Joshua J. Angel v. Warrior Met Coal Inc.

• Court: Court of Chancery of Delaware
• Decided: June 30, 2021
• Docket: CA No. 2019-0235-SG
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

JOSHUA J. ANGEL, individually and on ) behalf of all others similarly situated, ) ) Plaintiff, ) ) v. ) C.A. No. 2019-0235-SG ) WARRIOR MET COAL INC., APOLLO ) MANAGEMENT LLC, ARES ) MANAGEMENT LLC, CASPIAN ) CAPITAL LP, FIDELITY ) INVESTMENTS, FRANKLIN ) MUTUAL ADVISORS LLC, GSO ) CAPITAL PARTNERS LP, and KKR ) CREDIT ADVISORS (US) LLC, ) ) Defendants. )

MEMORANDUM OPINION

Date Submitted: March 16, 2021 Date Decided: June 30, 2021

Julia B. Klein, of KLEIN LLC, Wilmington, Delaware, Attorneys for Plaintiff Joshua J. Angel.

Matthew F. Davis and Justin T. Hymes, of POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; OF COUNSEL: Stephen M. Baldini, Brian Carney, and Stephanie Lindemuth, of AKIN GUMP STRAUSS HAUER & FELD LLP, New York, New York, Attorneys for Defendants Warrior Met Coal, Inc., Apollo Management LLC, Ares Management LLC, Caspian Capital LP, Fidelity Investments, Franklin Mutual Advisors LLC, GSO Capital Partners LP, and KKR Credit Advisors (US) LLC.

GLASSCOCK, Vice Chancellor The Plaintiff here received a right to acquire equity in a Delaware limited

liability company (an “LLC”) via a bankruptcy court order. He failed to file

paperwork required by the LLC to receive the equity; his right was forfeited

accordingly. Per the Plaintiff, he did not receive notice sufficient to the exercise of

his rights. He now brings a litany of claims against some, but not all, of the parties

involved in implementing the bankruptcy court order; with these claims, he seeks to

frame his loss as a remediable impoverishment. As I explain in more detail below,

all but one of his attempts must fail.

This matter involves the bankruptcy of a coal company, Walter Energy, Inc.

(“Debtor”). The Plaintiff, Joshua Angel, was a holder (a “Lienholder”) of the

Debtor’s first lien debt. An ad hoc steering committee (the “Steering Committee”)

composed of other such Lienholders—including all the Defendants here, with the

exception of Warrior Met Coal Inc. (“Warrior, Inc.”)—proposed a purchase of

Debtor’s assets in return for a release of debt, including the Lienholders’ debt. Angel

was not a member of the Steering Committee.

The Steering Committee’s proposal involved the Debtor’s assets being

transferred to a purpose-created Delaware entity, Coal Acquisition LLC, later

renamed Warrior Met Coal LLC (“Warrior LLC”). In exchange, the Debtor’s

creditors would receive equity in Warrior LLC (the “Distribution”). Additionally,

Lienholders would be permitted to participate in a rights offering (the “RO”),

1 intended to raise sufficient capital to ensure Warrior LLC equity would continue to

have value. The RO permitted Lienholders to acquire Warrior LLC equity at what

Angel perceives as a favorable price. This acquisition was ultimately approved by

order of the Bankruptcy Court dated January 8, 2016 (the “BC Order”).1 Angel did

not object to the proposal in the Bankruptcy Court.

The BC Order required that the Distribution and the RO comply with

securities law. To facilitate that provision, the Steering Committee and trustees for

both the unsecured creditors and the Lienholders negotiated procedures for the

Distribution, under which the Lienholders would be required to demonstrate

entitlement to the Distribution—and, therefore, receive Warrior LLC equity—by

submitting eligibility documents by a date certain, December 31, 2016. After that

date, the Lienholders’ rights to distribution of equity were forfeited to Warrior LLC.

The documentation was required to establish, among other things, that each equity

claimant was an accredited investor in compliance with SEC regulations. Notice of

this condition was sent to Lienholders by Warrior LLC’s agent, Kurtzman Carson

Consultants LLC (“KCC”). In Angel’s case, the notice was sent to his designated

agent, UBS Financial Services Inc. (“UBS”). Angel did not respond and did not

receive equity in the distribution.

1 This order, oddly, is not attached to the Amended Complaint. 2 With respect to the RO, Angel alleges that he agreed to purchase Warrior LLC

equity. The RO, however, required payment in cash. Angel failed to pay for the

equity, and Warrior LLC did not distribute any equity to him under the RO.

