Prosser v. Pharmalogic Holdings Corp.

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

RODNEY PROSSER, individually ) and as Sellers’ Representative, ) FRANK RUDDY, and KOK ) C.A. No. N25C-08-284 MAA CCLD WAYNE WONG, ) ) Plaintiffs, ) ) v. ) ) PHARMALOGIC HOLDINGS ) CORP., ) ) Defendant. )

Submitted: April 22, 2026 Decided: July 7, 2026

Defendant’s Motion to Dismiss the Amended Complaint: GRANTED in part; DENIED in part.

MEMORANDUM OPINION

John H. Newcomer, Jr., Esquire, Kirsten A. Zeberkiewicz, Esquire, Barnaby Grzaslewicz, Esquire (Argued), Alena Smith, Esquire, MORRIS JAMES LLP, Wilmington, DE. Attorneys for Plaintiffs.

Ryan D. Stottmann, Esquire, Cassandra L. Baddorf, Esquire, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, DE; Joseph P. Rockers, Esquire (Argued), Brendan Blake, Esquire, GOODWIN PROCTER LLP, Boston, MA. Attorneys for Defendant PharmaLogic Holdings Corp.

Adams, J. INTRODUCTION

This action concerns a dispute between the buyer and sellers of a business

over a post-closing earnout scheme. The sellers contend the buyer changed the

operations of the business to reduce EBITDA and avoid an earnout payment, in

violation of the parties’ contract. The buyer moved to dismiss, contending the

sellers’ breach of contract claim is subject to an alternative dispute resolution

provision which requires resolution of the claim before an independent auditor, is

time barred, and fails to state a claim for which relief can be granted. For the reasons

explained herein, the Court disagrees with the buyer and denies the motion as to the

breach of contract claim.

Separately, the sellers bring a declaratory judgment claim seeking a

declaration that the buyer materially breached the parties’ contract and therefore the

sellers are excused from bringing their breach of contract claims before the

independent auditor. The buyer contends the sellers waived this argument by

continuing to perform under the contract after the purported material breach. The

Court agrees with the buyer but finds the relevant breach claim was nonetheless not

subject to the independent auditor’s review.

Finally, the sellers contend that the business sold to the buyer received tax

refunds for pre-closing tax payments and that the sellers are entitled to those refunds

because the business was treated a pass-through entity for taxation purposes.

1 Because the parties’ contract does not explicitly address this issue, sellers contend

their claims for the tax refund are viable pursuant to the implied covenant of good

faith and fair dealing’s gap-filling capabilities or the doctrine of unjust enrichment.

The buyer contends the existence of a contract which comprehensively addresses tax

issues precludes these claims. For the reasons explained herein, the Court agrees

with the buyer. This Memorandum Opinion resolves the buyer’s motion to dismiss.

FACTS

The factual background outlined herein is drawn from the Amended

Complaint, 1 accepting all well-pled allegations as true only for purposes of this

Motion, as is required for a Rule 12(b)(6) motion to dismiss.2 The Court will not

necessarily use terms like “alleged” throughout. The Court intends to convey no

agreement with the truth of the matters asserted in the Complaint. The veracity of

the Complaint’s allegations can be resolved after discovery.

I. The Parties

Plaintiffs Rodney Prosser, Frank Ruddy, and Kok Wayne Wong (“Plaintiffs”)

are individuals residing in New Jersey.3 Defendant PharmaLogic Holdings Corp. is

a Delaware Corporation (Defendant).4 Plaintiffs founded and developed a nuclear

1 D.I. 13. Citations to the Amended Complaint are in the form of “AC ¶ X.” Citations to exhibits to the Amended Complaint are in the form of “AC Ex. X.” 2 Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011). 3 AC ¶¶ 8-10. 4 Id. ¶ 11. 2 pharmacy business (the “Business”), which they sold to Defendant pursuant to the

Parties’ Securities Purchase Agreement (“SPA”).5 Under the SPA, Plaintiffs are the

