IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
CHRISTOPHER KOSCHO, ) ) Plaintiff, ) v. ) C.A. No. N24C-12-106 PAW CCLD ) THE MERIT DISTRIBUTION ) GROUP, LLC and CZECH ASSET ) MANAGEMENT, L.P., ) ) Defendants. )
Submitted: June 20, 2025 Decided: September 29, 2025
MEMORANDUM OPINION
Upon Consideration of Defendant The Merit Distribution Group, LLC’s Motion to Dismiss Count I and Defendant Czech Asset Management, L.P.’s Motion to Dismiss Counts III and IV;
GRANTED.
Jonathan M. Stemerman, Esq.; Glen H. Waldman, Esq.; and Jeffrey R. Lam, Esq., of Armstrong Teasdale LLP, Attorneys for Plaintiff Christopher Koscho.
Lauren K. Neal, Esq.; and Sarah Carnahan, Esq., of Morris, Nichols, Arsht & Tunnell LLP; Alexandra Peurach, Esq., of Alston & Bird LLP, Attorneys for Defendant The Merit Distribution Group, LLC.
Rebecca L. Butcher, Esq.; and Howard W. Robertson IV, Esq., of Landis Rath & Cobb LLP, Attorneys for Defendant Czech Asset Management, L.P.
WINSTON, J. I. INTRODUCTION
Plaintiff initiated this litigation against the company for which he used to work
and the private credit manager that controls it. After the private credit manager took
control, the company terminated plaintiff’s employment. Plaintiff asserted that he
was entitled to benefits under two agreements with the company. The company
refused to pay those benefits, and plaintiff brought suit. Against the company, the
Complaint alleges two counts of breach of contract, one relating to an Employment
Agreement (Count I), the other to a Transaction Benefit Agreement (Count II).
Against the controller, the Complaint alleges two counts of tortious interference with
those contracts (Counts III and IV).
The company moves to dismiss Count I, and the controller moves to dismiss
Counts III and IV, each motion under Superior Court Civil Rule 12(b)(6). For the
reasons discussed below, the motions are GRANTED. Plaintiff fails to plead a
breach of the Employment Agreement because he failed to sign a release, which was
a condition precedent to the company’s obligation to pay the benefits he seeks.
Although plaintiff signed a modified version of the release, that version was not
“substantially in the form” of the release attached to the Employment Agreement, as
contractually required. Plaintiff also fails to plead that the controller tortiously
interfered with either of the two contracts because the Complaint lacks facts
sufficient to overcome the “affiliate privilege,” which requires Plaintiff to plead bad
2 faith. Only Count II, for breach of the Transaction Benefit Agreement against the
company, remains.
II. FACTUAL AND PROCEDURAL BACKGROUND1
A. THE EMPLOYMENT AGREEMENT
Defendant Merit Distribution Group, LLC (“Merit” or the “Company”) hired
plaintiff Christopher Koscho to serve as its Chief Executive Officer pursuant to an
Employment Agreement dated as of January 16, 2023 (the “Employment
Agreement”).2
Section 5 of the Employment Agreement sets forth the term of Koscho’s
employment. 3 Section 5(a) provides the circumstances in which Koscho’s
employment period would end. 4 Section 5(d) provides that in two of those
circumstances—“termination by the Company at any time without Cause” under
Section 5(a)(iii) or “resignation by [Koscho] with Good Reason” under Section
5(a)(iv)—Koscho is entitled to receive certain benefits from the Company.5 In full,
Section 5(d) provides:
1 The facts are drawn from the Complaint and the documents incorporated therein. The Court accepts as true the well-pled facts in the Complaint solely for the purposes of defendants’ motions to dismiss. 2 Compl. ¶ 8; see also Compl., Ex. A (hereinafter “Employment Agreement”). 3 Compl. ¶ 12. 4 Employment Agreement § 5(a). 5 Id. § 5(a), (d). 3 If the Employment Period is terminated pursuant to Section 5(a)(iii) or Section 5(a)(iv), [Koscho] shall be entitled to receive from the Company:
(i) The Accrued Benefits;
(ii) Subject to compliance with Section 5(f), the Prior Year Bonus; and