In his First Amended Complaint (the “Complaint”), Angel avers that he did

not receive notice of any duty to submit eligibility documents in connection with the

Distribution, and that, in any event, he had a vested right to receive equity in the

Distribution, without condition. With respect to the RO, he alleges that he submitted

sufficient instructions for the ultimate payment of the subscription amount such that

he should be deemed to have purchased equity under the RO.

In vindication of his rights, the Plaintiff serves up a dog’s breakfast of claims:

breach of contract against Defendant Warrior, Inc. and the members of the Steering

Committee; breach of fiduciary duty against members of the Steering Committee;

the tort of conversion; unjust enrichment; and declaratory judgment. The

Defendants have moved to dismiss all counts and for summary judgment with

relation to the breach of contract claim. What follows is consideration of those

motions. I find that the unjust enrichment claim survives.

3 I. BACKGROUND2

A. The Parties and Relevant Nonparties

Plaintiff Joshua J. Angel is a former owner of 9.50% senior secured notes due

2019 (the “9.50% Notes”) of non-party Walter Energy, Inc. (defined above as

“Debtor”) and a lender under the Debtor’s credit agreement dated April 1, 2011 (the

“Term Loan” and, together with the 9.50% Notes, the “First Lien Debt”).3

Defendant Warrior Met Coal Inc. (defined above as “Warrior, Inc.”) is a

Delaware corporation with its principal place of business in Alabama.4 It is the

successor entity to Warrior Met Coal, LLC (defined above as “Warrior LLC”).

Warrior Met Coal, LLC was formed under the name Coal Acquisition LLC (“Coal

Acquisition”), for the express purpose of acquiring Debtor’s assets via a credit bid;5

it changed its name from Coal Acquisition LLC to Warrior Met Coal, LLC, on

March 4, 2016.6 Warrior LLC converted into a corporation, Defendant Warrior Inc.,

on April 12, 2017.7

The remaining Defendants—Apollo Global Management LLC, Ares

Management LLC, Caspian Capital LP, Fidelity Investments, Franklin Mutual

2 The facts, except where otherwise noted, are drawn from the First Am. Compl., Dkt. No. 41 [hereinafter “Compl.”], and exhibits or documents incorporated therein, and are presumed true for the purposes of this Motion to Dismiss. 3 Compl., at Introduction. 4 Compl. ¶ 8. 5 Compl. ¶ 8. 6 Compl. ¶ 8. 7 Compl. ¶ 8. 4 Advisers LLC, GSO Capital Partners LP, and KKR Credit Advisors (US) LLC

(collectively, the “Steering Committee Defendants”)—were all holders of First Lien

Debt. These defendants later together created an ad hoc steering committee in

connection with the Debtor’s bankruptcy proceedings (defined above as the

“Steering Committee”).8 The Complaint does not allege that the Steering Committee

was formed pursuant to any Bankruptcy Court order, or that it operated pursuant to

any governing contract or agreement.

B. The Debtor’s Restructuring

Debtor filed for relief under Chapter 11 of the Bankruptcy Code on July 15,

2015, in the U.S. Bankruptcy Court for the Northern District of Alabama, Southern

Division (the “Bankruptcy Court”).9 The Steering Committee Defendants

collectively retained Akin Gump Strauss Hauer & Feld LLP (“Akin Gump) as legal

counsel to represent the Steering Committee in connection with the Debtor’s

restructuring.10

8 See generally Compl. 9 Compl. ¶ 20. 10 Compl. ¶ 17. 5 On September 3, 2015, the Steering Committee Defendants formed Coal

Acquisition,11 a Delaware limited liability company.12 Coal Acquisition was formed

“for the purposes of bidding on and acquiring a select portion of the Debtor[’]s

assets.”13 The Steering Committee Defendants were the sole members of Coal

Acquisition at the time and, accordingly, had complete control of the entity.14

C. The Genesis of the Distribution

On November 5, 2015, Coal Acquisition entered into an asset purchase

agreement to acquire the Debtor’s assets, including the entirety of the First Lien

Debt, in return for Class A equity in Coal Acquisition (a transaction defined as the