“Sellers,” and Defendant is the “Buyer.”6

II. Plaintiffs sell the Business.

Plaintiffs operated the Business out of two pharmacy locations in New Jersey

and one in New York. 7 In 2015, Plaintiffs began contemplating retirement and

sought to sell the Business. 8 Plaintiffs and Defendant commenced negotiations

regarding a potential sale, ultimately culminating in the execution of the SPA on

March 20, 2020.9 The sale of the business closed on January 6, 2021.10

Under the SPA, Plaintiffs sold the Business for $30,000,000 plus an earnout

payment.11 Pursuant to the Earnout Provision, the SPA provides that, if the business

hit certain earnings before interest, taxes, depreciation, and amortization

(“EBITDA”) levels by a certain date (an earnout target), Plaintiffs would be entitled

to an additional payment. 12 Specifically for purposes of this action, the earnout

5 Id. ¶ 2. 6 Id. ¶¶ 8-11. 7 Id. ¶ 17. 8 Id. ¶ 18. 9 AC ¶ 22. 10 Id. 11 Id. ¶ 23; AC Ex. 1 (“SPA”) at 1. 12 SPA § 2.6. Section 2.6 provides, in part: if, during the Earnout Period, the Company achieves EBITDA greater than or equal to $7,000,000, but less than or equal to $7,499,999, Buyer shall pay to the Sellers’ Representative, for further distribution by the Sellers’ Representative to the Sellers in accordance with the allocations set forth on Schedule 2.3(c), $6,600,000, as an additional purchase price payment, pursuant to the procedures set forth in this 3 provision provided that, if the Business’s EBITDA, at the assessment date, lay

between $7 million and $7.5 million, Plaintiffs would be entitled to a earnout

payment of $6.6 million. 13 Pursuant to an amendment to the SPA, the relevant

earnout period after which the EBITDA would be assessed was defined as the twelve

months following July 1, 2021.14 During this earnout period, Defendant’s authority

to manage the Business was restricted, as they promised “to act in good faith and

operate the Business in a manner that is not designed or intended to impede or

interfere with EBTIDA and not take, or cause to be taken, any action intended to

decrease EBITDA.”15

Pursuant to the SPA, after the earnout period closed, Defendant was to present

an EBITDA calculation, “prepared in good faith,” to Plaintiffs “together with

reasonably detailed supporting documentation” (the “Earnout Statement”). 16

Plaintiffs would have the opportunity to dispute the Earnout Statement via a notice

of non-acceptance, potentially triggering resolution via an independent auditor. 17

Section 2.6;… if, during the Earnout Period, the Company achieves EBITDA greater than or equal to $7,500,000, but less than or equal to $7,999,999, Buyer shall pay to the Sellers’ Representative, for further distribution by the Sellers’ Representative to the Sellers in accordance with the allocations set forth on Schedule 2.3(c), $9,900,000, as an additional purchase price payment, pursuant to the procedures set forth in this Section 2.6;…et cetera. 13 SPA § 2.6(a)(i). 14 AC Ex. 2. 15 SPA § 2.6(e) (citation modified). 16 Id. § 2.6(b). 17 Id. § 2.6(c). 4 During the earnout period, Defendant was to provide Plaintiffs with (at least)

quarterly reports, including “a written statement showing an estimated calculation

of EBITDA based on the period beginning on the day after the Closing Date through

the date such quarterly estimate is provided, along with reasonable supporting

financial statements and…quarterly financial statements within twenty (20)

Business Days of quarter’s end.”18

If Plaintiffs disputed the EBITDA calculation and resulting earnout payment

proposed by Defendant, an independent auditor (the “Auditor”) would be employed

to resolve “any remaining disagreements in respect of the [Earnout] Statement” not

resolved by the Parties.19 Specifically, the Auditor would “act as an arbitrator to

determine…only the amounts of each component on the [Earnout] Statement

disputed” by Plaintiffs.20

The SPA also addressed issues regarding taxation of the Business. The SPA

contains a robust provision concerning “Tax Matters,”21 and contains a provision

requiring Plaintiffs to indemnify Defendant in the event the government concluded

