CRE Niagara Holdings, LLC v. Resorts Group, Inc.

• Court: Superior Court of Delaware
• Decided: May 31, 2022
• Docket: N20C-05-157 PRW CCLD
• Status: Published

Opinion

SUPERIOR COURT OF THE STATE OF DELAWARE PAUL R. WALLACE LEONARD L. WILLIAMS JUSTICE CENTER JUDGE 500 N. KING STREET, SUITE 10400 WILMINGTON, DELAWARE 19801 (302) 255-0660

Date Submitted: March 11, 2022 Date Decided: May 31, 2022

Richard P. Rollo, Esquire Garvan McDaniel, Esquire Travis S. Hunter, Esquire HOGAN MCDANIEL Dorronda R. Bordley, Esquire 1311 Delaware Avenue RICHARDS, LAYTON & FINGER, P.A. Wilmington, Delaware 19806 920 North King Street Wilmington, Delaware 19801 David S. Rosner, Esquire Ronald R. Rossi, Esquire J. David Washburn, Esquire Paul J. Burgo, Esquire Charles L. Perry, Esquire KASOWITZ BENSON TORRES LLP KATTEN MUCHIN ROSENMAN LLP 1633 Broadway 2121 North Pearl Street, Suite 1100 New York, New York 10019 Dallas, Texas 75201 Rebecca L. Butcher, Esquire David A. Crichlow, Esquire LANDIS RATH & COBB LLP Katten Muchin Rosenman LLP 919 Market Street, Suite 1800 575 Madison Avenue Wilmington, Delaware 19801 New York, New York 10022 William H. Gussman, Jr., Esquire Andrew D. Gladstein, Esquire George H. Rowe, Esquire SCHULTE ROTH & ZABEL LLP 919 Third Avenue New York, New York 10022

RE: CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc., C.A. No. N20C-05-157 PRW CCLD

Dear Counsel:

The Court provides this Letter Opinion and Order in lieu of a more formal writing CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 2 of 47

to resolve: (1) CRE’s Motion to Dismiss (D.I. 96); (2) Cerberus’s Motion to Dismiss

(D.I. 95) (together with CRE’s Motion, the “12(b)(6) Motions”); and (3) RGI’s

Renewed Motion for a Stay (D.I. 126) (the “Stay Motion”). For the reasons explained

below, the 12(b)(6) Motions are GRANTED, in part, AND DENIED, in part.

The Stay Motion is DENIED.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. PROCEDURAL BACKGROUND .

The Court detailed the background of this case in its Memorandum Opinion

dated April 7, 2021.1 Briefly stated, Plaintiff CRE Niagara Holdings, LLC, filed this

action contesting its purchase of a resort and timeshare business (the “Resort”) in 2017.

CRE Niagara and its co-plaintiffs brought claims of fraudulent inducement, breach of

contract, and declaratory judgment against Defendant Resorts Group, Inc. (“RGI”),

alleging RGI made false representations in an effort to induce execution of the

agreements that brought about the sale.

The Court denied RGI’s motion to dismiss the First Amended Complaint in April

2021 and, in May 2021, denied RGI’s motion for re-argument of that decision and its

1 CRE Niagara Holdings, LLC v. Resorts Grp., Inc., 2021 WL 1292792 (Del. Super. Ct. Apr. 7, 2021). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 3 of 47

separate motion for stay or enlargement of time.2 RGI then filed its Answer to the First

Amended Complaint, Counterclaims, and a Third-Party Complaint.3 RGI filed its

Amended Counterclaims and Third-Party Complaint on September 1, 2021.4

Plaintiffs/Counterclaim-Defendants CRE Niagara, LLC, Club Exploria, LLC,

and CRE Niagara Participation Holdings, LLC, as well as Third-Party Defendants CRE

Bushkill Group, LLC and CRE Echo Group, LLC (collectively, “CRE”) moved to

dismiss the Amended Counterclaims and Third-Party Complaint on September 30,

2021.5 Separately, Third-Party Defendants Cerberus Capital Management, L.P.,

Cerberus Partners II, L.P., Cerberus Institutional Real Estate Partners IV, L.P., CI II

MF Echo, LLC, Cerberus Institutional Partners VI, L.P., CRE Niagara Management

Holdings, LLC, and CRE Niagara Manager, LLC (collectively, “Cerberus”) moved to

dismiss the Third-Party Complaint.6

The Motions have been complicated by RGI’s decision to initiate and maintain

parallel proceedings in other jurisdictions.7 RGI first filed suit in the United States

2 CRE Niagara Holdings, LLC v. Resorts Grp., Inc., 2021 WL 2110769 (Del. Super. Ct. May 25, 2021). 3 D.I. 81. 4 See RGI’s Am. Countercl. and Third-Party Compl. (D.I. 92). 5 See CRE’s Mot. to Dismiss (D.I. 96). 6 See Cerberus’s Mot. to Dismiss (D.I. 95). 7 See RGI’s Mot. to Dismiss Am. Compl. at 9–11 (D.I. 46) (detailing RGI’s initiation of parallel litigation). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 4 of 47

District Court for the Southern District of New York on May 18, 2020, shortly after

CRE Niagara filed its complaint in Delaware. RGI also filed an action in the United

States District Court for the District of Delaware on May 19, 2020. These federal

actions were dismissed on jurisdictional grounds in August 2020. On August 12, 2020,

RGI refiled in the Supreme Court of the State of the New York (the “New York court”

and “New York Action”).

In its Amended Counterclaims and Third-Party Complaint, RGI explained that it

“separately filed the claims herein” in New York.8 RGI asserted that its claims “should

proceed in the New York Action in accordance with mandatory forum-selection [sic]

and that this Court is an improper and inconvenient forum.”9 RGI nevertheless filed its

claims in this Court “in the event that the New York court rules on the Cerberus-CRE

Defendants’ motions to dismiss . . . that RGI’s claims should be brought before this

Court and to the extent RGI is required to file them with its answer under Del. Super.

Ct. R. 13.”10

On December 27, 2021, the New York court issued a decision resolving motions

to dismiss that CRE and Cerberus filed in the New York Action.11 The parties then

8 RGI’s Am. Countercl. and Third-Party Compl. at 2 n.1. 9 Id. 10 Id. 11 See Letter Transmitting New York Supreme Court Decision and Order, Dec. 30, 2021, Ex. A (D.I. 109). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 5 of 47

filed supplemental briefing in this Court concerning the effect of the New York decision

on the pending 12(b)(6) Motions.12 RGI’s supplemental brief alluded to the possibility

of RGI filing for a stay,13 and RGI filed its Stay Motion on February 4, 2022.14 RGI

explained that the Stay Motion raised the same arguments as its supplemental brief and

that it filed the Stay Motion “to the extent that the Court believes that a motion, and an

opportunity to respond, is necessary.”15

The Court heard argument on the three pending motions on different dates and

took them all under advisement after the final hearing.16

B. RGI’S AMENDED COUNTERCLAIMS AND THIRD-PARTY COMPLAINT.

RGI’s Amended Counterclaims and Third-Party Complaint encompass 176

pages, 445 paragraphs, and eleven causes of action. RGI’s core contention is that

Cerberus and CRE did not adhere to RGI’s past practices in operating the Resort after

they acquired it, as required by various transaction documents, nor did they ever intend

to.17 Instead, Cerberus and CRE allegedly acquired the Resort with the goal of looting

its resources to enrich Cerberus and another timeshare company that CRE owned, Club

12 See RGI’s Supp. Br. (D.I. 120); Cerberus’s Supp. Br. (D.I. 121); CRE’s Supp. Br. (D.I. 122). 13 See RGI’s Supp. Br. at 2 n.2. 14 RGI’s Renewed Mot. for a Stay (D.I. 126) 15 See id. at 1 n.1. 16 D.I. 131; D.I. 135. 17 RGI’s Answering Br. at 1–2 (D.I. 105). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 6 of 47

Exploria.18 As a result of these breaches, RGI’s interest in the Payment Stream from

the Resort’s existing contracts with its timeshare members (the “Portfolio”) has

allegedly lost most of its value.19

RGI’s story begins with Cerberus fraudulently inducing RGI into the transaction.

Cerberus allegedly promised RGI that it would use the Resort as the headquarters of

subsequent timeshare acquisitions.20 RGI claims that Cerberus’s true intention was to

gut the Resort’s infrastructure and turn over operations to Club Exploria. RGI claims

Cerberus made these misrepresentations because RGI would have never otherwise

agreed to the transaction.