(iii) Subject to compliance with Section 5(f), for a period of twelve (12) months (the “Severance Period”), (A) continued payment of [Koscho’s] Base Salary (the “Severance Payments”), payable in regular installments in accordance with the Company’s general payroll practices; and (B) an amount sufficient, on an after-tax basis, to cover [Koscho’s] premium for family coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA Coverage”), payable over the Severance Period, unless during such period, [Koscho] undertakes employment which provides [Koscho] with access to group health plan coverage that is substantially equivalent or better than the group health plan coverage to which [Koscho] is entitled under the COBRA Coverage, in which case, all such payments shall terminate as of the first day of the month on which [Koscho] is eligible to participate in the group health plans of [Koscho’s] new employer (the “COBRA Subsidy”).6
Section 5(f) sets forth conditions precedent to Koscho’s entitlement to three
of the benefits listed in Section 5(d), namely: (1) the Prior Year Bonus, (2) the
6 Id. § 5(d). 4 Severance Payments, and (3) the COBRA Subsidy (together, the “Disputed
Severance Benefits”).7 Specifically, Section 5(f) provides:
To be eligible for the Prior Year Bonus, the Severance Payments and the COBRA Subsidiary set forth in Section 5(d), [Koscho] must meet the following conditions:
(i) Within thirty (30) days following termination, [Koscho] (or his estate, as applicable) must promptly sign, not revoke, and continue to honor an employment separation and release, substantially in the form attached as Exhibit A (the “Release”);
(ii) [Koscho’s] compliance with this Section (and the expiration of the seven-day revocation period required by the Older Workers Benefit Protection Act, or any similar mandatory revocation or waiting period, if applicable) shall be a condition to the Company’s obligation to make any Severance Payment under this Agreement; and
(iii) [Koscho] must comply with his continuing obligations under this Agreement and any similar agreements with the Company and its Subsidiaries. Should [Koscho] fail to comply with this Section, [Koscho] shall receive no further amounts under Section 5(d) of this Agreement.8
7 Id. § 5(f). Section 5(f) refers to the “COBRA Subsidiary.” No party disputes that this is a typo meant to refer to the COBRA Subsidy. 8 Id. § 5(f). 5 As referenced in Section 5(f)(i), the Employment Agreement attaches, as
Exhibit A, an unexecuted document titled “GENERAL RELEASE” (the “Exhibit A
Release”).9 The Exhibit A Release reads, in part:
Except as provided in Section 3 below, I knowingly and voluntarily (for myself, my heirs, executors, administrators and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, causes of action, cross- claims, counter-claims, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date on which I sign this General Release) and whether known or unknown, including, but not limited to, any allegation, claim or violation arising under or for: breach of contract; Title VII; the Age Discrimination in Employment Act as amended (including the Older Workers Benefit Protection Act); the Americans with Disabilities Act; the Employee Retirement Income Security Act; their state and/or local counterparts; or under any other federal, state, common or local law or theory (the “Claims”). I represent that I have made no assignment or transfer of any released claims.10
B. KOSCHO AND THE COMPANY ENTER INTO A TRANSACTION BONUS AGREEMENT AFTER CAM EXPRESSES INTEREST IN TAKING OVER.
About one year after he was hired, Koscho learned that Czech Asset
Management, L.P. (“CAM”), a private credit manager, was interested in taking over
the Company.11 Koscho began having discussions with the directors of Merit—
including CAM, which had a representative on Merit’s Board—in which Koscho
9 Employment Agreement, Ex. A (hereinafter “Exhibit A Release”). 10 Exhibit A Release § 2. 11 Compl. ¶ 15. 6 made clear he did not want to work for a lender-owned company such as CAM.12
Consistent with these discussions, Koscho and Merit negotiated an arm’s-length
transaction in the event there was change in control of Merit.13 On June 27, 2024,
Koscho and Merit entered into the Transaction Bonus Agreement (the “TBA”).14
The TBA provides, subject to certain terms and conditions, that Kosho would
be entitled to receive a “Transaction Bonus” from Merit in the event of a “Change