Plaintiffs’ pre-closing tax payments on behalf of the business were deficient and

required a further payment.22 The Business, an S-corporation, operated as a pass-

18 Id. § 2.6(b). 19 Id. § 2.4(d). 20 Id. § 2.4(d)(iii). 21 SPA § 7.2 22 Id. § 9.2(a)(iii). 5 through entity for purposes of taxation, with the Plaintiffs being financially

responsible for the Business’s taxes before the sale.23

III. Defendant delivers the Earnout Statement, and disputes ensue.

On August 31, 2022, Defendant delivered its Earnout Statement, calculating

the Business’s EBITDA at $6.8 million—$200,000 short of the target which would

have qualified Plaintiffs to a $6.6 million earnout payment.24 The Earnout Statement

provided was a single-page document unaccompanied by analysis.25

Plaintiffs responded by requesting financial information for each of the

Business’s three locations.26 Prior to the sale, Plaintiffs had maintained financial

records such as balance sheets and general ledgers at the pharmacy site level for the

Business.27 The Parties commenced months of dialogue in which Plaintiffs sought

further information underlying the conclusions of the Earnout Statement and

Defendant failed to satisfy.28

On February 9, 2023, Defendant provided a spreadsheet supporting

Defendant’s Earnout Statement which revealed changes implemented during the

earnout period.29 Specifically, the data provided on February 9, 2023 showed that

23 AC ¶ 75. 24 AC Ex. 3. 25 Id. 26 AC ¶ 32. 27 Id. ¶ 61. 28 Id. ¶¶ 33-37. 29 Id. ¶¶ 38-39 6 the bad debt provided on the Business’s books was significantly higher than prior

years, that the Business had incurred expenses implementing a new 401K matching

program and bonuses for sales personnel, and had incurred over $170,000 of

additional expenses by changing to a new product supplier.30 Plaintiffs ultimately

determined that the increased bad debt was the result of a shift in the way bad debt

was accounted for on the Business’s books. 31 Plaintiffs requested site-specific

financial information, and were informed that the Business no longer maintained

site-specific balance sheets.32 Plaintiffs’ request for site-specific general ledgers was

ignored.33 After this exchange, Plaintiffs sent two letters to Defendant, explaining

they did not accept the Earnout Statement provided (the letters, together, the “Notice

of Non-Acceptance”).34 The Notice of Non-Acceptance identified specific issues

with the Earnout Statement, including those articulated above regarding the bad debt

accounting, 401k matching, sales personnel bonuses, change in supplier. 35 The

Notice of Non-Acceptance further reiterated the request for site-specific financial

records.36

30 Id. 31 Id. ¶¶ 65-66. 32 AC ¶ 40. 33 Id. 34 Id. ¶¶ 41-42. 35 AC Ex. 14. 36 Id. 7 The Parties attempted to resolve the dispute for more months and, ultimately,

years.37 During this period, Plaintiff Wong, who had stayed on as an employee of

the Business after closing, attempted to investigate the issues highlighted by

Plaintiffs. 38 Wong’s post-closing role in the Business’s sales department was

“strictly transitional,” and he was not provided with financial records pursuant to his

role.39 Wong was able to reconcile some of the Plaintiffs’ highlighted discrepancies

by investigating sales data.40

The Business incurred tax refunds related to tax overpayments made by

Plaintiffs before closing.41 Defendant retained these tax refunds, an act to which