“Distribution,” above). The debt to be surrendered, per the agreement, included debt

owned by non-Steering Committee Lienholders like Angel.15

The Bankruptcy Court established so-called “Bid Procedures” for the

Distribution that meant to ensure that Coal Acquisition—the equity of which was

the consideration for the Debtor’s assets—had value. In particular, the Bid

11 The Complaint uses passive voice, but the implication is that Coal Acquisition LLC was formed by the Steering Defendants. See Compl. ¶ 18 (“The Steering Committee Defendants were the sole members of Warrior LLC until the March 31, 2016 Rights Offering and [Distribution] closings.”); Compl. ¶ 21 (“On September 3, 2015, Warrior LLC, then operating as Coal Acquisition [LLC], was formed . . . .”). At any rate, I make this Plaintiff-friendly assumption here. 12 Compl. ¶ 21. 13 Compl. ¶ 21. 14 Compl. ¶ 18–19. 15 Compl. ¶ 22–23. 6 Procedures required Coal Acquisition to show that it would be able to carry on the

Debtor’s business with adequate liquidity to honor its contractual obligation.16

D. The Development of the Rights Offering

To fulfill the liquidity obligation of the Distribution, Coal Acquisition pledged

to raise $200 million of operating capital from existing holders of debt—i.e., the

rights offering defined as “RO” above.17 The RO offered existing Debtor

stakeholders—both the unsecured creditors and the Lienholders18—the opportunity

to purchase Class B equity in Coal Acquisition.19

To cover the possibility that the RO would not raise the full $200 million

required by the Bankruptcy Court, the Steering Committee Defendants committed

to backstopping the RO.20 The Steering Committee Defendants agreed to split the

backstop commitment according to each Defendant’s pro rata portion of the First

Lien Debt.21 As consideration for the backstop commitment, the Steering

Committee Defendants collectively received22 278,438 fully paid Class A Units of

16 Compl. ¶ 26. 17 Compl. ¶ 26. 18 Compl. ¶ 25. 19 Compl. ¶¶ 30–31. The Class B Units were later converted to Class A Units, which were then collectively converted into equity in Warrior, Inc. Compl. ¶ 54. 20 Compl. ¶ 27. 21 Compl. ¶ 27. 22 The passive voice is used in the Amended Complaint and adopted here. Compl. ¶ 28. 7 Coal Acquisition—equivalent to about 5% of all Class A Units fully outstanding at

the time the commitment was made.23

E. The Bankruptcy Court Order and Execution of the Distribution and RO

The Bankruptcy Court approved both the Distribution and RO by order on

January 8, 2016 (defined above as the “BC Order”).24 Accordingly, representatives

of the various stakeholders—including the Steering Committee, Coal Acquisition,

the trustee of the unsecured creditors, and the indenture trustees for the First Lien

Debt holders (defined in the Complaint as the “Indenture Trustees”)25—then

negotiated and agreed on the procedure by which stakeholders could participate in

each transaction.26 The Complaint is entirely silent as to how, if at all, this

“agreement” was memorialized, under what authority the participants presumed to

act, or the terms of the “agreement,” other than the “procedure” alleged to have

resulted from the negotiation.27 For the Distribution, that procedure required

existing stakeholders, including Lienholders like Angel, to provide Coal Acquisition

with a credit bid eligibility letter (a “CBEL”).28 If a Lienholder did not return the

CBEL by December 31, 2016, the Lienholder’s right to the equity would be

23 Compl. ¶ 28. 24 Compl. ¶ 29. 25 Compl. ¶ 35; see Compl. ¶¶ 35–40. 26 See Compl. ¶¶ 35–38. 27 See Compl. ¶¶ 35–39. 28 Compl. ¶¶ 35–36. 8 forfeited.29 As to the RO, stakeholders were given, for no consideration, a right to

participate in the RO;30 to exercise that right, the stakeholders were required to

execute a subscription agreement (“Subscription Agreement”) by March 29, 2016.31

After establishing the deadlines, those same representatives—which, I note,

included the Indenture Trustees—agreed that the CBEL should be delivered, by Coal

Acquisition, to the stakeholders in tandem with documents informing them of the

RO;32 this was done on February 25, 2016.33 Certain stakeholders, including Angel,

did not receive either the CBEL or the RO-related documents, however.34 As a result

of that error, the Bankruptcy Court ordered an extension of the March 29, 2016 RO

participation deadline—to April 15, 2016—for the unsecured creditors, but did not

extend the deadline for the Lienholders.35 In June 2016, the Defendants re-sent the