of Control” of the Company.15 Under Section 1 of the TBA, “the Transaction Bonus
shall be payable within (7) days after the Closing of the Change of Control.”16
C. CAM TAKES CONTROL OF MERIT, THE COMPANY TERMINATES KOSCHO, AND CONTRACTUAL DISPUTES ARISE.
In October 2024, CAM took control of Merit’s Board.17 The next month, the
Company terminated Koscho’s employment.18
After Koscho’s termination, CAM “attempted to have” Koscho sign a new
document titled “SEPARATION AGREEMENT AND RELEASE” (the “CAM
12 Id. ¶ 18, 22. 13 Id. ¶ 19. 14 Id. ¶ 20; see also Compl., Ex. B (hereinafter “TBA”). 15 TBA § 1. 16 Id. 17 Compl. ¶ 24. 18 Id. ¶ 25. 7 Release”). 19 The CAM Release differed from the Exhibit A Release, including
because it would have released not only Merit, but also CAM, from all claims.20 In
return for signing the CAM Release, Koscho would receive severance benefits.21
Koscho alleges that he was already entitled to severance benefits under the
Employment Agreement and therefore refused to sign this “self-serving document
prepared by CAM.”22
By mid-November, Merit had paid neither the Disputed Severance Benefits
under the Employment Agreement nor the Transaction Bonus under the TBA.23 At
that time, Koscho sent a Notice of Default to Merit, with a copy to CAM, regarding
the Company’s alleged failure to comply with the TBA.24 A few days later, Koscho
sent the Company an executed modified version of the Exhibit A Release (the
“Modified Release”).25 The Modified Release differed from the Exhibit A Release
in one respect—specifically, at the end of Section 2, which sets forth the scope of
19 Id. ¶ 26; Pl.’s Ans. Br. in Opp’n to Def. Czech Asset Management, L.P.’s Mot. to Dismiss Count III and Count IV of the Compl. (D.I. 20) (hereinafter “Ans. Br. to CAM’s Mot.”), Ex. 1. 20 Compl. ¶ 26. 21 Id. 22 Id. 23 Id. ¶¶ 27, 38. 24 Id. ¶ 28. 25 Compl. ¶ 29; Def.’s Op. Br. in Support of Mot. to Dismiss Count I of the Compl. (D.I. 15) (hereinafter “Merit Op. Br.”), Ex. 1 (hereinafter “Modified Release”) § 2. 8 the released claims, Koscho added a sentence: “The released Claims are related
solely to the Agreement and, in any event, do not include claims related to The
Transaction Bonus Agreement dated June 27, 2024.” 26 Koscho alleges that the
executed release he sent entitled him to benefits including the Disputed Severance
Benefits.27
Merit has notified Koscho it will not pay any benefits to him under the
Employment Agreement and has not paid the Transaction Bonus under the TBA.28
26 Modified Release § 2. The Court may consider the Modified Release on the present motions because it was incorporated by reference into and is integral to the Complaint. See Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 817-18 (Del. 2013); Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 797 (Del. Ch. 2016) (“The incorporation-by-reference doctrine permits a court to review the actual document to ensure that the plaintiff has not misrepresented its contents and that any inference the plaintiff seeks to have drawn is a reasonable one.” (citations omitted)), abrogated on other grounds by Tiger v. Boast Apparel, Inc., 214 A.3d 933 (Del. 2019). Moreover, no party objects to the Court’s consideration of the Modified Release. Merit attached the Modified Release as Exhibit 1 to its opening brief, and Koscho in his answering brief cited Merit’s opening brief Exhibit 1 as the release that he contends “entitl[es] him to” the Disputed Severance Benefits. See Pl.’s Ans. Br. in Opp’n to Def. The Merit Distribution Group, LLC’s Mot. to Dismiss Count I of the Compl. (D.I. 21) (hereinafter “Ans. Br. to Merit’s Mot.”) at 4-5. 27 Compl. ¶ 29. 28 Id. ¶¶ 30, 38, 44. 9 D. PROCEDURAL HISTORY
Koscho initiated this action by filing his Complaint on December 16, 2024.29
Merit filed a motion to dismiss Count I,30 and CAM filed a motion to dismiss Counts
III and IV.31 Koscho filed two answering briefs, one in opposition to Merit’s motion
and one in opposition to CAM’s motion, 32 and Merit and CAM each filed reply
briefs.33 The Court heard oral argument on June 20, 2025 and reserved its decision.