The transaction involved three initial agreements between RGI and two

subsidiaries of Cerberus, CRE Bushkill and CRE Niagara.21 First, RGI sold its equity

in CRE Bushkill to CRE Niagara under the UAPA. The UAPA provided that CRE

Niagara would continue RGI’s past practices to incentivize Portfolio members to

continue making payments. Second, the SA governed how the Resort would be run and

how the Portfolio would be serviced. Third, the PA assigned a minority portion of

RGI’s interest in the pre-acquisition Portfolio to a Cerberus-designated “Holder,”

18 Id. 19 Id. at 2. 20 Id. 21 Id. at 8–9. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 7 of 47

initially CRE Bushkill. This included RGI’s existing contracts for the timeshares in the

Villas at Tree Tops (the “TreeTops Contracts”) and Fairway (the “Fairway Contracts,”

together the “Timeshare Agreements”). Among other things, the PA required the

Holder to follow past practices, continue to provide members with use and enjoyment

of the Resort, and placed a cap on fee increases.

RGI claims Cerberus put its plan into motion immediately after closing.

Cerberus allegedly caused CRE to breach the UAPA, SA, and PA by:

1. Cancelling approximately $20 million in members’ contracts and failing to take contractually required steps to stem cancellations (like offering “downgrades”);

2. Abandoning RGI’s past practices and enumerated Servicing Procedures;

3. “[P]rioritizing their own receivables,” including by engaging in fraudulent sales practices and denying member access to amenities and reservations;

4. Failing to provide members with the use, enjoyment, and service to which they were entitled and had previously been provided; and

5. Firing substantially all the Resort’s personnel, thereby worsening service and driving away members.22

RGI claims these breaches led to “significant defaults and a corresponding erosion in

Portfolio value.”23 RGI says it regularly demanded that the CRE-Cerberus entities cure

the breaches, but to no avail.

22 Id. at 12–13 (D.I. 105). 23 Id. at 13. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 8 of 47

In late 2018, Cerberus asked RGI to take a $3 million advance against a

Hypothecation Loan, secured by the Portfolio, which RGI was required to split with

CRE Participation.24 Cerberus allegedly wanted these funds so that CRE Participation

could “gift” them to Exploria. RGI initially refused. But then Cerberus made additional

promises, including to restore RGI’s “Profit Recovery” program. This would obligate

the Counterclaim-Defendants to seek to settle or reinstate defaulting members’

contracts and thereby reduce the shortfall to RGI. Later, RGI allegedly would learn that

Counterclaim-Defendants “materially omitted that they had no intention of doing so

inasmuch as they had already intentionally re-registered the cancelled inventory in

Exploria’s name, which prevented CRE from reinstating the members.”25

CRE and RGI entered into the First Supplemental Agreement (“FSA”) in

December 2018.26 The FSA provided that CRE would keep personnel in Bushkill and

not terminate anyone without RGI’s consent. But by February 2019, Counterclaim-

Defendants allegedly announced their intention to outsource certain additional

functions. RGI consented on the condition that Counterclaim-Defendants again

promise to keep “all Collections and Customer Service in Bushkill.”27

24 Id. at 13–14. 25 Id. at 14. 26 Id. 27 Id. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 9 of 47

Cerberus requested that RGI take out another loan advance in April 2019.28

When RGI refused, Cerberus allegedly threatened to recalculate the proceeds it owed

to RGI and impose a special assessment on Portfolio members. RGI relented, with

Cerberus again promising to cure its breaches and reintroduce the Profit Recovery

program. The parties entered the Second Supplemental Agreement (“SSA”) and took

out the loan advance.29

RGI was “forced” to issue default notices in November 2019, December 2019,

and January 2020.30 As retaliation, CRE allegedly shut down over 100 units, terminated

the entire financial and customer services departments in Bushkill, and cut off all

contractually required communications with RGI.31 Litigation between the parties

began shortly thereafter, in May 2020.

Cerberus and CRE imposed the Special Assessment in September 2020, which

Club Exploria claimed necessary to cover maintenance shortfalls.32 RGI objected,

contending RGI’s past practices and the Timeshare Agreements required Exploria to

cover the shortfalls itself. The Special Assessment allegedly resulted in member fees

28 Id. at 15. 29 Id. 30 Id. 31 Id. 32 Id. at 15–16. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 10 of 47

totaling approximately 157% of the prior year, exceeding the cap of 110% imposed by

the PA and Timeshare Agreements.

Counts I–VI of the Amended Counterclaims and Third-Party Complaint are

breach-of-contract and implied covenant claims brought against various CRE entities.33

Count I is a claim for “Breach of the UAPA/Indemnification” against CRE Niagara.

RGI alleges CRE Niagara breached the UAPA through a wide range of activities

discussed in greater detail below. Counts II–V are breach-of-contract claims against

various CRE entities relating to their alleged breaches of the SA, PA, FSA, and PSQ

Agreement. Count VI claims CRE also breached the implied covenant of good faith

and fair dealing with respect to the contracts listed previously. Counts VII–XI are tort

claims brought against Cerberus, alleging tortious interference with contract, fraudulent

inducement, and civil conspiracy.34

C. THE NEW YORK COURT’S TREATMENT OF RGI’S CLAIMS.

In its Amended Counterclaims and Third-Party Complaint, RGI represented that

it had “separately filed the claims herein” in New York.35 But RGI’s claims generally

did not fare well there. The New York court dismissed RGI’s claim for breach of the

UAPA for lack of venue “based on the broad Delaware forum clause contained in that

33 RGI’s Am. Countercl. and Third-Party Compl. at ¶¶ 325–97. 34 Id. at ¶¶ 397–445. 35 RGI’s Amend. Countercl. and Third-Party Compl. at 2 n.1. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 11 of 47

agreement.”36 It dismissed RGI’s fraud claim “without prejudice to moving for leave

to replead if specific facts can be alleged showing that the breaches were intended at

the time of contracting and a clear indication of which defendant made each alleged

misrepresentation.”37 And it dismissed the tortious interference claims “based on the

economic-interest doctrine and because the complaint does not allege how a particular

non-contracting CRE Defendant caused the contracting party to breach or why it was

the but-for cause of the breach.”38 The only claims to survive dismissal were the breach-

of-contract claims corresponding to the SA, PA, FSA, and PSQ Agreement.39

II. LEGAL STANDARD

A party may move to dismiss under this Court’s Civil Rule 12(b)(6) for failure

to state a claim upon which relief can be granted.40 In resolving a Rule 12(b)(6) motion,

the Court (1) accepts as true all well-pleaded factual allegations in the complaint;

(2) credits vague allegations if they give the opposing party notice of the claim;

(3) draws all reasonable factual inferences in favor of the non-movant; and (4) denies

dismissal if recovery on the claim is reasonably conceivable.41 The Court need not

36 Letter Transmitting New York Supreme Court Decision and Order, Dec. 30, 2021, Ex. A at 2. 37 Id. at 3. 38 Id. at 4. 39 Id. at 2. 40 Del. Super. Ct. Civ. R. 12(b)(6). 41 Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531, 535 (Del. 2011). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 12 of 47

“accept conclusory allegations unsupported by specific facts or . . . draw unreasonable

inferences in favor of the non-moving party.”42 Nor must the Court adopt “every

strained interpretation of the allegations” the claimant proposes.43 Still, even with those

cautions in mind, Delaware’s pleading standard is “minimal.”44 Dismissal is

inappropriate unless “under no reasonable interpretation of the facts alleged could the

complaint state a claim for which relief might be granted.”45 Indeed, “[i]f any

reasonable conception can be formulated to allow [a claimant’s] recovery, the motion

must be denied.”46

Each of these well-established rules that the Court applies to a suit-initiating

plaintiff’s claims are of equal utility when assessing an answering defendant’s (i.e.,

counterclaim-plaintiff’s) counterclaims.47

42 Price v. E.I. DuPont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011), overruled on other grounds by Ramsey v. Ga. S. Univ. Advanced Dev. Ctr., 189 A.3d 1255, 1277 (Del. 2018). 43 Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001). 44 Cent. Mortg., 27 A.3d at 536 (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 895 (Del. 2002)). 45 Unbound Partners Ltd. P’ship v. Invoy Holdings Inc., 251 A.3d 1016, 1023 (Del. Super. Ct. 2021) (internal quotation marks omitted); see Cent. Mortg., 27 A.3d at 537 n.13 (“Our governing ‘conceivability’ standard is more akin to ‘possibility . . . .’”). 46 Vinton v. Grayson, 189 A.3d 695, 700 (Del. Super. Ct. 2018) (citing Cent. Mortg. Co., 27 A.3d at 535). 47 inVentiv Health Clinical, LLC v. Odonate Therapeutics, Inc., 2021 WL 252823, at *4 (Del. Super. Ct. Jan. 26, 2021). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 13 of 47

III. PARTIES’ CONTENTIONS

The parties’ contentions have become numerous and must be distilled from:

(1) CRE’s and Cerberus’s separate motions to dismiss, RGI’s omnibus answering brief

thereto, and both movants’ reply briefs in further support of their motions; (2) all three

parties’ supplemental briefs; (3) RGI’s Renewed Motion for a Stay and CRE’s

opposition; and (4) two full rounds of oral argument. At this stage, a full summary of

the parties’ contentions—for the parties as audience—wouldn’t be particularly helpful.

