Neil Smith v. Promonotory Financial Group, LLC

Opinion

COURT OF CHANCERY OF THE SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE VICE CHANCELLOR 34 THE CIRCLE GEORGETOWN, DELAWARE 19947

Date Submitted: October 23, 2019 Date Decided: October 24, 2019

David A. Jenkins, Esquire Bruce E. Jameson, Esquire Laurence V. Cronin, Esquire Eric J. Juray, Esquire Smith Katzenstein & Jenkins LLP Prickett, Jones & Elliott, P.A. 1000 West Street, Suite 1501 1310 North King Street Wilmington, DE 19899 Wilmington, DE 19801

Re: Neil Smith, et al. v. Promontory Financial Group, LLC, et al. Civil Action No. 11255-VCG

Dear Counsel:

This Letter Opinion addresses which Defendant, Promontory Financial

Group, LLC (“Promontory”) or Promontory Growth and Innovation, LLC (“PGI”),

must pay Plaintiff Neil Smith the amount owed pursuant to my April 30, 2019

Memorandum Opinion.1 I reserved judgment on this question at Oral Argument on

October 23, 2019.

The Letter of Intent (“LOI”) requires that Smith receive “over a period not to

exceed 5 years 50% of the then going business value of [PGI] minus [Smith’s]

services, the value to be decided between the parties at the time thereof.”2 However,

1 Mem. Op., D.I. 80. This Letter Opinion relies on the facts adopted in the Memorandum Opinion. 2 Id. at 6. the LOI does not specify who must pay Smith. The parties to the LOI were Smith

and Eugene Ludwig, the founder and CEO of Promontory. I find that Promontory,

as the assignee of Ludwig, is responsible for this payment.

Promontory, rather the PGI, must pay under the plain language of the LOI.

Under general contract principles, “only a party to a contract may be sued for breach

of that contract.”3 However, “[w]hen interpreting a contract, the Court will give

priority to the parties’ intentions as reflected in the four corners of the agreement.”4

The LOI specifies three events that trigger payment to Smith: death, incapacity or

voluntary withdrawal. In both the case of Smith’s death or incapacity, the LOI

explicitly made a non-party to the contract, PGI, liable for payment. The LOI did

not do so in the case of Smith’s voluntary withdrawal. In the absence of plain

language shifting responsibility for payment upon Smith’s voluntary withdrawal

from Promontory to PGI, I find no justification to hold PGI, a non-party, responsible

for such payment.

To the extent the foregoing requires an Order to take effect, IT IS SO

ORDERED.

3 Gotham Partners, L.P. v. Hallwood Realty Partners, L.P., 817 A.2d 160, 172 (Del. 2002) (quoting Wallace v. Wood, 752 A.2d 1175, 1180 (Del. Ch. Oct. 12, 1999)). 4 GMG Capital Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 779 (Del. 2012) (quoting Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009)). 2 Sincerely,

/s/ Sam Glasscock III

Sam Glasscock III