side Agreement and the

Participation Agreement but not the CX Side Letter Agreement.

ii. CIBC properly alleged damages from the breaches.

CIBC properly alleged damages from the breaches. CIBC alleges that the

distribution percentage adjustment under the Participation Agreement and distribution

based on projected collections resulted in “substantial overpayments” to Joint Venture

Partners.131 For example, CIBC alleges that Met Fund IIIA received at least $1.919

million in distributions while the agreement only allocated $1.179 million to Met Fund

IIIA.132 Therefore, CIBC pled facts that would support a finding of damages.

F. CIBC’s CLAIM OF BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING AGAINST THE JOINT VENTURE PARTNERS (COUNT VI)

“The implied covenant of good faith and fair dealing inheres in every contract . . .

and ‘requires a party in a contractual relationship to refrain from arbitrary or

unreasonable conduct which has the effect of preventing the other party to the contract

from receiving the fruits of the bargain.’”133 It is best understood “as a way of implying

130 Id. ¶ 88, Ex. M. 131 Id. ¶¶ 92-93. 132 Id. ¶ 94. 133 Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126 (Del. Ch. 2009) (citing Dunlap v. State Farm Fire and Cas. Co., 878 A.2d 434, 442 (Del. 2005).

27 terms in the agreement.”134 The Court can only imply terms where it is “clear from what

was expressly agreed upon that the parties who negotiated the express terms of the

contract would have agreed to proscribe . . . had they though to negotiate with respect to

the matter.”135

The covenant “operates only in that narrow band of cases where the contract as a

whole speaks sufficiently to suggest an obligation and point to a result, but does not

speak directly enough to provide an explicit answer.”136 Therefore, before invoking the

covenant, the Court must “determine whether there is a gap that needs to be filled.”137 If

the contract expressly covers a particular issue, then “the implied covenant will not

apply.”138 When “a contract confers discretion on one party, the implied covenant of

good faith and fair dealing requires” that discretion be used reasonably and in good

faith.139 “But ‘[a] party does not act in bad faith by relying on contract provisions for

which that party bargained where doing so simply limits advantages to another party.’”140

Furthermore, “an implied covenant claim requires factual allegations that are different

from those underlying any accompanying breach-of-contract claims.”141 “Otherwise, the

implied covenant claim . . . is duplicative and not viable.”142

For CIBC’s claim that the Joint Venture Partners breached the implied covenant

of good faith and fair dealing to survive, CIBC must show (i) a specific implied

contractual obligation, (ii) a breach of that obligation by the defendant and (iii) resulting

134 Dunlap, 878 A.2d at 441 (Del. 2005). 135 Airborne Health, Inc., 984 A.2d at 146 (Del. Ch. 2009). 136 Id. 137 Allen, 113 A.3d at 183 (Del. Ch. 2014). 138 Id. 139 Winshall v. Viacom Intern., Inc., 55 A.3d 629, 638 (Del. Ch. 2011). 140 Id. (citing Nemec v. Shrader, 991 A.2d 1120, 1128 (Del. 2010)). 141 Brightstar Corp. v. PCS Wireless, LLC, 2019 WL 3714917, at *13 (Del. Super. Aug. 7, 2019). 142 Id.

28 damage to the plaintiff.143 In this case, CIBC pled that the Joint Venture Partners agreed

not to take any actions that would impair or otherwise dissipate CIBC’s collateral in the

Portfolios or amend their Joint Venture Agreements without CIBC’s written consent.144

CIBC did not plead its breach of the implied covenant of good faith and fair

dealing claim in the alternative. If the complained about conduct is contractual then it is

not an implied obligation but an explicit one. Because the Court is not dismissing the

breach of contract claim, the Court will dismiss this implied covenant of good faith and

fair dealing claim. The Court will allow CIBC twenty days from the date of this opinion

to try to amend the SAC as to the breach of the implied covenant of good faith and fair

dealing claim as to the CX Side Letter Agreement.

G. CIBC’S CLAIM OF TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONS AGAINST THE JOINT VENTURE PARTNERS (COUNT VII)

CIBC does not plead sufficient facts to show that the Joint Venture Partners

induced JH to breach the Credit Agreement and Security Agreement by entering into side

agreements that interfered with CIBC’s rights to its collateral under the agreements.

