FILED IN BUSINESS COURT OF TEXAS BEVERLY CRUMLEY, CLERK ENTERED 5/19/2026
2026 Tex. Bus. 30
The Business Court of Texas, First Division
COBALT FALCON, LLC, § Plaintiff, § § v. § Cause No. 25-BC01A-0023 § AXS INVESTMENTS, LLC, § Defendant. § ═══════════════════════════════════════ Memorandum Opinion and Order Construing the Transaction Agreement Under TRCP 166(g) ═══════════════════════════════════════ ¶1 Before the Court is a question of law that is partially dispositive of
the above-captioned cause: whether Schedule 2.4 of the First Amendment to
Transaction Agreement dated effective May 2, 2022, which provides for
“Consideration Terms” including monthly payments to be “paid in perpetuity
(unless otherwise agreed)” by Defendant/Buyer AXS Investments, LLC to
Plaintiff/Seller Cobalt Falcon, LLC requires the continuation of such
payments after the closure of the High Yield ETF Fund involved in the
Page 1 transaction. 1 For the reasons that follow, the Court answers: yes, the
unambiguous plain language does so require.
¶2 Delaware law governs this dispute. Def.’s Ex. 1-A at § 11.3; see
also Def.’s R166(g) Brief at p. 3; Pl.’s Resp. at p. 8. Under Delaware law,
contract interpretation is a legal question. Advent Int’l Corp. v. Servicios
Funerarios GG S.A. de C.V., No. 2023-0647, 2024 WL 3580934, at * 7 (Del.
Ch. June 7, 2024). A contract is to be read as a whole, enforcing clear and
unambiguous language by its plain meaning and giving effect to all terms. See
Manti Holdings, LLC v. Authentix Acquisition Co., Inc., 261 A.3d 1199, 1208
(Del. 2021); Page v. Village Prac. Mgmt. Grp., LLC, No. 2022-0581, 2023 WL
3563049, at *1 (Del. Ch. May 19, 2023).
¶3 Parties’ disagreement over interpretation does not create
ambiguity in a contract. Manti Holdings, 261 A.3d at 1208. Only when
susceptible to two or more reasonable interpretations is a contract ambiguous.
See Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192,
1 The original Transaction Agreement, effective April 6, 2022, likewise contained “Consideration Terms” to “be paid in perpetuity” in its erroneously-labeled Schedule 2.3. Cf. Def.’s Ex. 1-A at § 2.3 (“Excluded Liabilities”) and § 2.4 (“Purchase Consideration,” referencing “monthly amounts determined by the formula set forth in Schedule 2.4 hereto”) with Schedule 2.3 (“Consideration Terms,” setting forth monthly payment calculations and citing Section 2.3).
Page 2 1196 (Del. 1992). Under Delaware law, “[a]n interpretation is unreasonable
if it ‘produces an absurd result’ or a result ‘that no reasonable person would
have accepted when entering the contract.’” Terrell v. Kiromic Biopharma,
Inc., 338 A.3d 1272, 1277 (Del. 2025) (quoting Manti Holdings, 261 A.3d at
1208); see Capella Holdings, LLC v. Anderson, No. 9809, 2017 WL 5900077,
at *5 (Del. Ch. Nov. 29, 2017).
¶4 At issue here is the contractual provision setting forth the
consideration promised by AXS to Cobalt Falcon in exchange for assets
relating to the management, administration, and operation of the High Yield
ETF Fund. The Agreement and its First Amendment state that AXS shall
compensate Cobalt Falcon “for all calendar months following the Closing, in
the monthly amounts determined by the formula set forth in Schedule 2.4.”
Def.’s Ex. 1-B at 1(b) (“Section 2.4. Purchase Consideration”). In turn,
Schedule 2.4 calculates the monthly consideration in two parts: “90 bps
multiplied by the Conversion AUM; plus 15 bps multiplied by any and all AUM
in excess of the Conversion AUM as of the end of the calendar month prior to
Page 3 such payment.” 2 Id. at 1(f) (“Schedule 2.4 CONSIDERATION TERMS”)
(emphasis in original). The Agreement and its First Amendment require the
monthly payments to be made “in perpetuity (unless otherwise agreed).” Id.
Cobalt Falcon contends “in perpetuity” means that the payments are to
continue regardless of the Fund’s existence. Pl.’s Resp. at p. 10. AXS argues
this provision only requires the monthly payments to continue while the Fund
is operating. Def.’s R166(g) Brief at p. 5.