Plaintiffs object.42

IV. Procedural History

On August 29, 2025, Plaintiffs filed the instant action.43 On October 27, 2025,

Defendant filed a motion to dismiss Plaintiffs’ Complaint.44

On November 19, 2025, Plaintiffs filed an Amended Complaint, claiming

Defendant breached Section 2.6(e) of the SPA (the provision providing that

37 See generally AC ¶¶ 44-55. 38 AC ¶ 49. 39 Id. 40 Id. 41 AC ¶¶ 77-96. 42 Id. ¶¶ 80, 87, 95-96. 43 D.I. 1. The initial complaint is dated August 29, 2025, but the online docket shows a filing date of September 8, 2025. The August 29, 2025 date is operative. 44 D.I. 9-10. 8 Defendant would operate the business in good faith and not take action to interfere

with the Business’s EBITDA) by (1) failing to maintain site-specific financial

records and (2) changing the Business’s “historical business, operations and

accounting practices to decrease the Company Group’s EBITDA” (Count I). 45

Plaintiffs further seek a declaratory judgment that (1) Defendant materially breached

the SPA by breaching Section 2.6(b) (which required Defendant to provide the

Earnout Statement in good faith and with “reasonably detailed supporting

documentation”); (2) Defendant’s material breach relieved Plaintiffs of the

obligation to follow the resolution via independent auditor provision in the SPA; and

(3) that Defendant needed to provide site-specific financial information in order to

comply with Section 2.6(b) (Count II).46 Finally, Plaintiffs claimed Defendant either

violated the SPA’s implied covenant of good faith and fair dealing (Count III) or was

unjustly enriched (Count IV) in retaining tax returns for pre-closing overpayments.47

Defendant moved to dismiss the Amended Complaint, contending Count I

must go before the Auditor pursuant to the SPA and that Counts I-IV fail to state a

claim for which relief can be granted. 48 Defendant’s motion to dismiss is fully

briefed.49 The Court heard oral argument on the motion to dismiss on March 23,

45 AC ¶ 101. 46 Id. ¶ 109. 47 Id. ¶¶ 110-141. 48 D.I. 16. 49 D.Is. 16, 18, 21. Citations to Defendant’s opening brief are in the form of “OB at X.” Citations to Plaintiffs’ answering brief are in the form of “AB at X.” Citations to exhibits to Plaintiffs’ 9 2026.50 On April 22, 2026, the Court received the transcript of the March 23, 2026

oral argument, and took the matter under advisement.51

LEGAL STANDARD

Defendant moves to dismiss the Amended Complaint pursuant to Rule

12(b)(1) and Rule 12(b)(6). 52 The “pleading standards governing the motion to

dismiss stage…are minimal.” 53 The court must “accept all well-pleaded factual

allegations in the [complaint] as true.”54 The court also must “read the complaint

generously” and construe all such allegations “in a light most favorable to the

[plaintiff].”55 The court “credits even vague allegations, so long as they provide the

opposing party notice of the claim;…gives the non-movant the benefit of all

reasonable factual inferences; and…denies the motion if recovery on the claim is

reasonably conceivable.”56 Dismissal pursuant to Rule 12(b)(6) is appropriate only

where a complaint is so deficient that the plaintiff “could not recover under any

reasonably conceivable set of circumstances susceptible of proof.”57

answering brief are in the form of “AB Ex. X.” Citations to Defendant’s reply brief are in the form of “RB at X.” 50 D.I. 26. 51 D.I. 27 52 D.I. 16. 53 Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011) (citation omitted). 54 Id. 55 Aramark US Offshore Servs., LLC v. Amity Lodges LTD, 2022 WL 17087052, at *1 (Del. Super. Nov. 21, 2022) (citing In re Tri-Star Pictures, Inc., Litig., 634 A.2d 319, 326 (Del. 1993), as corrected (Dec. 8, 1993)). 56 Agahi v. Kelly, 2024 WL 1134048, at *7 (Del. Super. Mar. 15, 2024). 57 Cent. Mortg., 27 A.3d at 536 (citation omitted). 10 Motions to dismiss in favor of alternative dispute resolution are commonly

addressed as motions to dismiss for lack of subject matter jurisdiction under Rule