So the Court will instead summarize the parties’ general positions and detail specific

arguments as they become relevant to the analysis.

Succinctly stated, Cerberus and CRE argue that RGI’s claims fail on their merits

because RGI does not adequately plead facts supporting each element of those claims.

Through its supplemental briefing, CRE argues the tortious interference claims should

be dismissed also based on “res judicata (privity) and/or collateral estoppel”48 in light

of the New York decision. Cerberus, for its part, urges this Court to follow the New

York court’s reasoning with respect to the claims against it. Moreover, Cerberus says

RGI should be held to its representation that it filed its claims in this Court only to

preserve its rights to the extent the New York court dismissed the claims on forum non

conveniens grounds.

48 CRE’s Supp. Br. at 5. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 14 of 47

Conversely, RGI argues it has adequately pleaded facts supporting each of its

claims in this Court. In a refrain that has become familiar, RGI suggests the Court’s

response to the New York ruling that has now been rendered rather than predicted

should be “to stay the non-UAPA claims in the interest of comity to avoid inconsistent

judgments and conserve resources.”49

IV. DISCUSSION

As explained below, RGI adequately states a claim for breach of the UAPA

(Count I) and breach of the implied covenant of good faith and fair dealing with respect

only to the UAPA (Count VI). Accordingly, Count I survives and Count VI survives

to the extent it concerns the UAPA. But the claims for breach of the SA, PA, FSA, and

PSQ Agreement (Counts II–V) are barred under RGI’s prior representations to the

Court, as is the implied covenant claim to the extent it concerns those non-UAPA

contracts. Counts VII and VIII fail to state claims for tortious interference with

contract. Counts IX and X fail to state claims for fraudulent inducement. And Count

XI fails to state a claim for a civil conspiracy.

A. THE UAPA CLAIM SURVIVES (COUNT I)

Count I alleges CRE breached the UAPA by: (i) failing to provide the Tree Tops

Purchasers and Fairway Purchasers with the use and enjoyment to which they are

49 RGI’s Supp. Br. at 1. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 15 of 47

entitled under those agreements in violation of UAPA Section 6.11(a); (ii) failing to

maintain and operate the Villas in a manner that was, at minimum, materially equivalent

to how RGI operated the Villas before closing in violation of UAPA Section 6.11(b);

(iii) failing to provide the Tree Tops and Fairway Purchasers with customer service at

an overall level of quality that was, at a minimum, materially equivalent to that provided

by RGI prior to closing in violation of UAPA Section 6.11(c); (iv) failing to “continue

to maintain and operate [the Resort] in a manner that is at a minimum materially

equivalent to how [it was] being maintained and operated by [RGI] as of the Closing

Date;” and (v) failing to provide the demanded information necessary to permit RGI to

review and consent to the Proposed Special Assessment.50 RGI then provides a long

list of specific conduct that it claims constitutes the breaches.51

1. The “Materially Equivalent” Claim Survives.

CRE argues Count I should be dismissed insofar as it alleges breaches of UAPA

Sections 6.11(b) and 6.11(c) because RGI has not adequately alleged “how or why the

changes about which it complains were material changes in operations or services.”52

Not so. RGI raised detailed factual allegations concerning the “important[ce]”

and materiality of RGI’s past practices, including how they induced members to enter

50 See RGI’s Am. Countercl. and Third-Party Compl. at ¶ 327. 51 See id. at ¶¶ 328–35. 52 CRE’s Mot. to Dismiss at 13–14 (emphasis in original). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 16 of 47

into Timeshare Agreements and continue to pay.53 RGI alleged that CRE’s deviation

from these practices caused collections to fall short of the parties’ negotiated

projections.54 Moreover, RGI alleged that CRE’s changes caused customer satisfaction

to decline and complaints to increase, with at least one longtime customer directly citing

CRE’s practices as the reason she “stopped paying.”55

Materiality “is difficult to treat as a question of law on a motion to dismiss . . .

They are matters that in many instances require a rich factual context to responsibly

decide.”56 At this stage, it is reasonably conceivable that RGI could prove CRE failed

to operate the Villas in a manner materially equivalent to how RGI operated them and

that CRE failed to provide materially equivalent service to members. That is enough to

deny CRE’s motion with respect to the parts of Count I relating to Section 6.11(b) and

6.11(c) of the UAPA.

2. The “Use and Enjoyment” Claims Survive.

CRE argues Count I should be dismissed insofar as it alleges breach of UAPA

Section 6.11(a), which required CRE to provide the Tree Tops Purchasers and Fairway

53 See RGI’s Am. Countercl. and Third-Party Compl. at ¶¶ 52–59, 87–93, 158–64, 173–79, 196, 211–20. 54 See id. at ¶¶ 78–81, 147, 201–02. 55 See id. at ¶¶ 215–19. 56 Wells Fargo Co. v. First Interstate Bancorp, 1996 WL 32169, at *1 (Del. Ch. Jan. 18, 1996); see also Malca v. Rappi, Inc., 2021 WL 2044268, at *4 (Del. Ch. May 20, 2021) (“‘[M]ateriality’ in the breach of contract context raises predominantly a question of fact.”). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 17 of 47

Purchasers “under their respective Timeshare Agreements all of the rights, title, access,

services, reservations, use and enjoyment to which they are entitled thereunder.”57 CRE

notes that RGI attached “sample” Timeshare Agreements as exhibits to its

Counterclaims.58 But CRE contends that the Counterclaims “do not identify any

obligation of the CRE Defendants under any of the sample contracts that was allegedly

breached.”59 Additionally, CRE argues that the sample Timeshare Agreements

“contractually permitted [CRE] to do what RGI now claims was a breach.”60 CRE then

addresses each specific instance of conduct that RGI identified as a breach.

First, CRE addresses RGI’s claims that CRE “cut[] resort amenity availability

and hours,” “restrict[ed] permissible forms of payment,” and conducted “massive Unit

shut-downs.”61 CRE argues this conduct could not constitute a breach because the

Timeshare Agreements provide that use of amenities is subject to “restrictions and

costs” and “rules and regulations established by Resort management.”62 CRE’s position

is that its alleged breaches fall within these safe harbors. Although CRE may be right,

it would not be appropriate for the Court to decide this issue at the pleadings stage.

57 RGI’s Am. Countercl. and Third-Party Compl., Ex. C at § 6.11. 58 See id., Exs. H and I. 59 CRE’s Mot. to Dismiss at 7. 60 Id. at 8. 61 Id. 62 Id. at 8–9. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 18 of 47

The UAPA required CRE to provide “all of the rights, title, access, services,

reservations, use and enjoyment” guaranteed under the Timeshare Agreements. The

question of whether an owner has been deprived of the “use and enjoyment” of their

property appears to be a fact-intensive inquiry unfit for resolution at the pleadings

stage.63 For now, it is reasonably conceivable that RGI could show CRE’s changes in

operations were sufficiently intrusive to deprive Tree Tops Purchasers and Fairway

Purchasers of the use and enjoyment of their units, even though the Timeshare

Agreements allow for some restrictions, rules, and regulations. That is enough to

survive dismissal.