¶5 As already stated, the contract’s plain language calls for monthly
payments to be made “in perpetuity (unless otherwise agreed).” The words
“in perpetuity” are not inherently ambiguous or susceptible to multiple
meanings; in fact, the phrase can be—and has been—clearly defined. “In
perpetuity” means “forever; without end.” In perpetuity, BLACK’S LAW
DICTIONARY (12th ed. 2024). 3 Under Delaware law, this plain meaning
controls unless there is an ambiguity. AXS contends that an interpretation
2 AUM refers to “total assets under management of the Fund.” See Def.’s Ex. 1-A at art. I (“Defined Terms”). The parties have represented that, following Fund closure, the “Conversion AUM” is a known and fixed dollar amount, causing the consideration formula to permanently equal the sum of $74,062.45.
3 The only express limitation imposed on “in perpetuity” is “unless otherwise agreed.” It is undisputed that the First Amendment is the last agreement between the parties concerning the consideration.
Page 4 adopting the plain meaning—the interpretation urged by Cobalt Falcon—
would be unreasonable and that AXS can supply a (sole) reasonable
alternative. But since deviation from the plain language requires two or more
reasonable interpretations, the Court cannot adopt the interpretation urged by
AXS unless it and the interpretation urged by Cobalt Falcon are both
reasonable, creating ambiguity. Accordingly, the Court must assess the
reasonableness of the interpretations advanced by Cobalt Falcon and by AXS.
¶6 The Court finds that the interpretation relied on by Cobalt Falcon
is reasonable. The parties’ use of the phrase “in perpetuity” must be given
effect, which can only be achieved under Cobalt Falcon’s interpretation. See
Reybold Constr. Co. v. Lennar Corp., No. N22C-06-206, 2025 WL 2346985,
at *10 (Del. Super. Ct. Aug. 13, 2025). In Reybold Construction, the Superior
Court of Delaware rejected an interpretation of “for actual costs” that would
include a management fee on the basis that, if the parties intended to include
such a fee, “they would have expressly stated it.” Id. Delaware law does not
support the adding of unwritten conditions that the parties could have
included. See Allied Capital Corp. v. GC-Sun Holdings, L.P., 910 A.2d 1020,
1035 (Del. Ch. 2006). Further, as Cobalt Falcon noted, the contract required
payments “for all calendar months following the Closing,” which similarly
Page 5 indicates no end date. Def.’s Ex. 1-B at 1(b) (“Section 2.4. Purchase
Consideration”). Reading “in perpetuity” according to its plain meaning gives
effect to all of the Agreement’s words and creates certainty as to the duration
of the payments.
¶7 In opposition to this reading, AXS makes two arguments: First,
AXS contends that Cobalt Falcon’s interpretation renders other contractual
provisions meaningless. See Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153,
1159 (Del. 2010) (noting a contract interpretation that renders a provision
meaningless or mere surplusage yields an absurd result). Second, AXS
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FILED IN BUSINESS COURT OF TEXAS BEVERLY CRUMLEY, CLERK ENTERED 5/19/2026
2026 Tex. Bus. 30
The Business Court of Texas, First Division
COBALT FALCON, LLC, § Plaintiff, § § v. § Cause No. 25-BC01A-0023 § AXS INVESTMENTS, LLC, § Defendant. § ═══════════════════════════════════════ Memorandum Opinion and Order Construing the Transaction Agreement Under TRCP 166(g) ═══════════════════════════════════════ ¶1 Before the Court is a question of law that is partially dispositive of
the above-captioned cause: whether Schedule 2.4 of the First Amendment to
Transaction Agreement dated effective May 2, 2022, which provides for
“Consideration Terms” including monthly payments to be “paid in perpetuity
(unless otherwise agreed)” by Defendant/Buyer AXS Investments, LLC to
Plaintiff/Seller Cobalt Falcon, LLC requires the continuation of such
payments after the closure of the High Yield ETF Fund involved in the
Page 1 transaction. 1 For the reasons that follow, the Court answers: yes, the
unambiguous plain language does so require.
¶2 Delaware law governs this dispute. Def.’s Ex. 1-A at § 11.3; see
also Def.’s R166(g) Brief at p. 3; Pl.’s Resp. at p. 8. Under Delaware law,
contract interpretation is a legal question. Advent Int’l Corp. v. Servicios
Funerarios GG S.A. de C.V., No. 2023-0647, 2024 WL 3580934, at * 7 (Del.