CBELs—return of which was necessary to participate in the Distribution.36 Angel

alleges that he did not receive this updated CBEL either.37

Angel filed an executed Subscription Agreement, along with the requisite

paperwork, on March 28, 2016, “one day prior to the Subscription Deadline” for the

29 Compl. ¶ 36. 30 Compl. ¶ 31. 31 Compl. ¶ 46. 32 Compl. ¶ 38. 33 Compl. ¶ 38. Shortly after this, Coal Acquisition changed its name to Warrior LLC. 34 Compl. ¶ 41. 35 Compol. ¶ 42–43, 46; Ex. E. 36 Compl. ¶ 48. 37 Compl. ¶ 57. 9 RO.38 The Complaint alleges that, included with requisite paperwork was an

instruction by Angel to wire payment for the new equity to be issued in the RO.39

However, that is the only allegation as to the payment;40 there are no details

regarding the recipient of the instruction, what the instruction said, the amount (if

any) authorized, or when payment was to be made—all details presumably in the

possession of the Plaintiff. In fact, the Complaint avers nothing other than the

existence of the instructions—and the parties do not dispute that payment was not

actually made.41 Angel allegedly became aware that he did not, in fact, own Warrior

LLC equity when he did not receive the dividend that was issued in connection with

Warrior LLC’s initial public offering and conversion into a corporation, Defendant

Warrior, Inc.42 He contacted Warrior, Inc. and Akin Gump, and first learned of the

CBEL requirement through his correspondence with an Akin Gump partner.43

F. Procedural History

Angel filed his Verified Class Action Complaint for Breach of Fiduciary

Duties and Breach of Contract on March 27, 2019.44 Following motion practice, he

38 Compl. ¶ 53. 39 Compl. ¶ 53. 40 See Compl. ¶ 53. 41 Tr. of Mar. 16, 2021 Oral Argument on Defs.’ Mots. To Dismiss and for Partial Summ. J., at 14:23–15:1, Dkt. No. 75 [hereinafter “MTD Tr.”]. 42 Compl. ¶ 56. 43 Compl. ¶ 57. 44 Dkt. No. 1. 10 filed a First Amended Complaint in July of 2020.45 That complaint contains five

counts: (I) Declaratory Judgment; (II) Conversion; (III) Breach of Contract related

to the RO; (IV) Unjust Enrichment; and (V) Breach of Fiduciary Duty.46 The

Defendants filed a Motion to Dismiss47 and a Motion for Partial Summary

Judgment48 only a day apart. The two motions were briefed in tandem and heard

together on March 16, 2021. This opinion addresses the Motion to Dismiss, granting

it for all counts except Count IV; such a ruling moots the Motion for Partial

Summary Judgment.

II. ANALYSIS

The Defendants seek dismissal under Rule 12(b)(6). At this stage, I must take

as true all well-pled allegations and draw inferences therefrom in the light most

favorable to the Plaintiffs.49 I may only grant the motion if I find it not reasonably

conceivable that the Plaintiffs may prevail.50 I turn, then, to each of the five counts

of the Complaint, albeit out of order as presented in that pleading.

45 Dkt. No 41. 46 Compl. ¶¶ 68–100. 47 Dkt. No. 63. 48 Dkt. No. 64. 49 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 27 A.3d 531, 536 (Del. 2011). 50 Id. at 536. In a recent Memorandum Opinion, I referred to “reasonable conceivability” using the venerable English term “plausible.” In re Oracle Corp. Deriv. Litig., 2021 WL 2530961, at *2 (Del. Ch. June 21, 2021). I am well aware that our Supreme Court has rejected the federal standard applied to motions under Rule 12(b)(6)—denominated a “plausibility” standard—in favor of the Delaware standard, “reasonable conceivability.” See Cent. Mortg., 27 A.3d at 537. It is of course within the purview of the Supreme Court to provide the standard under which a pleading, attacked for failure to state a claim, shall be reviewed; my review here, as in Oracle, is made under 11 A. Count III, for breach of contract, must be dismissed.