Second, CRE targets RGI’s allegation that CRE “curtail[ed] membership referral

and owner rental programs.”64 CRE argues that the Timeshare Agreements do not

require the operator to provide such services; instead, they state that the operator has

entered into an agreement with an “independent exchange company” to provide them.65

63 See, e.g., RESTATEMENT (SECOND) OF TORTS § 821D (1979) (“‘Interest in use and enjoyment’ . . . comprehends the pleasure, comfort and enjoyment that a person normally derives from the occupancy of land.”); see id. § 821F (“Rights and privileges as to the use and enjoyment of land are based on the general standards of normal persons in the community . . . .”). 64 CRE’s Mot. to Dismiss at 10. 65 See RGI’s Amended Counterclaims and Third-Party Complaint, Ex. H at ¶ 15 (“Tree Tops does not, however, operate a rental service for its members.”); see id. at ¶ 13 (“Tree Tops has entered into a contract with an independent exchange company” but “DOES NOT AND CAN NOT MAKE ANY REPRESENTATIONS CONCERNING CURRENT OR FUTURE SERVICES TO BE PROVIDED BY AN INDEPENDENT EXCHANGE COMPANY.”); see id., CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 19 of 47

In CRE’s view, the Timeshare Agreements disclaim any obligation by the operator to

maintain this service. But reasonable minds could disagree with CRE’s interpretation

of the Timeshare Agreements. Although CRE is correct that the Timeshare Documents

state the operator does not provide a rental service, they also state that each purchaser

“ha[s] the option to continue in the exchange program on a year to year basis.” 66 This

“option” would be a nullity unless the operator were required to ensure that the

exchange program actually exists on a year to year basis. Thus, the Timeshare

Agreements reasonably could be interpreted as requiring the operator to maintain its

agreement with the independent exchange company. CRE’s argument for dismissal

therefore falls short.

Third, CRE targets RGI’s claim that CRE “mad[e] it difficult to obtain

reservations.”67 CRE points out that although the Timeshare Agreements provide

purchasers “the right to reserve an Interval in its applicable season,” “there are no

guarantees that you can reserve a specific Interval or specific Unit.”68 Additionally, the

Timeshare Agreements provided that “Villa usage is subject to Seller’s reservation

Ex. I at ¶ 26 (“Seller has made no provisions for assisting in the resale of the Villa, nor will seller repurchase the Villa from Purchaser). 66 See id., Ex. H at ¶ 13. 67 CRE’s Mot. to Dismiss at 11. 68 See RGI’s Am. Countercl. and Third-Party Compl., Ex. H at ¶ 6. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 20 of 47

policies and procedures.”69 Thus, CRE’s argument is that any changes it made to the

Resort’s reservation policies were contractually permitted. But this argument is not

entirely persuasive.

Again, the UAPA required CRE to provide members their “rights, title, access,

services, reservations, and use and enjoyment” under the Timeshare Documents. It is

true that the Timeshare Agreements allow for certain restrictions to a purchaser’s

access, services, and reservations. But one can’t reasonably interpret the Timeshare

Agreements as allowing such restrictions to be made unreasonably or in bad faith, as

RGI claims.70 Moreover, even if purchasers were not entitled to a “specific” unit or

“specific Interval,” they still “have the right to reserve an Interval in its applicable

season.”71 Therefore, RGI can state a claim for breach of the UAPA by alleging, as it

did, that CRE interfered with the ability of purchasers to make reservations.

Finally, CRE addresses RGI’s claim that CRE “increase[ed] maintenance fees

and late payment charges.”72 CRE points out that the one of the two Timeshare

Agreements does not expressly address maintenance fees and states that “[l]ate charges

69 Id., Ex. H at ¶ 6. 70 See id. at ¶ 330 (“Any general disclaimers in the Timeshare Agreements that purportedly state that these obligations are subject to certain rules and restrictions do not negate CRE Niagara’s breaches which unreasonably withheld the entirety of these benefits from members above and beyond any safety rules of Resort protocols.”). 71 See RGI’s Am. Countercl. and Third-Party Compl., Ex. H at ¶ 6 (emphasis added). 72 CRE’s Mot. to Dismiss at 4. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 21 of 47

will be assessed at the highest rates allowable by law;” meanwhile, the other Timeshare

Agreement doesn’t speak to either fees or late charges.73 Therefore, CRE appears to

suggest that there is no contractual provision it could have breached.

CRE’s argument speaks past RGI’s actual allegations. One Timeshare

Agreement provided that the operator would not increase the yearly “maintenance fee”

by more than 10% from year to year;74 the other provided that the operator would not

increase annual “membership dues” by more than 10% from year to year. 75 Thus, the

two types of Timeshare Agreements appear to use “membership dues” and

“maintenance fee” interchangeably. And RGI’s claim is that CRE breached these

provisions by imposing a Special Assessment on members that raised their required

payments by more than the 10% limit.76 The Special Assessment could reasonably be

interpreted as raising the “maintenance fee” by more than 10% because CRE itself

justified the Special Assessment as necessary to cover costs associated with

maintenance issues.77 Alternatively, the Special Assessment could reasonably be

interpreted as raising “membership dues” by more than 10% because members were

73 Id. at 13. 74 RGI’s Am. Countercl. and Third-Party Compl., Ex. I at ¶ 3. 75 Id., Ex. H at 1. 76 See id. at ¶¶ 306–24 (explaining the circumstances and amount of the Special Assessment). 77 See id. at ¶ 306. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 22 of 47

required to pay the Special Assessment to continue using their Villas. Therefore, it is

reasonably conceivable that RGI could show CRE breached one or both types of

Timeshare Agreements by imposing the Special Assessment on members. In short, the

Court cannot find CRE is due dismissal on any of CRE’s arguments relating to its

obligations under Section 6.11(a) of the UAPA.

3. CRE’s Damages Argument Fails.

CRE briefly argues RGI has not adequately alleged damages resulting from the

alleged breaches of the UAPA.78 CRE acknowledges that RGI seeks damages of “not

less than $30 million” across its eleven counts. But CRE contends RGI has not

explained how its alleged damages could result “from the absence of information,

reports or certificates, even if they were not provided.”79 CRE apparently refers to

RGI’s claim that CRE breached the UAPA by “failing to provide the demanded

information necessary to permit RGI to review and consent to the Proposed Special

Assessment.”80 Additionally, CRE suggests that RGI’s alleged damages are not

“logically and reasonable related to the harm or injury for which compensation is being

awarded.”81 In other words, CRE’s position is that RGI has not alleged facts supporting

78 CRE’s Mot. to Dismiss at 15–16. 79 Id. at 15. 80 See RGI’s Am. Countercl. and Third-Party Compl. at ¶ 327. 81 CRE’s Mot. to Dismiss at 15–16 (quoting In re J.P. Morgan Chase & Co. S’holder Litig., 906 A.2d 776, 773 (Del. 2006)). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 23 of 47

“its conclusory claim of damages exceeding the same $30 million for each count.”

CRE’s argument fails for two reasons. First, CRE simply recites general rules

of law regarding damages and then asserts, in conclusory fashion, that RGI has not

satisfied them. But CRE provides authority establishing that a plaintiff must plead

damages in just the particular manner CRE envisions. Second, in Delaware, a plaintiff

“need not allege an exact monetary figure in order to sufficiently plead that it suffered

damages from [a] breach of contract.”82 Furthermore, Delaware courts have

consistently held that plaintiffs suffer a legally cognizable injury when they are not

provided with information to which they are contractually entitled.83 Therefore, RGI

has sufficiently pleaded that each alleged breach of the UAPA caused RGI to suffer a

legally cognizable injury. And while RGI has not provided a detailed accounting of

how the damages associated with these breaches adds up to $30 million, Delaware law

doesn’t require it to.

In short, RGI has adequately pleaded a claim against CRE for breach of the

UAPA. CRE’s 12(b)(6) Motion is therefore DENIED as to Count I of the Amended

Counterclaims and Third-Party Complaint.

82 Weyerhaeuser Co. v. Domtar Corp., 61 F. Supp. 3d 445, 453 (D. Del. 2014). 83 See Heritage Handoff Holdings, LLC v. Fontanella, 2019 WL 1056270, at *31-32 (D. Del. Mar. 6, 2019); Great-West Invs. v. Thomas H. Lee Partners, 2011 WL 284992, at *9 (Del. Ch. Jan. 14, 2011). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 24 of 47

B. THE NON-UAPA CONTRACT CLAIMS ARE DISMISSED WITH PREJUDICE (COUNTS II–V).

Counts II–V are breach-of-contract claims relating to the SA, PA, FSA, and PSQ

Agreement. The Court need not reach CRE’s arguments that these claims fail on their

merits, as advanced in its 12(b)(6) Motion. Instead, RGI’s own representations to this

Court are sufficient to bar each claim.