12(b)(1).58 In resolving such a motion, the court may consider documents outside

of the complaint.59 The court will dismiss a complaint in favor of alternative dispute

resolution if the dispute, on its face, falls within the alternative dispute resolver’s

authority as provided in the relevant agreement between the parties.60

ANALYSIS

I. Count I is not dismissed.

Defendant argues Plaintiffs’ breach of contract claim should be dismissed in

favor of the SPA’s alternative dispute resolution provision.61 The SPA states that an

independent Auditor has the authority to resolve “only the amounts of the Earnout

Statement disputed” by Plaintiffs.62

The relevant alternative dispute resolution provision is not a true arbitration

provision, even though it refers to the Auditor acting as an “arbitrator.”63 Regardless

of the “label the parties use” for the Auditor, the Auditor’s role here is “far enough

58 See, e.g. Behm v. Am. Int’l Gp., Inc., 2013 WL 3981663, at *4 (Del. Super. July 30, 2013). 59 Id. (citation omitted). 60 Schwaber v. Margalit, 2022 WL 2719952, at *2 (Del. Ch. July 13, 2022) (citation omitted). 61 OB at 16. 62 SPA §§ 2.4(d)(iii), 2.6(c) (citation modified). 63 Id. § 2.4(d)(iii). 11 along the spectrum” of alternative dispute resolution provisions “that it is not legal

arbitration.”64

In arguing the instant breach of contract claim should be dismissed in favor of

resolution by the Auditor, Defendant highlights the two categories of issues raised

by Plaintiffs. 65 The first category is the “Books-and-Records Issue,” in which

Plaintiffs contend Defendant provided inadequate information supporting

Defendant’s Earnout calculation because the appropriate records did not exist.66 The

second category, in which Plaintiffs contend that Defendant improperly altered the

Business’s “historical business, operations, and accounting practices to decrease the

[Business’s] EBITDA,”67 is defined as the “Earnout Statement Issues.”68

1. The Books-and-Records Issue falls outside of the Auditor’s Authority.

Defendant contends the Auditor has the authority to resolve the Books-and-

Records Issue, as a dispute over the documents providing the basis for an EBITDA

calculation falls within both the Auditor’s contractual authority and professional

expertise.69 Defendant further contends Plaintiffs are engaging in artful pleading,

attempting to circumvent the Auditor by arguing Defendant failed to maintain

64 ArchKey Intermediate Holdings Inc. v. Mona, 302 A.3d 975, 994 (Del. Ch. 2023). 65 OB at 17. 66 Id. 67 AC ¶ 101. 68 OB at 17. 69 Id. at 18. 12 certain documentation instead of arguing Defendant failed to provide that

documentation.70

Plaintiffs contend the Books-and-Records Issue falls outside of the Auditor’s

limited contractual authority, which enables the Auditor to resolve “only the

amounts” in dispute.71

The Auditor’s authority is defined using “contract interpretation principles.”72

Accordingly, while the Auditor may have expertise in resolving issues over what

accounting documentation must be maintained by the Business, the language of the

SPA governs the Court’s analysis of this issue.

Both parties reference Katz v. Infusion Services Management, LLC,73 in which

this Court dismissed a post-closing “True-Up” dispute in favor of an independent

auditor.74 The Court has examined the SPA’s alternative dispute resolution provision

against that in Katz, and the two are very similar. In Katz, this Court sent disputes

regarding which records the buyer kept after closing to an independent auditor.75

The Katz provision, however, provided the auditor with the enumerated authority to

70 Id. at 20. 71 AB at 17. 72 Lytle v. Lytle Intermediate, LLC, 2026 WL 50135, at *5 (Del. Ch. Jan. 7, 2026) (citing Terrell v. Kiromic Biopharma, Inc., 297 A.3d 610, 619 (Del. 2023)). 73 2025 WL 2979825 (Del. Super. Oct. 22, 2025). 74 OB at 20; AB at 25. 75 2025 WL 2979825, at *2. 13 resolve disputes about what financial records should have been provided by the

buyer.76 This enumerated power is not provided to the Auditor in the SPA.