Ch. June 7, 2024). A contract is to be read as a whole, enforcing clear and
unambiguous language by its plain meaning and giving effect to all terms. See
Manti Holdings, LLC v. Authentix Acquisition Co., Inc., 261 A.3d 1199, 1208
(Del. 2021); Page v. Village Prac. Mgmt. Grp., LLC, No. 2022-0581, 2023 WL
3563049, at *1 (Del. Ch. May 19, 2023).
¶3 Parties’ disagreement over interpretation does not create
ambiguity in a contract. Manti Holdings, 261 A.3d at 1208. Only when
susceptible to two or more reasonable interpretations is a contract ambiguous.
See Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192,
1 The original Transaction Agreement, effective April 6, 2022, likewise contained “Consideration Terms” to “be paid in perpetuity” in its erroneously-labeled Schedule 2.3. Cf. Def.’s Ex. 1-A at § 2.3 (“Excluded Liabilities”) and § 2.4 (“Purchase Consideration,” referencing “monthly amounts determined by the formula set forth in Schedule 2.4 hereto”) with Schedule 2.3 (“Consideration Terms,” setting forth monthly payment calculations and citing Section 2.3).
Page 2 1196 (Del. 1992). Under Delaware law, “[a]n interpretation is unreasonable
if it ‘produces an absurd result’ or a result ‘that no reasonable person would
have accepted when entering the contract.’” Terrell v. Kiromic Biopharma,
Inc., 338 A.3d 1272, 1277 (Del. 2025) (quoting Manti Holdings, 261 A.3d at
1208); see Capella Holdings, LLC v. Anderson, No. 9809, 2017 WL 5900077,
at *5 (Del. Ch. Nov. 29, 2017).
¶4 At issue here is the contractual provision setting forth the
consideration promised by AXS to Cobalt Falcon in exchange for assets
relating to the management, administration, and operation of the High Yield
ETF Fund. The Agreement and its First Amendment state that AXS shall
compensate Cobalt Falcon “for all calendar months following the Closing, in
the monthly amounts determined by the formula set forth in Schedule 2.4.”
Def.’s Ex. 1-B at 1(b) (“Section 2.4. Purchase Consideration”). In turn,
Schedule 2.4 calculates the monthly consideration in two parts: “90 bps
multiplied by the Conversion AUM; plus 15 bps multiplied by any and all AUM
in excess of the Conversion AUM as of the end of the calendar month prior to
Page 3 such payment.” 2 Id. at 1(f) (“Schedule 2.4 CONSIDERATION TERMS”)
(emphasis in original). The Agreement and its First Amendment require the
monthly payments to be made “in perpetuity (unless otherwise agreed).” Id.
Cobalt Falcon contends “in perpetuity” means that the payments are to
continue regardless of the Fund’s existence. Pl.’s Resp. at p. 10. AXS argues
this provision only requires the monthly payments to continue while the Fund
is operating. Def.’s R166(g) Brief at p. 5.
¶5 As already stated, the contract’s plain language calls for monthly
payments to be made “in perpetuity (unless otherwise agreed).” The words
“in perpetuity” are not inherently ambiguous or susceptible to multiple
meanings; in fact, the phrase can be—and has been—clearly defined. “In
perpetuity” means “forever; without end.” In perpetuity, BLACK’S LAW
DICTIONARY (12th ed. 2024). 3 Under Delaware law, this plain meaning
controls unless there is an ambiguity. AXS contends that an interpretation
2 AUM refers to “total assets under management of the Fund.” See Def.’s Ex. 1-A at art. I (“Defined Terms”). The parties have represented that, following Fund closure, the “Conversion AUM” is a known and fixed dollar amount, causing the consideration formula to permanently equal the sum of $74,062.45.
3 The only express limitation imposed on “in perpetuity” is “unless otherwise agreed.” It is undisputed that the First Amendment is the last agreement between the parties concerning the consideration.
Page 4 adopting the plain meaning—the interpretation urged by Cobalt Falcon—
would be unreasonable and that AXS can supply a (sole) reasonable
alternative. But since deviation from the plain language requires two or more
reasonable interpretations, the Court cannot adopt the interpretation urged by
AXS unless it and the interpretation urged by Cobalt Falcon are both
reasonable, creating ambiguity. Accordingly, the Court must assess the
reasonableness of the interpretations advanced by Cobalt Falcon and by AXS.