III. STANDARD OF REVIEW
Upon a Rule 12(b)(6) motion, the Court: (i) accepts all well-pleaded factual
allegations as true; (ii) credits vague allegations if they give the opposing party
notice of the claim; (iii) draws all reasonable inferences in favor of the non-moving
party; and (iv) denies dismissal if recovery on the claim is reasonably conceivable.34
The Court does not, however, accept conclusory allegations unsupported by the facts
or draw unreasonable inferences in favor of the nonmovant.35
29 See generally Compl. 30 D.I. 15. 31 D.I. 16. 32 D.I. 20; D.I. 21. 33 D.I. 23; D.I. 24. 34 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldg., LLC, 27 A.3d 531, 535 (Del. 2011) (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896 (Del. 2002)). 35 Windsor I, LLC v. CWCapital Asset Mgmt. LLC, 238 A.3d 863, 871 (Del. 2020) (citing Deuley v. DynCorp Int’l, Inc., 8 A.3d 1156, 1160 (Del. 2010)). 10 IV. ANALYSIS
Koscho’s Complaint brings two counts for breach of contract against Merit:
one for breach of the Employment Agreement (Count I), the other for breach of the
TBA (Count II).36 The Complaint also brings two counts for tortious interference
with contract against CAM, relating to the Employment Agreement (Count III) and
the TBA (Count IV).37
Merit moves to dismiss the claim for breach of the Employment Agreement
but not the claim for breach of the TBA. CAM moves to dismiss both claims for
tortious interference. The Court first addresses Merit’s argument that the Complaint
fails to state a claim for breach of the Employment Agreement. Then, the Court
addresses CAM’s arguments that the Complaint fails to state a claim for tortious
interference with either agreement.
A. COUNT I IS DISMISSED; UNDER THE UNAMBIGUOUS TERMS OF THE EMPLOYMENT AGREEMENT, KOSCHO FAILED TO SATISFY A CONDITION PRECEDENT TO THE DISPUTED SEVERANCE BENEFITS.
In Count I, Koscho alleges that Merit breached the Employment Agreement
by failing to pay him the Disputed Severance Benefits following his termination.38
Merit argues that Koscho is not entitled to the Disputed Severance Benefits because
36 See Compl. ¶¶ 33-45. 37 See id. ¶¶ 46-63. 38 See id. ¶¶ 29-31, 33-39. 11 he failed to satisfy a condition precedent to them—namely, that Koscho sign a
release “substantially in the form” of the Exhibit A Release.39 The parties do not
dispute that this is a condition precedent,40 meaning that if Koscho did not satisfy it,
then Merit was not obligated to perform and did not breach the contract. 41 Nor do
the parties dispute that, to the extent Koscho signed a release, it was only the
Modified Release, which differed from the Exhibit A Release.42 The only dispute is
whether the Modified Release was “substantially in the form” of the Exhibit A
Release, as required by the condition precedent. Merit contends that it was not, as a
matter of law.43 Koscho asserts that the dispute raises an issue of fact that the Court
cannot resolve at this stage.44
“[T]he proper interpretation of language in a contract is a question of law”
which may be decided on a motion to dismiss.45 Dismissal is warranted where the
39 See Merit Op. Br. at 11. 40 See id. at 1; see generally Ans. Br. to Merit’s Mot. 41 See Roth v. Sotera Health Co., 2024 WL 4260649, at *10 (Del. Ch. Sept. 23, 2024) (“A condition precedent ‘must be performed or happen before a duty of immediate performance arises on the promise which the condition qualifies.’” (quoting 13 Williston on Contracts § 38:7 (4th ed.) (Westlaw, May 2024 Update))). 42 See Merit Op. Br. at 7; Ans. Br. to Merit’s Mot. at 4. 43 See Merit Op Br. at 2-3, 11. 44 See Ans. Br. to Merit’s Mot. at 1, 6. 45 Allied Capital Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1030 (Del. Ch. 2006) (citing OSI Sys., Inc. v. Instrumentarium Corp., 892 A.2d 1086, 1090 (Del. Ch. 2006)). 12 contract’s terms are unambiguous and support the movant.46 “To determine whether
the contract is unambiguous, Delaware ‘adheres to the objective theory of
contracts.’”47 That means the Court will “interpret a particular contractual term to
mean ‘what a reasonable person in the position of the parties would have thought it
meant.’” 48 The Court must “read [the] contract as a whole and . . . give each
provision and term effect.”49 The Court will grant a motion to dismiss where “the
movant’s interpretation is ‘the only reasonable construction as a matter of law.’”50
The dispute here requires the Court to interpret contract language,