CIBC must allege facts showing “(1) a valid contract, (2) about which the defendants

have knowledge, (3) an intentional act by defendants that is a significant factor in causing

the breach of the contract, (4) done without justification and (5) which causes injury.”145

First, the Credit Agreement and Security Agreement between CIBC and JH are valid

enforceable contracts.146 Second, the Joint Venture Partners knew about the

143 NAMA Holdings, LLC v. Related WMC LLC, 2014 WL 6436647 at * 144 SAC ¶ 155. 145 Great American Opportunities, Inc. v. Cherrydale Fundraising, LLC, 2010 WL 338219 at *9 (Del. Ch. Jan. 29, 2010). 146 SAC ¶ 160.

29 agreements.147 Third, there are no facts suggesting justification. And finally, the CIBC

suffered injury from JH’s breach detailed in the Illinois Litigation.148

However, CIBC only pleads that the Joint Venture Partners actions were

intentional and in bad faith in a conclusory fashion. The SAC states “[t]he actions of the

Joint Venture Partners were intentional, in bad faith, and without justification.”149 To

establish tortious interference with contract rights, “the non-breaching party must show

that the . . . defendant ‘was not pursuing in good faith the legitimate profit seeking

activities of [its] affiliated enterprise’ that was a party to the contract.”150 CIBC therefore

fails to allege facts that show the Joint Venture Partners’ bad faith; and the Court will

dismiss Count VII.

H. CIBC’S TORTIOUS INTERFERENCE CLAIM AGAINST THE JOINT VENTURE LENDERS (COUNT VIII)

The Court dismisses Count VIII for the same reason that it dismissed Count VII.

To survive the motion to dismiss, CIBC must allege facts that show the Joint Venture

Lenders were not acting in good faith to pursue greater profits.151 CIBC only alleges that

“[o]n information and belief, the Joint Venture Lenders intentionally and improperly

induced or otherwise caused JH to breach the Credit Agreement.”152 This allegation is

conclusory and the Court will dismiss Count VIII.

147 Id. ¶ 161. 148 Id. ¶¶ 100-108. 149 Id. ¶ 165. 150 Bhole, Inc. v. Shore Investments, Inc., 67 A.3d 444, 453 (Del. 2013). 151 See id. 152 SAC ¶ 170.

30 I. CIBC’S UNJUST ENRICHMENT CLAIM (PLED IN THE ALTERNATIVE) AGAINST THE JOINT VENTURE PARTNERS (COUNT IX)

CIBC pleads Count IX in the alternative “in the event the Court determines that

no valid and binding contracts exist between CIBC and the Joint Venture Partners.”153

To state a claim for unjust enrichment, CIBC must plead “(1) an enrichment, (2) an

impoverishment, (3) a relation between the enrichment and impoverishment, (4) the

absence of justification and (5) the absence of a remedy provided by law.”154 JH only

argues that CIBC has not alleged an impoverishment because “any claim for damages is

not ripe.”155 CIBC, however, alleges facts showing that the Joint Venture Partners

benefitted from alleged overpayments under the Side Agreements.156 Therefore, the

Court will not dismiss Count IX at this stage of the case.

J. CIBC’S UNJUST ENRICHMENT CLAIM (PLED IN THE ALTERNATIVE) AGAINST THE JOINT VENTURE LENDERS (COUNT X)

This claim survives for the same reason that CIBC’s unjust enrichment claim

survives against the Joint Venture Partners. CIBC pled facts that showed how the Joint

Venture Lenders benefitted from overpayments.157 Therefore, the unjust enrichment

claim against the Joint Venture Lenders survives.

K. CIBC’S DECLARATORY JUDGMENT CLAIM (XI)

JH argues that Count XI should be dismissed for two reasons: (1) CIBC did not

adequately allege a breach occurred or that it suffered any damages and (2) the

declaratory judgment is duplicative of the contract breach claim.158 CIBC adequately

153 Pl.’s Response in Opp. To Defs.’ Mots. To Dismiss Pl.’s Second Amend. Compl. or in the Altern., to Stay. 28. 154 Total Care Physicians, P.A. v. O’Hara, 798 A.2d 1043, 1056 (Del. Super. 2001). 155 JH. Mot. 29. 156 SAC ¶¶ 75-91. 157 See e.g. id. ¶ 88, Ex. M (the Participation Agreement). 158 JH Mot. 30.