In its Amended Counterclaims and Third-Party Complaint, RGI “maintain[ed]

that its claims should proceed in the New York Action in accordance with mandatory

forum-selection [sic] and that this Court is an improper and inconvenient forum.”84

Nevertheless, RGI filed its claims in this Court “in the event that the New York court

rules on the Cerberus-CRE Defendants’ motions to dismiss, which are now sub judice,

that RGI’s claims should be brought before this Court and to the extent RGI is required

to file them with its answer under Del. Super. Ct. R. 13.”85 RGI thus informed the

Court, in no uncertain terms, that it believed its claims belong in New York and that it

filed them here only in case the New York court disagreed.

RGI’s precautions proved unnecessary. The New York court found that the SA,

PA, and FSA contained “broad mandatory New York forum selection clauses

applicable to all claims related to these agreements,” and although the PSQ Agreement

84 RGI’s Amend. Countercl. and Third-Party Compl. at 2 n.1. 85 Id. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 25 of 47

lacked such a clause, it was “related to the [SA].”86 The New York court determined

that this “deliberate drafting decision must be given effect and the specific forum

selection clauses at issue here choosing New York must be enforced”—otherwise,

“those clauses would be rendered completely meaningless.”87 Thus, the non-UAPA

contract claims survived dismissal in the New York action.

So what should be done with the non-UAPA contract claims that RGI filed in

this Court? RGI says they should either be stayed or dismissed without prejudice under

comity principles.88 Not so fast. How does that further comity or judicial economy in

any way.

RGI has done its utmost to avoid litigating this dispute in this Court, having filed

actions in the District of New York, the District of Delaware, and now the New York

Supreme Court. RGI has filed several motions in this Court insisting that Delaware is

an improper or inconvenient venue,89 a claim it repeated in its Amended Counterclaims

and Third-Party Complaint. RGI’s tactical maneuvering has finally borne fruit, with

the New York court agreeing that the non-UAPA contract claims “must” be litigated in

86 Letter Transmitting New York Supreme Court Decision and Order, Dec. 30, 2021, Ex. A at 3. 87 Id. 88 See RGI’s Supp. Br. at 3–5; see generally RGI’s Stay Motion. 89 See RGI’s Mot. to Dismiss at 12–18 (D.I. 11); RGI’s Am. Mot. to Dismiss at 27–33 (D.I. 28); RGI’s Mot. to Dismiss at 28–35 (D.I. 46); RGI’s Mot. to Reargue (D.I. 71); RGI’s Am. Mot. to Reargue (D.I. 76). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 26 of 47

New York. RGI has gotten what it wanted; but now asks for more. Having derided—

in at least two courts—any notion that it should be in this Court for any of this, RGI

now asks to stay or dismiss without prejudice its non-UAPA contract claims, thus

leaving this Court’s door open to reenter if things don’t go its way in New York. Yet,

RGI gives no cogent reason why the Court should.

At this point, RGI’s appeal to “comity” and economy rings rather hollow. RGI’s

efforts to avoid this forum have consumed the time and resources of four busy courts

and created the very same risk of duplicative litigation and inconsistent judgments about

which RGI now complains. Moreover, RGI represented that it filed its Amended

Counterclaims and Third-Party Complaint just in case the New York court determined

those claims belong in Delaware. The New York court didn’t. Given RGI’s

maneuverings, it can and should be held to its prior representations—its non-UAPA

contract claims can now be dismissed with prejudice so as to avoid any possible threat

to comity, to judicial economy, or of inconsistent judgments. Too, dismissing these

claims here is fidelitous to the caution the Court extended a year ago: “The Court will

not rescue a party from its own strategy calls, nor will it give that party any advice on

how to avoid its own litigation peril.” 90

In short, the non-UAPA contract claims are dismissed with prejudice based on

90 CRE Niagara Holdings, LLC v. Resorts Grp., Inc., 2021 WL 2110769, at *7 (Del. Super. Ct. May 25, 2021). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 27 of 47

RGI’s previous representations to this Court; RGI may now prosecute those claims in

New York as it sees fit. Accordingly, RGI’s Stay Motion is DENIED and CRE’s

dismissal motion is GRANTED as to Counts II–V.

C. THE IMPLIED COVENANT CLAIM SURVIVES AS IT RELATES TO THE UAPA (COUNT VI)

In Count VI, RGI alleges CRE breached its implied obligations under the SA,

PA, UAPA, FSA, and PSQ Agreement.91 It is tempting to simply declare certain parts

of the implied covenant claim are dismissed with prejudice—i.e. those related to the

non-UAPA contracts—for the reasons discussed in the previous section and leave the

rest. “But at the pleading stage of a case, a trial judge is not a robed gardener

employing Rule 12(b)(6) as a judicial shear to prune individual theories from an

otherwise healthily pled claim or counterclaim.”92 And here the implied covenant

claim survives to the extent RGI alleges CRE breached its implied obligations under

the UAPA.93

91 See RGI’s Am. Countercl. and Third-Party Compl. at ¶ 392. 92 inVentiv Health Clinical, 2021 WL 252823, at *4. 93 In practical terms, this means the Court no longer should nor will hear claims or arguments by RGI that CRE breached some implied covenant under the SA, PA, FSA, or PSQ Agreement. The Court holds RGI to its protestations that such claims should have never been here to begin with— and all can be confident they are now safely in the hands of the New York court for adjudication. See Letter Transmitting New York Supreme Court Decision and Order, Dec. 30, 2021, Ex. A at 2 (“The claims for breach of the implied covenant of good faith and fair dealing asserted as against the contracting parties and their successors by merger survive for now . . .”). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 28 of 47

RGI alleges CRE breached the implied covenant as to the UAPA by exercising

its discretion to manage the Resort and perform collections “in bad faith to maximize

their own personal profits while depriving RGI of the fruits of their contract.” 94

“Among other things,” CRE “used the Resort for lending for their own purposes instead

of to maximize profits for the benefit of all parties” and “provided better service to

members in the Club Exploria Program, who were not in the Participation Portfolio.”95

CRE advances several arguments for dismissal in its 12(b)(6) Motion. First,

CRE argues RGI has not identified any implied obligations that have been breached or

any contractual gaps that must be filled.96 Second, CRE argues there is no claim under

the implied covenant because CRE was given discretion to manage the Resort after

closing. Third, CRE argues RGI has not identified how using the Resort as collateral

would contravene any implied obligations under the UAPA. Instead, CRE claims RGI

is simply asking the Court to impose a term that RGI wishes it had bargained for, but

failed to. The Court addresses these arguments in their reverse order.

CRE’s third argument may well have merit. RGI has made no attempt to explain

how CRE “us[ing] the Resort as collateral for lending” would breach any of CRE’s

obligations under the UAPA. It is not enough for RGI to claim that CRE used the

94 RGI’s Am. Countercl. and Third-Party Compl. at ¶ 393. 95 Id. 96 CRE’s Mot. to Dismiss at 45. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 29 of 47

Resort as collateral “for [its] own purposes instead of to maximize profits for the benefit

of all parties.”97 The UAPA did not require CRE to “maximize profits for the benefits

of all parties”—instead, it simply required CRE to operate the Resort in accordance

with RGI’s past practices to protect RGI’s interest in the Portfolio after closing. Thus,

this allegation alone does fail to state a claim for breach of the implied covenant relating

to CRE’s use of the Resort as collateral.

But CRE’s second argument on Count VI fails. The UAPA cannot be reasonably

interpreted as leaving the management of the Resort solely to CRE’s discretion. Rather,

the UAPA set limits on CRE’s discretion by requiring CRE to honor its obligations

under the existing Timeshare Contracts, to operate the Villas in a manner “materially

equivalent” to how RGI operated them, and to provide customer service “materially

equivalent” to that provided by RGI. And even “[w]hen a contract confers discretion

on one party, the implied covenant requires that the discretion be used reasonably and

in good faith.”98 This alone is enough to save Count VI, though—given the ruling

above—it form and effect may be pared down later effect via motions practice or jury

instruction.99

97 RGI’s Am. Countercl. and Third-Party Compl. at ¶ 393. 98 Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 146–47 (Del. Ch. 2009) (internal citations omitted). 99 Again, deadheading these non-starter theories from an otherwise viable count in a complaint is not done via Rule 12(b)(6). inVentiv Health Clinical, 2021 WL 252823, at *4. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 30 of 47

For completeness’ sake, the Court also addresses CRE’s first argument—that

RGI’s general allegations of bad-faith conduct were not sufficient to state a claim under

the implied covenant. This issue is more difficult to assess. For the most part, RGI’s

claim that CRE exercised its discretion under the UAPA in bad faith appears to

duplicate RGI’s breach-of-contract claim in Count I. After all, RGI could demonstrate

that CRE breached the UAPA simply by showing that CRE did not adhere RGI’s past

practices, regardless of whether CRE acted in good faith or in bad faith. That said, there

appears at least one gap in the UAPA that the implied covenant could fill.