In Count III, the Plaintiff alleges that a contract exists between the

Defendants—that is, the Steering Committee Defendants who are fellow

Lienholders and Warrior, Inc.—and Angel, the Plaintiff Lienholder, because the

Defendants used Angel’s portion of the first lien debt to obtain the BC Order

implementing the Distribution and RO.51 This supposed contract allegedly

“contractually entitled” Angel both “to receive adequate notice of the Rights

Offering and the distributions emanating therefrom”52 and to receive Warrior LLC

equity via the Distribution.53

the “reasonable conceivability” standard—that is, assuming the truth of the allegations, together with plaintiff-friendly inferences, I may only dismiss if I find that the plaintiff is nonetheless unable to recover “under any reasonably conceivable set of circumstances.” Cent. Mortg., 27 A.3d at 535. I occasionally use the term “plausible” herein, but not to refer to the federal standard set out in Twombly and Iqbal and rejected by Central Mortgage. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009). Instead, I use the term “plausible” because, in my perhaps modest understanding of English, it is a synonym of “reasonably conceivable,” and is clearer and better English usage than the double-barreled term. “Plausible,” in this context, per the Shorter Oxford English Dictionary, means “Having a show of truth, reasonableness or worth.” 2 The Shorter Oxford English Dictionary 1603 (3rd ed. 1973). With that adjective describing a claim, then, the claim is plausible if it has an appearance of reasonableness. In any event, I have applied the Delaware standard of reasonable conceivability, as I understand it, throughout. Per Central Mortgage, the federal 12(b)(6) standard requires something “beyond mere ‘possibility’ but short of ‘probability[,]’” while the Delaware “governing standard of conceivability is more akin to ‘possibility.’” Accordingly, as I understand this pronouncement, a claim survives if its success appears possible to a rational objective observer. Where this decision dismisses a claim, it is under that standard. 51 Compl. ¶ 80. 52 Compl. ¶ 80. 53 Compl. ¶ 81. 12 I confess to some confusion as to the source of this alleged agreement; that

the Plaintiff’s property—his share of the First Lien Debt—was implicated in a court

order does not, to my mind, create a contract. The facts, as I understand them from

the Complaint, are thus: The BC Order approved a transfer of the Debtor’s assets to

Warrior LLC as fair to the creditors, in that they would receive equity in Warrior

LLC in return for the sublimation of their debt; the Lienholders would, via the

Distribution, receive equity pro rata to their secured debt. The Bankruptcy Court

did not address the terms under which the Distribution would be made, other than to

require it to comply with securities law.54 The Steering Committee, a subgroup of

the Lienholders, were to be the initial members of Warrior LLC pending the

distribution.55 They negotiated terms with fiduciaries appointed by the Bankruptcy

Court—one for the Lienholders and one for the unsecured creditors—and arrived at

a condition whereby the Lienholders would submit documentation proving that they

were accredited investors, so that the Distribution would qualify as a private

placement under the securities regulations.56

Warrior LLC sent notice of the Distribution through its agent, KCC, in March

2016, informing the Lienholders that they must return documentation, including an

54 Compl. ¶¶ 29–30. 55 Compl. ¶ 18. 56 Compl. ¶ 34. 13 executed copy of the CBEL, a draft eligibility letter.57 That notice encouraged the

Lienholders to submit the documentation by March 20, 2016, in order to timely

receive their share of the Warrior LLC equity, but made clear that the right to receive

their share of equity would be forfeit absent compliance by December 31, 2016. 58

The parties do not dispute that Angel did not provide the requisite paperwork.59

Although the parties do dispute whether and when Angel received actual

notice, I accept, for purposes of this motion, the allegation that the notice was sent

to an ineffective email address for Angel’s agent, and that he never received that

notice. Angel alleges the Defendants breached a contractual duty to ensure that he

received both notice of the RO60 and his pro rata share of Warrior LLC equity,61 in

light of the fact that his lien against Debtor was cancelled.

The problem is, Angel is unable to identify the contract. He suggests that an

amorphous blend of the indenture agreement under which he became a debtor entity

Lienholder, the BC Order, Warrior LLC’s Operating Agreement, and equity, read

together, require that he receive both proper notice and his share of interest in

Warrior LLC; but he is unable to frame a cogent explanation of an actual contract,

express or implied, that was breached. The indemnification agreement between the

57 Compl. ¶¶ 34–36. 58 Compl. Ex. C, at 2. 59 See Compl. ¶ 58. 60 Compl. ¶ 80. 61 Compl. ¶ 81. 14 Lienholders and the Debtor does not bind Warrior LLC. The BC Order is a court

order, not a contract. And nothing in the LLC Operating Agreement provides for

distribution without documentation.