specifically, the language “substantially in the form.” It appears that Delaware
courts have not had occasion to interpret this language in the present context of
comparing a contractual release to a modified version of it.51 Accordingly, the Court
46 See Maka v. Musial, 2025 WL 1744936, at *3 (Del. Super. June 11, 2025). Vinton v. Grayson, 189 A.3d 695, 704 (Del. Super. 2018) (quoting Osborn ex rel. 47
Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010)). 48 Id. at 699 (quoting Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 740 (Del. 2006)). 49 Osborn, 991 A.2d at 1159. 50 Seaworld Entm’t, Inc. v. Andrews, 2023 WL 3563047, at *3 (Del. Ch. May 19, 2023) (quoting Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609, 613 (Del. 1996)), aff’d, 314 A.3d 662 (Del. 2024) (TABLE). 51 Roth involved nearly identical language in a very similar context, where a former officer was required to sign a release to be entitled to severance benefits. 2024 WL 4260649, at *10. But in Roth, the former officer did not sign any release. Id. The Court of Chancery thus did not need to determine whether a modified version of a release was “in substantially the form” of the release attached to the contract. Id. 13 looks to dictionary definitions52 and caselaw interpreting similar language. Itself
consulting dictionaries, the Court of Chancery observed that “substantial” means,
among other things, “being largely but not wholly that which is specified.”53 The
court observed further that “[s]ubstantially conveys the same meaning as
‘considerably’ and ‘essentially’ because it means ‘to a great extent or degree’ and
communicates that it is very nearly the same thing as the noun it acts upon.” 54
Black’s Law Dictionary defines “substantial” as, among other things, “[o]f, relating
to, or involving substance; material,” “[i]mportant, essential, and material; of real
worth and importance,” and “[c]ontaining the essence of a thing; conveying the right
idea even if not the exact details.”55 “In all their relevant meanings,” the Court of
Chancery has observed, “substantial and substantially convey the idea of amplitude,
52 See Stream TV Networks, Inc. v. SeeCubic, Inc., 279 A.3d 323, 339 (Del. 2022) (“[T]his Court ‘often looks to dictionaries to ascertain a term’s plain meaning.’” (quoting In re Solera Ins. Coverage Appeals, 240 A.3d 1121, 1132 (Del. 2020))). 53 Hollinger Inc. v. Hollinger Int’l, Inc., 858 A.2d 342, 377 (Del. Ch. 2004) (quoting Merriam-Webster On-Line Dictionary, http://www.m-w.com) (analyzing the meaning of “substantially all” under 8 Del. C. § 271 concerning the stockholder approval required for a sale of “all or substantially all” of a corporation’s assets), appeal refused, 871 A.2d 1128 (Del. 2004) (TABLE). 54 Id. at 377 (first quoting MSN Encarta Dictionary, http:// encarta.msn.com/encnet/features/dictionary/dictionaryhome.aspx; and then quoting http://www.dictionary.reference.com). 55 Substantial, Black’s Law Dictionary (12th ed. 2024). 14 of something that is ‘[c]onsiderable in importance, value, degree, amount, or
extent.’”56
It is also worth noting that, because these meanings of “substantial” evoke
comparisons between things, the proper criteria for comparison will depend on the
types of things being compared. In considering whether one apple is “substantially
similar to” or “substantially in the form” of another apple, for example, one might
properly consider the apples’ size, color, smell, taste, texture, or number of bruises.
None of those criteria are relevant when comparing contracts; a contract itself is
intangible, and the Court does not need to feel the texture of the paper on which a
contract is written, much less taste it. More relevant will be the scope of rights and
obligations that the contracts establish. And, zooming in further, which rights and
obligations are most important may depend on the type of contract and the context
of the parties’ bargain.
In sum, for the Modified Release to be “substantially in the form” of the
Exhibit A Release, the two must, at least, contain the same essence and not differ in
important or considerable ways. And when determining what is “essential” and what
differences are “important” or “considerable,” the Court takes into account that it is
56 Hollinger, 858 A.2d at 377 (citing American Heritage Dictionary 1727 (4th ed. 2000)). 15 comparing contractual releases. Based on these considerations, the Modified
Release is not “substantially in the form” of the Exhibit A Release.