As detailed previously, the UAPA required CRE to provide Villa residents with

the “rights, title, access, services, reservations, use and enjoyment to which they are

entitled” under their Timeshare Agreements. But the Timeshare Agreements allow the

operator to impose certain rules and regulations restricting the residents’ rights, access,

services, reservations, use, and enjoyment. RGI suggests an implied term of the UAPA

is that CRE cannot create unreasonable rules and restrictions to alienate residents and

therefore harm the Portfolio. Maybe so.

The agreements in this case were intended to protect RGI’s interest in the

Portfolio after closing. But that intent would be frustrated if CRE could use its rule-

making authority to drive away Portfolio members and thereby harm the payment

stream to RGI.

Accordingly, RGI has identified here again a potential gap for the implied CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 31 of 47

covenant to fill. And Count VI’s survival also because it alleges, with reasonable

conceivability, that CRE breached the implied covenant by exercising its authority to

manage the Resort under the UAPA in bad faith.

D. THE TORTIOUS INTERFERENCE CLAIMS FAIL (COUNTS VII & VIII)

Counts VII and VIII are claims for tortious interference with contract against

Cerberus. Count VII alleges Cerberus “wrongfully procured” CRE to breach the

UAPA, SA, PA, FSA, and PSQ Agreement.100 As evidence, RGI cites Cerberus’s “day-

to-day control” over the CRE entities, that the breaches Cerberus procured were “to the

detriment” of the CRE entities, and the “express assurances RGI obtained from

Cerberus’s agents that they were speaking on behalf of Cerberus and that Cerberus

would, and could, assure the subsidiaries’ compliance with the agreements.”101

Count VIII is another claim for tortious interference with contract. The contracts

at issue are the “thousands” of Timeshare Documents that Bushkill Group entered into

with the Participation Portfolio Obligors before the transaction.102 RGI alleges that

Cerberus “by itself and through Club Exploria” procured the Participation Portfolio

obligors’ breach of those agreements by: (1) “informing Participation Portfolio obligors

that they would lose their reservation priority unless they ‘upgraded’ to a membership

100 RGI’s Am. Countercl. and Third-Party Compl. at ¶ 401. 101 Id. at ¶ 404. 102 Id. at ¶ 409. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 32 of 47

in the new Exploria Program”; (2) “denying them day use of the Resort as a threat to

get Participation Portfolio obligors to ‘upgrade’ to the Exploria Program”; and,

(3) “informing Participation Portfolio obligors that they were not entitled to the benefits

they had previously enjoyed, and had contracted for, who instead of being forced to

upgrade were more likely to cancel their contract.”103 As evidence that Cerberus

procured the breaches, RGI again cites Cerberus’s day-to-day control over CRE, that

the breaches Cerberus procured were to the detriment of RGI, and the express

assurances RGI obtained from Cerberus’s agents that they were speaking on behalf of

Cerberus.104 RGI adds that it has standing to pursue a tortious interference claim

because it is an intended beneficiary or third-party beneficiary of the Timeshare

Documents.105

In its 12(b)(6) Motion, Cerberus argues that Counts VII and VIII simply recite

the elements of a tortious interference claim without sufficient factual support. First,

Cerberus contends RGI has not alleged any “specific acts” by which Cerberus

“procured” the alleged breaches.106 Instead, “RGI’s allegations amount to an assertion

that a parent corporation can be liable for tortious interference because it has some

103 Id. at ¶ 413. 104 Id. at ¶ 414. 105 Id. at ¶ 412. 106 Cerberus’s Mot. to Dismiss at 11. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 33 of 47

degree of control over the actions of its subsidiary.”107 Second, Cerberus contends the

economic interest doctrine independently bars RGI’s tortious interference claim.108

This doctrine requires that, when a defendant has an economic interest in the contract,

a plaintiff must allege supporting facts that the defendant acted with malice or employed

illegal means to procure a breach of that contract. Cerberus contends RGI instead

recited a conclusory allegation that Cerberus “acted wrongfully, illegally, with malice,

and without justification or excuse.”109 The problem, says Cerberus, is that RGI’s

allegations of malice don’t involve any Cerberus entities, but rather conduct by Club

Exploria. Third, Cerberus argues that RGI’s allegation of “but for” causation is

conclusory; Count VII does not allege any specific action by Cerberus that could have

caused the breaches, while Count VIII fails to identify which of the “thousands” of

agreements were breached.110 Finally, Cerberus argues RGI lacks standing to bring

Count VIII because RGI was neither a party nor an intended beneficiary of the

Timeshare Agreements.111

107 Id. at 12. 108 Id. at 14–15. 109 Id. at 15. 110 Id. at 18. 111 Id. at 20. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 34 of 47

1. RGI’s cannot rely on Pennsylvania law.

The parties’ briefing raises a choice-of-law issue. The UAPA contains a

Delaware choice-of-law provision, while the SA, PA, FSA contain New York choice-

of-law provisions. In its 12(b)(6) Motion, Cerberus argued that a choice-of-law analysis

is unnecessary because the law of Delaware and New York on tortious interference with

contract is substantially similar.112 But then, oddly, RGI’s answering brief argued for

Pennsylvania law because Pennsylvania has the closest relationship to the contracts at

issue.113 RGI prefers Pennsylvania law because “Pennsylvania does not recognize an

economic interest privilege for interference with existing, as opposed to prospective,

contracts.”114 Cerberus’s reply brief criticized RGI for ignoring the choice-of-law

provisions and “transparently seeking to avoid the economic interest defense available

under both Delaware and New York law.”115

RGI cannot rely on Pennsylvania law to save this claim. RGI’s argument entirely

ignores the Delaware and New York choice-of-law provisions in the relevant contracts.

Cerberus is correct to suggest that RGI is simply attempting to avoid an unfavorable

result under Delaware and New York law, by eschewing the subject contract’s express

112 Id. at 9 n.5. 113 RGI’s Answering Br. at 61 n.23. 114 Id. at 65. 115 Cerberus’s Reply Br. at 3. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 35 of 47

choice-of-law provisions. The Court cannot.116 And the Court need not choose between

Delaware and New York law because the elements of a tortious interference claim are

substantively identical between the states.

In Delaware, the elements are “(1) a contract, (2) about which defendant knew

and (3) an intentional act that is a significant factor in causing the breach of such

contract (4) without justification (5) which causes injury.”117 In New York, the

elements are “(1) the existence of a valid contract between the plaintiff and a third party;

(2) the ‘defendant’s knowledge of the contract; (3) the defendant’s intentional

procurement of the third-party’s breach of the contract without justification; (4) actual

breach of the contract; and (5) damages resulting therefrom.”118 Additionally, both

states recognize that corporate entities have a limited privilege to interfere with the

operations of their affiliates and subsidiaries to protect their own economic interests.119

In New York, this defense is available where the defendant sought to protect an

economic interest in the breaching party’s business and the plaintiff makes no showing

116 J.S. Alberici Constr. Co. v. Mid-W. Conveyor Co., 750 A.2d 518, 520 (Del 2000) (“Delaware Courts will honor a contractually-designed choice of law provision so long as the jurisdiction selected bears some material relationship to the transaction” and the jurisdiction’s laws are not “repugnant to the public policy of Delaware.”). 117 Aspen Advisors LLC v. United Artists Theatre Co., 861 A.2d 1251, 1266 (Del. 2004). 118 Horowitz v. Nat’l Gas & Elec., LLC, 2018 WL 4572244, *5 (S.D.N.Y. Sept. 24, 2018) (internal quotations and citations omitted). 119 See id. at *6; Buck v. Viking Holding Mgmt. Co. LLC, 2021 WL 673459, at *6 (Del. Super. Ct. Feb. 22, 2021). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 36 of 47

that the defendant acted “maliciously, fraudulently, or illegally.”120 In Delaware, the

plaintiff must allege facts to rebut the presumption that the defendant was pursuing

legitimate profit-seeking goals in good faith (i.e., by showing that its sole motive in

interfering was bad faith to injure the plaintiff).121 Given this similarity in law between

the two jurisdictions, no choice-of-law analysis is necessary.122

2. RGI’s claims fail under both Delaware and New York law.

RGI’s tortious interference claims fail in several respects. First, RGI fails to

adequately plead that Cerberus intentionally procured CRE to breach the relevant

agreements. RGI’s only real support for this claim is its recitation that Cerberus “runs

and controls the CRE Subsidiaries’ day-to-day operations and is capable of and

responsible for procuring breaches of the Agreement.”123 But RGI cannot state a claim

for tortious interference based on its Cerberus’s ability to procure a breach of contract;