Angel does point out that the BC Order provides that Lienholders “shall

receive” equity in Warrior LLC.62 But, again, that assertion is not an allegation of

breach of contract, but rather a claim that the BC Order was breached.63 The BC

Order is, manifestly, not a contract. To the extent that Angel believes that any

defendant violated the BC Order, nothing in this decision is in prejudice of his right

to seek relief from the Bankruptcy Court. But to succeed under a contract theory, a

plaintiff must, at minimum, point to a meeting of the minds between the parties,

mutual consideration, and a promise to perform. Such a contractual relationship is

absent here. Finally, to the extent Angel makes a contractual argument as to the RO,

the Complaint fails to allege that Angel’s failure to pay—the fatal flaw to his

participation in the RO—was related to the inadequate notice. Angel returned the

62 Pl.’s Answering Br. to Defs.’ Mot. to Dismiss First Am. Compl. 14, Dkt. No. 68 [hereinafter “MTD AB”]. 63 To the extent that the Complaint argues that the decisions jointly made by the Steering Committee, the Indenture Trustees, and the trustees for the unsecured creditors to effectuate the BC Order were not followed, those allegations do not point to any agreement or understanding, the terms of which were breached. In other words, if the Complaint alleged that some parties created a contractual distribution protocol to which Angel was a party or third-party beneficiary, that was subsequently breached to Angel’s detriment, that could presumably state a claim. But such a protocol is not pled in the Complaint, nor can I infer such even at the pleadings stage, based on the allegations here. 15 requisite paperwork to participate in the RO in a timely fashion.64 The Complaint

does not explain why, or even assert that, the allegedly inadequate notice, sufficient

for his return of the requisite paperwork, was insufficient to allow him to pay for his

participation in the RO.

B. Count V, for breach of fiduciary duty, must be dismissed.

As with his breach of contract claim, Angel has failed to perfect this claim for

the most basic of reasons: here, a failure to establish fiduciary duty. Count V appears

to allege that the Steering Committee Defendants owed the Plaintiff fiduciary duties

because the Plaintiff was entitled to become an owner of Warrior LLC Class A units

and the Steering Committee Defendants were controlling equityholders of Warrior

LLC.65 In particular, the Complaint alleges: (1) that the Steering Committee

Defendants acted as the alter ego of Warrior, Inc., Warrior LLC, and Coal

Acquisition and, accordingly, owed the Plaintiff fiduciary duties by holding

themselves as acting on the behalf of the Lienholders;66 (2) that Warrior LLC’s

Operating Agreement provides for the same fiduciary duties that a Delaware

corporation owes;67 (3) that the Steering Committee Defendants controlled Warrior

LLC by virtue of their majority equity ownership;68 (4) that, by virtue of their control

64 Compl. ¶ 53. 65 See Compl. ¶¶ 93–96. 66 Compl. ¶ 93. 67 Compl. ¶ 94. 68 Compl. ¶ 95. 16 of Warrior LLC, the Steering Committee Defendants owed fiduciary duties to

Warrior LLC equityholders;69 and (5) that Angel was entitled to become such an

equityholder.70 Angel also alleges that he “reposed a special trust in the Steering

Committee to act in his best interest because the Steering Committee was privy to

non-public and highly detailed information concerning” the Debtor—a special trust

that “likewise gave rise to fiduciary duties.”71

None of these allegations suffice to establish fiduciary duties. A sufficient

pleading that the Steering Committee Defendants owe fiduciary duties to the Warrior

LLC equityholders requires two allegations: first, that the Steering Committee

Defendants acted in concert in “some legally significant way,” thus forming a

control group,72 and second, that they exerted control over the managers of Warrior

LLC.73 The former is alleged throughout the Complaint, albeit without any

specificity—in fact, the actions of individual members of the Steering Committee

69 Compl. ¶¶ 95–96. 70 Compl. ¶ 96. 71 Compl. ¶ 97. 72 In re Hansen Med., Inc. S’holders Litig., 2018 WL 3030808, at *5 (Del. Ch. June 18, 2018); Dubroff v. Wren Holdings, LLC, 2009 WL 1478697, at *3 (Del. Ch. May 22, 2009) (“Although a controlling shareholder is often a single entity or actor, Delaware case law has recognized that a number of shareholders, each of whom individually cannot exert control over the corporation (either through majority ownership or significant voting power coupled with formidable managerial power), can collectively form a control group where those shareholders are connected in some legally significant way[—]e.g., by contract, common ownership, agreement, or other arrangement[—]to work together toward a shared goal.” (italics added)). 73 Lacey on behalf of S. Copper Corp. v. Mota-Velasco, 2021 WL 508982, at *10 n.110 (Del. Ch. Feb. 11, 2021); Bay Ctr. Apartments Owner, LLC v. Emery Bay PKI, LLC, 2009 WL 1124451, at *9 (Del. Ch. Apr. 20, 2009) (“First, to have any fiduciary duties to an entity, the affiliate must exert control over the assets of that entity.”). 17 are never propounded. The latter determination—that the will of the managers of