The Exhibit A Release is a general release. It is titled as such and purports to
“release and forever discharge the Company and the other Released Parties from any
and all claims, causes of action, cross-claims, counter-claims, or liabilities of any
nature whatsoever in law and in equity, both past and present (through the date on
which I sign this General Release) and whether known or unknown, including, but
not limited to” several examples.57 As a general release, the Exhibit A Release was
“intended to cover everything—what the parties presently have in mind, as well as
what they do not have in mind.”58 Such a general release is “designed to provide
‘complete peace.’”59
The Modified Release differs from the Exhibit A Release in an important and
considerable respect, and the two releases do not contain the same essence. True,
the Modified Release only “added one sentence” to the Exhibit A Release,60 but in
57 Exhibit A Release § 2; see Riverbend Cmty., LLC v. Green Stone Eng’g, LLC, 55 A.3d 330, 333, 335 (Del. 2012) (holding similarly broad language constituted general release). 58 Corp. Prop. Assocs. 6 v. Hallwood Grp. Inc., 817 A.2d 777, 779 (Del. 2003) (quoting Hob Tea Room v. Miller, 89 A.2d 851, 856 (Del. 1952)). 59 See Seven Invs., LLC v. AD Capital, LLC, 32 A.3d 391, 397 (Del. Ch. 2011) (quoting In re Phila. Stock Exch., Inc., 945 A.2d 1123, 1137 (Del. 2008)). 60 See Ans. Br. to Merit’s Mot. at 10. 16 the contractual context, one sentence, even one word, can make all the difference.61
The sentence Koscho added is important. At the end of Section 2, which sets forth
the scope of the release, Koscho added: “The released Claims are related solely to
the Agreement and, in any event, do not include claims related to The Transaction
Bonus Agreement dated June 27, 2024.”62 In other words, whereas the Exhibit A
Release covers all claims to provide a complete peace between the parties, the
Modified Release does not cover all claims and does not provide assurance of a
complete peace. A general category of claims, those that are not “related solely to
the Agreement,” as well as a more specific category, those “related to [t]he [TBA],”
were carved out. The Modified Release’s change strikes at the core purpose of the
Exhibit A Release. The two releases are not considerably or essentially the same.
To avoid this result, Koscho argues that because “substantial” is “not an
absolute term” and “can be ambiguous,” interpreting it here requires a determination
of fact that the Court cannot make on this motion.63 The Court is not persuaded.
Koscho is right that “substantial,” like many other words, can be ambiguous in some
61 For an illustration of the difference a single word can make, consider what happens when “not” is added to almost any contract provision, such as the italicized in the following: “I do not release all claims.” This is not to say that adding a single word or sentence to a contract will always result in an important or considerable change. That will depend on the word or sentence, as well as the words directly around it and the contract as a whole. 62 Modified Release § 2. 63 See Ans. Br. to Merit’s Mot. at 10. 17 contexts. But the Court is not required to determine and apply the meaning of
“substantial” in all contexts; it is required to determine if, based on the contract and
claims at issue in this case, there is a reasonable interpretation under which the
plaintiff can recover.64 Koscho has not offered such an interpretation, and the Court
does not know of one.65 No reasonable person would consider the Modified Release,
which materially narrowed the scope of the released claims, to be “substantially in
the form” of the general Exhibit A Release. Accordingly, Koscho has failed to
satisfy the condition precedent to his receipt of the Disputed Severance Benefits, and
his claim for breach of the Employment Agreement is dismissed.
The Court, therefore, GRANTS Merit’s motion to dismiss Count I.66
64 See Weinberg v. Waystar, Inc., 294 A.3d 1039, 1043 (Del. 2023) (explaining that “[i]n giving sensible life to a real-world contract, courts must read the specific provisions of the contract in light of the entire contract” and that “[l]anguage is ambiguous if it is susceptible to more than one reasonable interpretation” (citations omitted)); Winshall, 76 A.3d at 813 (explaining that dismissal is appropriate if complaint does not “allege[] a reasonably conceivable set of facts under which the plaintiff would be entitled to relief” (citation omitted)). 65 Koscho offered two definitions of “substantial”: “[c]ontaining the essence of a thing; conveying the right idea even if not the exact details,” and “being largely but not wholly that which was specified.” Ans. Br. to Merit’s Mot. at 8 (first quoting Substantial, Black’s Law Dictionary (12th ed. 2024); and then quoting Substantial, Merriam-Webster, https://www.merriam-webster.com/dictionary/substantial (last accessed Mar. 24, 2025)). But the Court considered those definitions above and, even under them, no reasonable person would consider the Modified Release to be “substantially in the form” of the Exhibit A Release. 66 It is unclear whether Count I seeks payment of only the Disputed Severance Benefits or also the “Accrued Benefits.” The Complaint references Employment Agreement Section 5(d), which provides that, under certain circumstances, Koscho 18 B. COUNTS III AND IV ARE DISMISSED; THE COMPLAINT FAILS TO STATE A CLAIM FOR TORTIOUS INTERFERENCE BECAUSE IT DOES NOT ALLEGE FACTS TO OVERCOME THE AFFILIATE PRIVILEGE.