¶6 The Court finds that the interpretation relied on by Cobalt Falcon
is reasonable. The parties’ use of the phrase “in perpetuity” must be given
effect, which can only be achieved under Cobalt Falcon’s interpretation. See
Reybold Constr. Co. v. Lennar Corp., No. N22C-06-206, 2025 WL 2346985,
at *10 (Del. Super. Ct. Aug. 13, 2025). In Reybold Construction, the Superior
Court of Delaware rejected an interpretation of “for actual costs” that would
include a management fee on the basis that, if the parties intended to include
such a fee, “they would have expressly stated it.” Id. Delaware law does not
support the adding of unwritten conditions that the parties could have
included. See Allied Capital Corp. v. GC-Sun Holdings, L.P., 910 A.2d 1020,
1035 (Del. Ch. 2006). Further, as Cobalt Falcon noted, the contract required
payments “for all calendar months following the Closing,” which similarly
Page 5 indicates no end date. Def.’s Ex. 1-B at 1(b) (“Section 2.4. Purchase
Consideration”). Reading “in perpetuity” according to its plain meaning gives
effect to all of the Agreement’s words and creates certainty as to the duration
of the payments.
¶7 In opposition to this reading, AXS makes two arguments: First,
AXS contends that Cobalt Falcon’s interpretation renders other contractual
provisions meaningless. See Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153,
1159 (Del. 2010) (noting a contract interpretation that renders a provision
meaningless or mere surplusage yields an absurd result). Second, AXS
contends that a forever payment obligation would be absurd on the facts
presented. Thus, AXS argues Cobalt Falcon’s interpretation is unreasonable
under Delaware law, and its proposed interpretation is the sole reasonable one.
¶8 But AXS has not convincingly demonstrated that interpreting “in
perpetuity” by its plain meaning renders any provision of the Agreement
meaningless. AXS makes this argument primarily in relation to the maintain-
and-operate clause in Section 6.9(b) of the contract. As AXS sees it, “it would
be pointless for AXS to use best efforts to maintain the Fund” if the obligation
to make payments survived the Fund’s closure. Def.’s R166(g) Brief at p. 16.
There is, however, no connection in the contract between the two-part
Page 6 consideration to be paid by AXS to Cobalt Falcon for management of the Fund
in Schedule 2.4, on the one hand, and AXS’s obligations to maintain and
market the fund in Section 6.9, on the other. Cf. Def.’s Ex. 1-B at 1(c) (Section
6.9) with Sched. 2.4.
¶9 And as Cobalt Falcon points out in response, the obligation of AXS
to use “best efforts” to maintain and operate the Fund and “commercially
reasonable efforts” to market the Fund and attempt to grow the AUM both
benefit the second component of the compensation to Cobalt Falcon: the
multiple “bps” of excess AUM. See Pl.’s Resp. at pp. 13-14. The Court agrees
that this is a reasonable interpretation, as the Fund cannot have excess AUM
to form the basis of the second component of the compensation if the Fund is
not maintained. Because the obligation in Section 6.9(b) is not expressly tied
to the first part of the consideration formula in Schedule 2.4, and because it
can be reasonably read to have meaning and purpose in connection with the
second part of the consideration formula, the Court rejects AXS’s contention
that Cobalt Falcon’s interpretation of “in perpetuity” renders Section 6.9(b)
meaningless and that AXS’s interpretation alone gives that provision meaning.
¶10 Relatedly, the Court rejects AXS’s argument that the
consideration terms have no meaning unless the Fund exists. It is undisputed
Page 7 that the “Conversion AUM,” a defined term in the Agreement, is capable of
being—and has been—calculated at a fixed rate by the parties. See Pl.’s Resp.
at p. 19. Regardless of how the sum was determined, and although the
Conversion AUM will now never change due to the Fund’s closure, the parties
can (and have) calculate(d) the Conversion AUM and the resulting
consideration due monthly under Schedule 2.4 of the Agreement. Accordingly,
the Fund’s closure does not render it impossible to calculate the consideration
owed. Thus, the provision has meaning whether the Fund exists or not.
¶11 AXS’s second argument is that enforcing a monthly payment
obligation in perpetuity leads to an absurd result because it reads the contract
to say AXS “agreed to pay more than a trillion dollars for these same rights
that were, at the time of the parties’ transaction, worth approximately 40%
less than $3.1M”—the price paid by Cobalt Falcon in a previous transaction. 4
Def.’s Brief at p. 3 (emphasis in original). Specifically, AXS argues, “No
4 AXS’s view that Cobalt Falcon’s interpretation results in an absurd windfall to Cobalt Falcon treats the value of the consideration at the time of the contract as the sum total of an infinite number of future payments. Cobalt Falcon contends it bargained for the then- present value of those future payments, now calculated to be $7,711,870.47. See Pl.’s Ex. A-15 (McKenna expert report) at F(8)(c). But the Court cannot consider extrinsic evidence—such as the amount paid by Cobalt Falcon in a previous transaction or expert opinions on the present-day value of the bargained-for consideration. See Holzbaur v. Trolley Square Hosp., LLC, 340 A.3d 603, 610–11 (Del. Ch. 2025), aff'd sub nom. Holzbaur v. Trolley Square Hosp. Grp., LLC, No. 289, 2025, 2026 WL 261522 (Del. Feb. 2, 2026).