Warrior LLC was overborne concerning the Distribution—is entirely absent from

the Complaint; indeed, the Complaint fails even to disclose the identities of the

Warrior LLC managers, much less how they were beholden or controlled by the

alleged control group. The Complaint utterly fails to show that the Steering

Committee Defendants, acting as a group, exerted their control to force Warrior LLC

to act concerning the Distribution.

Even assuming the Steering Committee Defendants seized control of Warrior

LLC with regard to the Distribution, the Complaint is silent as to what duty may

have been breached, other than failing to ensure that Angel received proper notice.

The Complaint alleges that the Steering Committee and fiduciaries for the creditors

agreed to a notice provision to implement the BC Order, that responsibility for such

notice was given to Warrior LLC (then-Coal Acquisition), and that Warrior LLC

delegated its notice responsibilities to an agent, KCC. KCC then sent Angel’s notice

to a bad email address. What duty was breached by the Steering Committee

Defendants in this scenario is not stated or implied in the Complaint.

Further, Angel’s allegations of breach of fiduciary duty in this regard fail for

one fundamental reason: he is not, and was not, an owner of Warrior LLC units. In

fact, the entire basis for Angel’s Complaint is that he never received that equity, even

though he was entitled to it. Thus, even if the Steering Committee Defendants did

18 owe fiduciary duties to Warrior LLC equityholders, those fiduciary duties would not

run to Angel, who was and is not a Warrior LLC equityholder.

Finally, Angel alleges that the Steering Committee Defendants owe him

fiduciary duties apart from their role as supposed Warrior LLC fiduciaries. He

alleges that he accorded the Steering Committee Defendants a “special trust,” in that

they had confidential information related to the transaction for the benefit of the

Lienholders.74 But it is implausible that the Debtor’s Lienholders reposed a special

trust in the Steering Committee Defendants. Rather, the Lienholders had their own

representatives that did owe them fiduciary duties and who participated in the

drafting and execution of the Distribution and RO participation procedures—the

Indenture Trustees.75 In fact, the Indenture Trustees—not the Steering Committee

Defendants—were responsible for preparing the February 25, 2016 CBEL cover

letter to the Lienholders.76 Angel has not sued the Indenture Trustees, even though

they signed off on the Distribution documentation requirements on his behalf.

Angel complains that, under the BC Order, he was entitled to Warrior LLC

equity; he criticizes the documentation requirement as unwarranted, but his real

complaint is that he failed to receive actual notice because that attempted notice—

with which he could easily have complied—was sent to the wrong email address.

74 Compl. ¶ 97. 75 Compl. ¶ 35; see Compl. ¶¶ 35–40. 76 Compl. ¶ 40. 19 That harm is not one that sounds in breach of fiduciary duty under the facts pled,

and Count V must be dismissed.

C. Count II, for conversion, must be dismissed.

Count II of the Complaint alleges that the Defendants wrongfully exerted

dominion over the Plaintiff’s “Warrior Class A and Class B Equity, Warrior

Common, and their pro rata share of the cash dividend paid in connection with the

IPO.”77 In other words, Count II alleges that the Defendants converted not only the

Plaintiff’s share of the First Lien Debt, but also (a) the Warrior LLC equity that his

share of the debt entitled him to under the Distribution; (b) whatever the Plaintiff

would have bought in the RO if he had, in fact, perfected his participation; and (c)

any benefits accruing from his resulting ownership of Warrior LLC equity.

The tort of conversion applies to goods held by another in which the plaintiff

has a present right of possession.78 In order to state a claim for conversion, then,

Angel must establish that he had a present right of possession in either the Class A

equity he would have received from the Distribution, or the Class B equity he would

have received from participating in the RO. He has failed to establish a present right

of possession of either.