Counts III and IV are claims for tortious interference with contract against
CAM. Count III relates to the Employment Agreement, Count IV to the TBA. At
the outset, Count III can be dismissed because, as held above, the Complaint fails to
plead a breach of the Employment Agreement that underlies it. 67 Nonetheless,
because the law and many of the facts underlying Counts III and IV overlap, the
Court addresses additional arguments regarding both counts together below.
To state a claim for tortious interference with contract, a plaintiff must plead
five elements: “(1) a valid contract; (2) about which defendants knew; (3) an
intentional act that is a significant factor in causing the breach of such contract; (4)
would be entitled to not only the Disputed Severance Benefits, but also the Accrued Benefits. See Compl. ¶ 13. Although the Complaint focuses on the Disputed Severance Benefits, it leaves open that it may also seek other benefits under the Employment Agreement. See, e.g., id. ¶ 35 (alleging that Koscho “was entitled to certain benefits upon his termination without cause including [the Disputed Severance Benefits]” (emphasis added)). Merit moved to dismiss Count I on grounds that Koscho failed to satisfy the condition precedent in Section 5(f), but that condition precedent does not appear to apply to the Accrued Benefits. See Employment Agreement § 5(f). The parties did not brief whether Count I seeks the Accrued Benefits or, if it does, whether it states a claim to receive them. Accordingly, only to the extent it seeks the Accrued Benefits, Count I is dismissed without prejudice. 67 See, e.g., Buck v. Viking Hldg. Mgmt. Co. LLC, 2021 WL 673459, at *5 (Del. Super. Feb. 22, 2021) (“As explained, [plaintiff] has not sufficiently pleaded an underlying breach of the [contract]. That alone precludes [plaintiff] from maintaining the associated tortious interference claim.”). 19 without justification; (5) which causes injury.” 68 CAM’s motion to dismiss
challenges two of these elements: “justification” and “intentional act.”69 Here, the
“justification” element is dispositive.
CAM argues that the Complaint’s tortious interference claims are barred by
the “affiliate privilege” doctrine.70 That doctrine “shields an affiliate from primary
or vicarious tort liability for the breach of a contract to which the affiliate itself was
not a signatory.” 71 Courts assess the affiliate privilege under the “justification”
element because the doctrine balances value judgments about when a corporate
parent is “justified” in interfering with its subsidiary.72 The privilege arises from a
68 Beard Research, Inc. v. Kates, 8 A.3d 573, 605 (Del. Ch. 2010) (quoting AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 437 n.7 (Del. 2005)). 69 See Opening Br. in Support of Czech Asset Mgmt., L.P.’s Mot. to Dismiss Counts III and IV of the Compl. (D.I. 16) (hereinafter “CAM Op. Br.”) at 7. 70 See id. at 7. 71 Buck, 2021 WL 673459, at *6 (citing Surf’s Up Legacy P’rs, LLC v. Virgin Fest, 2021 WL 117036, at *7 (Del. Super. Jan. 13, 2021); Bhole, Inc. v. Shore Invs., Inc., 67 A.3d 444, 453 (Del. 2013); Shearin v. E.F. Hutton Grp., Inc., 652 A.2d 578, 591 (Del. Ch. 1994)). 72 See, e.g., id. at *6 (applying privilege as a “presumption that any interference [the corporate affiliate] may have undertaken was justified economically”); Surf’s Up, 2021 WL 117036, at *6 (explaining that privilege arises from “balanc[ing] important policies” to “evaluat[e] whether a controller’s interference was ‘unjustified’”); Shearin, 652 A.2d at 589-90 & n.13 (explaining that an intentional interference claim “inevitably involve[s] a complex normative judgment relating to justification” and that “the close economic relationship of related entities requires enhanced latitude in defining what ‘improper’ interactions would be” (citation omitted)). 20 presumption that a corporate parent is “‘pursuing its legitimate profit seeking’
interests ‘in good faith.’”73 But that presumption, and thus the privilege it underlies,
are not absolute. 74 At the pleading stage, the plaintiff may rebut the privilege by
“alleg[ing] facts that support a reasonable inference that the interference was
‘motivated by some malicious or other bad faith purpose’ rather than ‘to achieve
permissible financial goals.’”75
Under Delaware law, pleading bad faith is generally a high bar.76 So too in
the affiliate privilege context, where “courts are reluctant to find bad faith because
affiliate interference often is a legitimate business strategy.”77 Courts have found
bad faith adequately pled where the controller took action that harmed the subsidiary
in some way, such as by rendering it insolvent or decreasing its value.78
73 Surf’s Up, 2021 WL 117036, at *7 (quoting Shearin, 652 A.2d at 591). 74 Id. at *1, *7. 75 Bandera Master Fund LP v. Boardwalk Pipeline P’rs, LP, 2019 WL 4927053, at *27 (Del. Ch. Oct. 7, 2019) (quoting Shearin, 652 A.2d at 591). 76 See, e.g., In re Trade Desk, Inc. Derivative Litig., 2025 WL 503015, at *22 (Del. Ch. Feb. 14, 2025) (explaining that, in the corporate fiduciary duty context, pleading bad faith is “no easy task”). 77 Buck, 2021 WL 673459, at *6; Allied Capital, 910 A.2d at 1039 (noting that the bad faith standard is “stringent”). 78 See, e.g., Surf’s Up, 2021 WL 117036, at *9 (citing examples of cases that “involved insolvent breaching parties in which a controlling entity was alleged to have forced their insolvency by siphoning the breaching parties’ assets and arrogating those assets to itself”); Bandera, 2019 WL 4927053, at *27 (holding bad faith adequately pled because complaint alleged general partner took action “to drive down the price of [the partnership’s] common units” to benefit itself); AM Gen. 21 Here, Koscho agrees that CAM controlled Merit,79 so the affiliate privilege
will apply unless the Complaint pleads facts to support an inference of bad faith.