Page 8 reasonable market participant would agree to make monthly payments forever
in exchange for fund management rights that would cease to exist and become
worthless upon the fund’s closing, which (no matter how successful) would
come at some point in time. . ..” Def.’s Brief at p. 22. But importantly, AXS
neglects to factor in that closure of the Fund was entirely within its own hands.
¶12 The idea that a party, holding an asset that may generate revenue
in perpetuity, would trade that asset for a perpetual obligation, is not
inherently absurd. See ITG Brands, LLC v. Reynolds Am., Inc., No. 2017-0129,
2025 WL 670818, at *15 (Del. Ch. Mar. 3, 2025), aff'd by 351 A.3d 519 (Del.
2025) (enforcing a contractual obligation for payments in perpetuity over
objections on grounds different from those presented here). Conversely,
AXS’s position—taken to its logical conclusion—requires the Court to find
that Cobalt Falcon agreed to relinquish control over the Fund (and the
resulting revenue stream) in exchange for payments that would be made only
as long as AXS elected to keep the Fund open and continue payments. Reading
the agreement to give AXS unilateral control, post-contract, over the
consideration to be paid presents an absurd outcome, rendering AXS’s
interpretation unreasonable.
Page 9 ¶13 Accordingly, the Court is left with a reasonable interpretation
urged by Cobalt Falcon which is wholly consistent with the plain language in
the Agreement, and an unreasonable interpretation urged by AXS which
would require the Court to write limitations into the Agreement that do not
exist and would contradict the words actually used. Further, even if Cobalt
Falcon’s interpretation could be viewed as absurd or unreasonable, ambiguity
cannot result from two competing unreasonable interpretations. See Rhone-
Poulenc Basic Chems., 616 A.2d at 1196 (discussing ambiguity as the product
of two or more reasonable interpretations). Either way, the plain language
must control.
¶14 In sum, while Cobalt Falcon’s interpretation may result in a
financial boon to Cobalt Falcon, that result is not veiled or obscured in the
contract—it is expressly stated, in plain terms. The parties’ ability to
constrain the reach of a given term is evident in the Agreement, including in
Schedule 2.4. The Court cannot rewrite the consideration obligations simply
Page 10 because AXS may have been mistaken as to their duration 5 or otherwise
regrets the bargain it struck. In re Tibco Software Inc. S’holders Litig., No.
10319, 2014 WL 6674444, at *13 (Del. Ch. Nov. 25, 2014) (“Reformation is
not an equitable license for the Court to write a new contract at the invitation
of a party who is unsatisfied with his or her side of the bargain.”).
¶15 For these reasons, the Court holds that there are not two or more
reasonable interpretations of “in perpetuity” in the Agreement. Because the
Agreement is unambiguous, its plain language applies. It thus follows that the
contractual obligation to make payments “in perpetuity (unless otherwise
agreed)” means exactly what it says: the payments are to continue in
perpetuity (forever) unless otherwise agreed to by the contracting parties.
5 Unilateral mistake can be remedied under Delaware law only if enforcement of the contract would be unconscionable, the mistake concerns consideration, the mistaken party exercised ordinary care, and the status quo can be maintained for the non-mistaken party. Matter of ENSTAR Corp., 604 A.2d 404, 411, 413 (Del. 1992). But even in such cases, rescission is the sole available remedy unless the mistaken party shows that the non- mistaken party was aware of the mistake and remained silent. Scion Breckenridge Managing Member, LLC v. ASB Allegiance Real Est. Fund, 68 A.3d 665 (Del. 2013) (overruling ENSTAR, 604 A.2d 404, to the extent it fails to recognize availability of reformation where party’s unilateral mistake was known by opposing party). No arguments concerning mistake were presented in this case.
Page 11 SO ORDERED.
_______________________ ANDREA K. BOURESSA Judge of the Texas Business Court, First Division
SIGNED ON: May 19, 2026.
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