77 Compl. ¶ 75 (italics added). 78 Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 889 (Del. Ch. 2009). 20 As to the Distribution, the Class A units were held by Warrior LLC; they were

not disbursed to Angel. The representatives of the Debtor’s stakeholders—including

the Indenture Trustees that represented Lienholders like Angel—agreed (per the

Complaint) that certain documentation must be returned by each of the Lienholders

in order to receive Warrior LLC equity under the Distribution.79 Angel failed to

return the requisite documentation before the forfeiture date; accordingly, he did not

have a present right of possession of Class A equity. There was no property of Angel

in hand that had been converted by Warrior LLC (now Warrior, Inc.). If Angel’s

forfeiture of the right to attain the equity was wrongful, the relief is not in conversion,

therefore.

As to the RO, again, the stakeholder representatives agreed that certain

documentation and payment must be received by a date certain—March 29, 2016.80

Angel provided the documents,81 but did not make payment.82 Because he did not

comply with the RO’s participation requirements, he does not have a present right

of possession of the Warrior LLC Class B equity that he would have purchased had

he tendered payment. Accordingly, Angel has failed to state a claim for conversion.

79 Compl. ¶¶ 35–38. 80 Compl. ¶ 46. 81 Compl. ¶ 53. 82 Compl. ¶ 53; MTD Tr. 14:23–15:1. 21 D. Count IV, for unjust enrichment, survives.

Unjust enrichment is an equitable remedy, applicable where, as here, a court

cannot identify a remedy at law.83 It further requires an enrichment, a related

impoverishment, and the absence of justification.84 This claim, alone, is well-pled.

Angel alleges that the Defendants were enriched, and he was impoverished,

because the Steering Committee Defendants and Warrior LLC caused his

entitlement to Warrior LLC equity—through his share of First Lien Debt—to be

extinguished.85 They did so, per Angel, by allowing their agent to attempt notice

using improper email addresses, thus failing to provide actual notice, and thereby

causing Angel to forfeit his entitlement to Warrior LLC equity under the

Distribution. The Complaint alleges that the use of the bad addresses was unjustified

and, perhaps, purposeful. As a result, Angel has lost his inchoate right to Warrior

LLC equity, and that equity remains with a Warrior entity or has been acquired by

the Steering Committee Defendants as part of their backstop commitment.86

I have found that the Plaintiff has failed to state a claim for breach of contract,

breach of fiduciary duty, or conversion. There does not, in my view, appear to be

adequate remedy at law. The Steering Committee Defendants and Warrior LLC

83 Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010). 84 Id. 85 Compl. ¶¶ 87–88. 86 The Complaint is silent as to the current owner of the equity—now converted to Warrior, Inc. stock—to which Angel was originally entitled. 22 (now Warrior, Inc.) have been enriched to Angel’s detriment, through their purchase

or retention of his forfeited Warrior LLC equity. Further, I note that it should have

been apparent to Warrior LLC that no reason existed for a Lienholder to fail to

provide documentation—which was the only step needed to receive the only possible

compensation for the Lienholders’ lost rights against the Debtor. If Angel proves

that the notice as given was wrongful, leading to the Defendants’ enrichment and

Angel’s impoverishment, an equitable claim to unjust enrichment will lie. I note

that this unjust enrichment claim can only apply to the Distribution, and not to the

RO, because, as noted above,87 the Complaint makes no allegation that inadequate

notice led to Angel’s failure to participate in the RO—i.e., his failure to pay.

E. Count I, for declaratory judgment, must be dismissed.

Finally, Angel makes a claim for a declaratory judgment that the Steering

Committee Defendants owed fiduciary duties to Angel, that those fiduciary duties

were breached, and that the Defendants impermissibly conditioned eligibility to

participate in the RO on receipt of the Distribution CBEL.88 I have already

determined, under the facts pled, that I cannot conclude that the Steering Committee

Defendants breached fiduciary duties to Angel. The declaratory-judgment analog of

that claim is moot. The final request for declaratory judgment is entirely duplicative

87 See Section II.A. supra. 88 Compl. ¶ 69. 23 of the unjust enrichment claim, and resolution of that claim will moot the declaratory

judgment claim.89 Accordingly, the Plaintiff’s count for declaratory judgment must

be dismissed.

III. CONCLUSION

For the foregoing reasons, the Motion to Dismiss is granted as to Counts I, II,

III, and V; it is denied as to Count IV. The parties should submit an appropriate

form of order.

89 Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2014 WL 6703980, at *29 (Del. Ch. Nov. 26, 2014), judgment entered, (Del. Ch. 2014). 24