The Complaint does not do so. It alleges only that CAM knew of the relevant
agreements, sought to obtain a broad release for both itself and the Company, and
“tried to have Koscho tear up the TBA and waive his rights thereunder.”80 Obtaining
waivers of Koscho’s rights, under the TBA or more broadly, would be to the Merit’s
benefit, not detriment, because it could relieve Merit of potential liabilities. And
although the Complaint states that CAM engaged in “self-dealing” by seeking a
waiver for itself as well,81 it does not plead facts to support this contention or show
how Merit was harmed.82 Nor does the Complaint plead facts to suggest that CAM
was motivated to harm Koscho rather than to advance Merit’s and CAM’s joint
Hldgs. LLC v. Renco Grp., Inc., 2013 WL 5863010, at *13 (Del. Ch. Oct. 31, 2013) (citing further examples). 79 See Compl. ¶¶ 24-25, 49, 62; Ans. Br. to CAM’s Mot. at 10 (“Plaintiff has alleged that CAM had control of the Company and used its position to interfere with the valid agreement between the Company and Koscho.”). 80 Compl. ¶¶ 22, 26, 48, 51, 57-58. 81 Id. ¶ 51. 82 MHC IV, LLC v. TCFIV Venturi Buyer P, LLC, 2024 WL 5183211, at *4 (Del. Super. Dec. 19, 2024) (“Conclusory allegations . . . are insufficient to overcome the presumption the controllers were acting in good faith to maximize joint profits.” (citing Nivagen Pharm., Inc. v. Hikma Pharm. USA Inc., 2024 WL 1576519, at *4 (Del. Super. Apr. 11, 2024))); Buck, 2021 WL 673459, at *4 (“The Court need not strain to read an untold narrative into the complaint.” (citing Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001))). 22 business interests. Absent factual allegations about CAM’s motivations or acts that
harmed Merit, the Complaint cannot support an inference of bad faith.
Because the Complaint lacks any facts from which it could be inferred that
CAM acted in bad faith, the affiliate privilege applies, and Koscho has failed to plead
the “justification” element of tortious interference.83 The Court therefore GRANTS
CAM’s motion to dismiss Koscho’s tortious interferences claims (Counts III and
IV).84
V. CONCLUSION
For the foregoing reasons, the Court GRANTS Merit’s and CAM’s motions
to dismiss Counts I, III, and IV of the Complaint.
IT IS SO ORDERED.
/s/ Patricia A. Winston Patricia A. Winston, Judge
83 Koscho argues that, as a general matter, the Court cannot grant dismissal because the affiliate privilege is an affirmative defense that cannot be decided at the pleading stage. See Ans. Br. to CAM’s Mot. at 10-11. But that argument ignores the long line of cases dismissing tortious interference claims based on the affiliate privilege. See, e.g., Buck, 2021 WL 673459, at *7; Surf’s Up, 2021 WL 117036, at *9; AM Gen. Hldgs., 2013 WL 5863010, at *14. 84 Because Koscho failed to plead the “justification” element, the Court need not reach CAM’s additional argument for dismissal under the “intentional act” element. See CAM Op. Br. at 13-15. 23