RGI must plead facts showing that Cerberus actually did procure a breach of contract.124

120 Horowitz, 2018 WL 4572244, at *6. 121 Buck, 2021 WL 673459, at *6. 122 See Deuley v. DynCorp Int’l, Inc., 8 A.3d 1156, 1162-65 (Del. 2010) (explaining that if the substantive law of the two jurisdictions is the same, then “there is a ‘false conflict,’ and the court should avoid the choice of law analysis altogether”); Lagrone v. Am. Mortell Corp., 2008 WL 4152677, at *5 (Del. Super. Ct. Sept. 4, 2008) (“In such instances of ‘false conflicts’ of laws, the Court may resolve the dispute without a choice between the laws of the competing jurisdictions.”) 123 RGI’s Am. Countercl. and Third-Party Compl. at ¶ 145. 124 See WaveDivision Holdings, LLC v. Highland Cap. Mgmt. L.P., 2010 WL 1267126, at *4 (Del. Super. Mar. 31, 2010) (dismissing a tortious interference claim where the complaint “simply states the elements required to plead a tortious interference claim without reference to the specific conduct that sets forth the allegations”); Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 855 (Del. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 37 of 47

RGI has nothing to offer in that regard. Instead, RGI relies on generalized and

conclusory allegations to connect Cerberus with CRE’s alleged breaches.

Second, RGI fails to adequately plead that Cerberus acted maliciously,

fraudulently, or illegally. RGI attempts to show malice by claiming that Cerberus and

Club Exploria “caused many of the breaches because of their personal animus toward

RGI;”125 from there, RGI describes the conduct of Tom Morris, an “agent” of Cerberus,

who “made it clear, on numerous occasions, that he did not like RGI or its principals.”126

Mr. Morris’s conduct allegedly included “criticiz[ing] RGI for not borrowing excessive

amounts on the Participation Portfolio and on the Resort real estate.”127 Mr. Morris

would later become CEO of Club Exploria.128 Even if it were accepted that Mr. Morris

spoke on Cerberus’s behalf, his alleged statements are insufficient to support a

reasonable inference that Cerberus acted with malice. Essentially, RGI rests its claim

of malice on Mr. Morris’s personal disagreement with RGI’s approach to using

Ch. 2009) (dismissing claim for tortious interference because complaint contained no “factual allegations” supporting its claim that various individuals exceeded the scope of their authority) (emphasis in original); Vandenberg, Inc. v. Townhouse 84, LLC, 941 N.Y.S.2d 541, at *2 (N.Y. Sup. Ct. 2011) (“By itself, the conclusory allegation of interference with plaintiff’s brokerage agreement fails to allege what actions the moving defendants took that procured defendant seller’s breach of the agreement and thus is insufficient to plead the tortious interference claim.”). 125 RGI’s Am. Countercl. and Third-Party Compl. at ¶ 284. 126 Id. 127 Id. 128 Id. at ¶ 65. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 38 of 47

leverage. That is hardly enough to reasonably infer that Cerberus’s “sole motive” in

for its purported interference was “bad faith to injure” RGI.129

Third, RGI does not adequately allege that Cerberus’s alleged interference was

the cause of CRE’s alleged breaches. Again, RGI has not credibly alleged that Cerberus

took any action to cause or procure the breaches. A necessary consequence is that RGI

cannot credibly allege that Cerberus’s conduct was a significant factor in causing the

breaches.

Because RGI has failed to state a claim for tortious interference, it is unnecessary

for the Court to assess Cerberus’s argument that RGI lacks standing to pursue the

tortious interference claim in Count VIII. Additionally, the Court need not decide

whether the tortious interference claims are barred under res judicata, as Cerberus and

CRE suggested in their supplemental briefing.

Cerberus’s 12(b)(6) Motion is GRANTED as to Counts VII and VIII because those

counts fail to state a claim under the reasonable conceivability standard the Court must

apply thereto.

E. THE FRAUDULENT INDUCEMENT CLAIMS FAIL (COUNTS IX AND X)

RGI brings two claims for fraudulent inducement. Count IX alleges that

129 Buck, 2021 WL 673459, at *6 (emphasis in original). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 39 of 47

Cerberus fraudulently induced RGI to enter into the UAPA, SA, and PA.130 RGI claims

that Cerberus falsely represented that it was purchasing Bushkill Group to make its

offices and data center the “Corporate Headquarters” of its timeshare holdings and that

it would complement the Resort through a subsequent timeshare acquisition. Cerberus

allegedly wanted RGI to rely on these statements so that it would sell Cerberus its equity

interest in Bushkill Group, which Cerberus could then siphon to grow Club Exploria.

Count X alleges Cerberus and Club Exploria fraudulently induced RGI to enter

into the Supplemental Agreements and take two loan advances in connection with the

Supplemental Agreements, totaling $9 million.131 RGI claims Cerberus and Club

Exploria made two sets of false representations in relation to these agreements. First,

in December 2018, Cerberus and Club Exploria allegedly represented that they would

reinstate the Profit Recovery program if RGI agreed to enter into the loan agreement,

restore amenity hours and members access, resume helping members with the Exchange

Program, re-create the link between Financial Services and Reservations, and re-

authorize different departments at the Resort to work with each other. Second, in July

2019, Club Exploria’s Executive Vice President allegedly made similar representations

to induce RGI to borrow more. Cerberus and Club Exploria allegedly knew that they

130 RGI’s Am. Countercl. and Third-Party Compl. at ¶¶ 419–26. 131 Id. at ¶¶ 427–39. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 40 of 47

would not and could not keep those promises. Additionally, Count X alleges that

Cerberus, Club Exploria, and CRE Participation fraudulently induced RGI to enter into

the Transaction Agreements and Joinder by falsely representing that any obligations

under the PA could be performed by any assignee.

In its 12(b)(6) Motion, Cerberus first argues that RGI has not pleaded sufficient

facts to support its conclusion that the alleged promises were never intended to be

performed. Cerberus acknowledges that a plaintiff can state a claim for fraudulent

inducement by showing that the defendant had an actual present intent not to perform

on its promises. But, says Cerberus, RGI hasn’t alleged any facts showing that Cerberus

never intended to honor its promises. Instead, RGI alleges only in a conclusory fashion

that Cerberus knew the alleged representations were untrue when made. Second,

Cerberus argues that RGI cannot establish reasonable reliance because the Transaction

Agreements contained merger clauses. Third, Cerberus argues that RGI failed to plead

Count X with particularity because it does not allege that anyone acting on behalf of

Cerberus made any false statements. As explained below, Cerberus’s first and third

arguments prevail and the Court need not reach the second.

The elements of a fraudulent inducement claim are: (1) a false representation of

material fact; (2) the defendant’s knowledge of or belief as to the falsity of the

representation or the defendant’s reckless indifference to the truth of the representation;

(3) the defendant’s intent to induce the plaintiff to act or refrain from acting; (4) the CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 41 of 47

plaintiff’s action or inaction taken in justifiable reliance upon the representation; and

(5) damages to the plaintiff as a result of such reliance.132 A claim for fraudulent

inducement must be pled with particularity in accordance with Rule 9(b): “In all

averments of fraud or mistake, the circumstances constituting fraud or mistake shall be

stated with particularity. Malice, intent, knowledge, and other condition of mind of a

person may be averred generally.”133

Here, RGI argues CRE never intended to honor its promises when they were

made and cites Rule 9(b) for the proposition that such averment of intent is enough.

Not so.