31 alleged a contract breach, at least with respect to the COCD Side Letter Agreement and

the Participation Agreement.159

The declaratory claim is not duplicative of claim for contract breach. CIBC seeks

to repair harm caused by the contractual breach caused by the side agreements while the

claim for declaratory relief is to prevent future harm caused by performing those

agreements. “The mere availability of another adequate remedy does not in and of itself

weigh against the giving of declaratory relief.”160 The real test is “whether the

declaratory judgment action would serve a useful purpose.”161 Declaratory relief was

appropriate in Clemente because “resolving the parties’ obligations under the contract

could affect their present behavior and have present consequences.”162 In this case,

declaratory relief would be appropriate to determine the rights and obligations of JH, the

Joint Venture Partners and Joint Venture Lenders to avoid future litigation that may arise

if the Court determines that performing those agreements is a breach of contract with

respect to CIBC. Therefore, the claim is not duplicative and should not be dismissed.

L. THE COURT WILL NOT STAY THIS ACTION.

The Court will not stay this action. First, the forum selection is binding only upon

JH and the Borrowers. A court should honor the parties’ contract and enforce the clause

“where contracting parties have expressly agreed upon a legally enforceable forum

selection clause.”163 Here, however, there is no forum selection clause to enforce against

CIBC.

159 See infra Section V(F). 160 Clemente v. Greyhound Corp., 155 A.2d 316, 321 (Del. Super. 1959). 161 Id. 162 Del. State Univ. Student Housing Found. v. Ambling Mgmt. Co., 556 F. Supp. 2d 367, 375 (D. Del. 2008) (distinguishing Clemente). 163 Ingres Corp. v. CA, Inc, 8 A.3d 1143, 1145 (Del. 2010).

32 The Court now turns to the “default rule of common law,” under McWane. Under the

McWane three-factor test, the Court considers whether (i) there is a prior action pending

elsewhere; (ii) in a court capable of doing prompt and complete justice; (iii) involving the same

parties and the same issues.164 When all three criteria are met, there is “a strong preference for

the litigation of a dispute in the forum in which the first action was filed.”165 Nevertheless, a

Delaware court may decline to stay a case if “Delaware has too vested an interest” in the matter

to turn away.166 For example, a Delaware court may decline to stay a case if there is no clear

evidence of proper service of process or litigation progress in the foreign forum.167

JH cannot satisfy the McWane three-factor test. The Illinois Action does not

involve the same parties and issues as this action. CIBC filed the Illinois Action against

JH and non-party Borrowers for breaching the Credit Agreement. By contrast, this action

was filed against JH, the Joint Venture Partners, and the Joint Venture Lenders to recover

for alleged fraudulent transfers under the Side Agreements and the Participation

Agreement. Therefore, this case does not arise “out of the same operative nucleus of

facts” and the Court should not stay this action.168 As this case does not involve the same

parties and same issues, the Court will not stay the matter under McWane.

164 See LG Elecs., Inc. v. InterDigital Commc’ns, Inc., 114 A.3d 1246, 1252 (Del. 2015). 165 Id. (Internal citations omitted). 166 NRG Barriers, Inc. v. Jelin, 1996 WL 377014, at *6 (Del. Ch. Jul. 1, 1996). 167 See id. (holding that only Delaware could do prompt and complete justice when there was no evidence of proper service of process or progress in the litigation in the foreign court). 168 Lisa, S.A., 993 A.2d at 1048 (Del. 2010).

33 VI. CONCLUSION

The Court GRANTS the Motion with respect to the CX Side Letter Agreement in

Count V, and as to Counts VI , VII and VIII. The Court otherwise DENIES the Motion.

Furthermore, the Court DENIES the request to stay the case.

Dated: June 2, 2021 Wilmington, Delaware

/s/ Eric M. Davis Eric M. Davis, Judge

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