“[W]hen a plaintiff pleads a claim of promissory fraud, in that the alleged false

representations are promises or predictive statements of future intent rather than past or

present facts, the plaintiff must meet an even higher threshold. In this situation, the

plaintiff ‘must plead specific facts that lead to a reasonable inference that the promisor

had no intention of performing at the time the promise was made.’”134 New York

imposes a similar requirement: “To fulfill the element of misrepresentation of material

fact, the party advancing the claim must allege a misrepresentation of present fact rather

132 CSH Theatres, LLC v. Nederlander of San Francisco Assocs., 2015 WL 1839684, at *21 (Del. Ch. Apr. 21, 2015). 133 Id. (internal citations omitted). 134 Id. (quoting MicroStrategy Inc. v. Acacia Rsch. Corp, 2010 WL 5550455, at *15 (Del. Ch. Dec. 30, 2010)). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 42 of 47

than of future intent. General allegations of lack of intent to perform are insufficient;

rather, facts must be alleged establishing that the adverse party, at the time of making

the promissory representation, never intended to honor the promise.”135

RGI’s factual allegations do not satisfy this standard. Count IX offers no support

for its allegation that Cerberus knew its representations were false as it was making

them. And Count X only weakly claims that the falsity of the promises “is made clear

by the Cerberus-CRE Defendants’ subsequent and immediate breach” of the

Supplemental Agreements.136 However, the mere fact that a party did not follow

through on its promise is not sufficient to state a claim for fraudulent inducement.

“Delaware law holds that a plaintiff ‘cannot bootstrap a claim of breach of contract into

a claim of fraud merely by alleging that a contracting party never intended to perform

its obligations.’”137 New York law is similar: “[A]ny inference drawn from the fact that

the expectation did not occur is not sufficient to sustain the plaintiff’s burden of

showing that the defendant falsely stated his intentions.”138

What’s more, Count X does not plead with particularity that anyone representing

135 Perella Weinberg Partners LLC v. Kramer, 58 N.Y.S.3d 384, 390 (N.Y. App. Div. 2017) (internal citations and quotations omitted). 136 RGI’s Am. Countercl. and Third-Party Compl. at ¶ 434. 137 CHS Theatres, 2015 WL 1839684, at *22 (internal citations omitted). 138 Lanzi v. Brooks, 388 N.Y.S.2d 946, 948 (N.Y. App. Div. 1976), aff’d, 373 N.E.2d 278 (N.Y. 1977). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 43 of 47

Cerberus made any false statements of material fact. Count X appears to rest entirely

on statements made by J. Richard Budd and Michael J. Smith.

Although RGI attempts to characterize Mr. Budd as a “principal” of Cerberus,139

RGI also claimed that Mr. Budd had been named President and CEO of CRE Bushkill

by this time.140 RGI fails to plead with particularity that Mr. Budd made the allegedly

false representations on behalf of Cerberus, rather than on behalf of CRE Bushkill.

Similarly, RGI identified Mr. Smith as the Vice President of Club Exploria.141

Although Mr. Smith allegedly acknowledged that he made certain representations “on

behalf of both Club Exploria and Cerberus,”142 RGI does not plead with particularity

which of Mr. Smith’s statements should be credited to Cerberus. In short, RGI relies

on vague, imprecise allegations to connect Cerberus with some allegedly false

statements. This is insufficient to plead fraudulent inducement by Cerberus with

particularity.

Finally, given the fatal deficiencies just noted, the Court need not decide whether

the fraud claims are barred by merger clauses in the relevant contracts as Cerberus

suggested in its 12(b)(6) Motion. Cerberus’s 12(b)(6) Motion is GRANTED as to

139 RGI’s Amended Counterclaims and Third-Party Complaint at ¶ 429. 140 Id. at ¶ 85. 141 Id. at ¶ 429. 142 Id. at ¶ 228. CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 44 of 47

Counts IX and X for want of the particularity required for such claims.

F. THE CIVIL CONSPIRACY CLAIM FAILS (COUNT XI)

Count XI is a claim for civil conspiracy.143 RGI alleges the Cerberus entities,

the CRE entities, and Club Exploria conspired together to “defraud RGI and tortiously

interfere with RGI’s contracts.”144 As support, RGI cites “the relationship of the

Cerberus-CRE Defendants, including their overlapping directors and officers,

Cerberus’s control of the Cerberus-CRE Defendants, and the CRE Subsidiaries actions

for the benefit of Cerberus and Club Exploria and to their own detriment.”145

In its 12(b)(6) Motion, Cerberus argues that RGI’s allegations are insufficient to

state a claim for civil conspiracy. To state a claim for civil conspiracy in Delaware, a

plaintiff must plead facts supporting (1) the existence of a confederation or combination

of two or more persons, (2) that an unlawful act was done in furtherance of the

conspiracy, and, (3) that the conspirators caused actual damage to the plaintiff.146

Similarly, in New York, the plaintiff must “demonstrate the primary tort, plus the

following four elements: (1) an agreement between two or more parties; (2) an overt act

in furtherance of the agreement; (3) the parties’ intentional participation in the

143 RGI’s Am. Countercl. and Third-Party Compl. at ¶¶ 440–45. 144 Id. at ¶ 441. 145 Id. 146 Allied Cap. Corp. v. GC-Sun Holdings, L.P., 910 A.2d 1020, 1037 (Del. Ch. 2006) (internal citations omitted). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 45 of 47

furtherance of a plan or purpose; and (4) resulting damage or injury.”147 Here, Cerberus

argues that RGI’s conclusory allegation of a conspiracy is insufficient under both New

York and Delaware law. Cerberus adds that RGI’s conspiracy claim must fail because

RGI has not adequately pleaded its underlying claims of tortious interference and

fraudulent inducement. Just so.

“New York does not recognize civil conspiracy to commit a tort as an

independent cause of action.”148 “[R]ather, such a claim stands or falls with the

underlying tort.”149 Thus, where the underlying tort claims have been dismissed, the

conspiracy claim that they might support must be dismissed too.150 The same is true

under Delaware law: if a plaintiff “fails to adequately allege the elements of the

underlying claim, the conspiracy claim must be dismissed.”151 Here, the underlying

claims are the claims for tortious interference and fraudulent inducement. Because

those claims fail, the civil conspiracy claim does too.

Even if the underlying tort claims were to survive, the conspiracy claim still

147 Abacus Fed. Sav. Bank v. Lim, 905 N.Y.S.2d 585, 588 (N.Y. App. Div. 2010). 148 Com. Realty Servs. of Long Island, Inc. v. Mehran Enterprises, Ltd., 149 N.Y.S.3d 493, 497 (N.Y. App. Div. 2021) (internal quotations and citations omitted). 149 Id. (internal quotations and citations omitted). 150 See id. (“Here, the fraud cause of action was dismissed by the Supreme Court and, as set forth above, the tortious interference with contract cause of action also should have been dismissed. As such, there remains no underlying tort upon which a conspiracy cause of action could be based. Thus, the cause of action alleging conspiracy should have been dismissed.”). 151 Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 892 (Del. Ch. 2009). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 46 of 47

would fail to state a claim. RGI pleaded no facts supporting either the existence of a

conspiracy or an overt act in furtherance of the conspiracy. Instead, RGI rests its claim

on the mere fact that Cerberus and CRE are closely affiliated through their corporate

structure. But that was not enough for RGI to state a claim for tortious interference,

and it is not enough to state a claim for civil conspiracy either.152

Thus, Cerberus’s 12(b)(6) Motion is GRANTED as to Count XI.

V. CONCLUSION

The 12(b)(6) Motions are DENIED as to RGI’s claim for breach of the UAPA

(Count I) and the implied covenant claims as it relates to the UAPA (Count VI). The

12(b)(6) Motions are GRANTED as to every other claim. The non-UAPA contract

claims (Count II–V) are dismissed to avoid duplicative litigation and the risk of

inconsistent judgments arising from the adjudication of those claims in the New York

Action. And dismissal of those non-UAPA contract claims is with prejudice based on

RGI’s previous representations to this Court. The claims for tortious interference

(Counts VII and VIII), fraudulent inducement (Counts IX and X), and civil conspiracy

(Count X) are dismissed because RGI has failed to plead facts supporting the requisite

152 See Kovkov v. L. Firm of Dayrel Sewell, PLLC, 119 N.Y.S.3d 849, 850 (N.Y. App. Div. 2020) (affirming dismissal of civil conspiracy claim because “[b]are, conclusory allegations of conspiracy are insufficient”); Encite LLC v. Soni, 2008 WL 2973015, at *11 (Del. Ch. Aug. 1, 2008) (dismissing civil conspiracy claim; “[s]imply alleging that [defendants] acted in concert . . . does not make it so”). CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc. N20C-05-157 PRW CCLD May 31, 2022 Page 47 of 47

elements of each claim. Finally, RGI’s Stay Motion is DENIED—the non-UAPA

claims are dismissed with prejudice, rather than stayed or dismissed without prejudice.

IT IS SO ORDERED.

/s/ Paul R. Wallace _________________________ Paul R. Wallace, Judge

Original to Prothonotary