Defendant attempts to parry this point by noting that the Court did not rely on

this provision in resolving Katz.77 While it is true that this Court did not reference

(in its brief order) the Katz auditor’s enumerated authority to resolve disputes about

which records the buyer provided, the Court does not agree with Defendant’s

reasoning. Defendant essentially asks the Court to declare that two contracts—one

of which explicitly sends disputes about record keeping to an independent auditor

while the other does not—command the same result. Such an argument renders the

additional provision present in Katz but absent here redundant and superfluous.78

Accordingly, Katz is distinct from the instant case insofar as it allocates disputes

over record-keeping to an auditor, and reliance on Katz does not resolve the issue of

where the Books-and-Records Issue must be heard.

76 AB at 24 n. 64 (first citing AB Ex. A at 6-7 (the motion to dismiss answering brief prepared by the plaintiff in Katz, providing the language of the relevant provision from the Katz contract: “The Auditor shall have the authority (i) to determine if a party has complied with its obligations to provide access to the financial information required pursuant to this Section 2.9(d) and to order that a party comply with any such obligations, and (ii) to allow a party the right to amend any prior objection notice where it finds that such party had been prejudiced by the failure to have been provided access to such financial information.”); then citing AB Ex. B at 12:6 (from the hearing transcript from Katz, in which counsel paraphrased the language quoted above)). 77 RB at 4 n. 3. 78 Johnson & Johnson Fortis Advisors LLC, 352 A.3d 229, 265 (Del. 2026) (noting that the Court avoids interpretations of contracts which render terms superfluous (citations omitted)). 14 Defendant contends the SPA enables the Auditor to resolve “all such

disagreements” raised regarding the Earnout Statement and unresolved by the

Parties, not just the “amounts” in dispute.79 The Court instead agrees with Plaintiffs

that the SPA provides the Auditor with the authority to resolve “only the amounts”

disputed in the Earnout Statement.80 “Specific language in a contract controls over

general language, and where specific and general provisions conflict, the specific

provision ordinarily qualifies the meaning of the general one.”81 Defendant cites to

the broad, general language articulating the authority of the Auditor, but Plaintiffs

trump this by highlighting the more specific rule articulated in the alternative dispute

resolution provision. The Auditor here has the authority to resolve only the amounts

of the Earnout Statement which are disputed. “Thus, the [SPA] only contemplates

the [Auditor] performing certain calculations and not an investigation into whether

the parties otherwise complied with the [SPA].”82 The open question regarding the

Books-and-Records Issue is whether said Issue concerns a calculation problem or

some other issue.

The Books-and-Records Issue concerns Defendant’s decision to cease

maintaining accounting records for each site after acquiring the business to reduce

79 RB at 3 (citing SPA § 2.6(c)). 80 AB at 16 (citing SPA § 2.4(d)(iii) (which is incorporated by reference into SPA § 2.6(c)). 81 DCV Hldgs., Inc. v. ConAgra, Inc., 889 A.2d 954, 961 (Del. 2005). 82 Lytle, 2026 WL 50135, at *7. 15 the Business’s EBITDA.83 The issue presented here is not a calculation matter: it

concerns the factors which underly the EBITDA calculation inputs. Were the Court

to send this issue to the Auditor, the instant dispute would not be resolved, as the

Auditor would only be empowered to conduct an EBITDA calculation using the

records in existence, not ascertain whether a party otherwise breached the SPA by

failing to maintain those records in the first place. That question is a legal issue

suited for resolution by the Court and is not delegable because the parties did not

specifically allocate it to the Auditor, unlike in Katz.

This case is analogous to Bonola v. N. Am. Dental Mgmt., LLC.84 In Bonola,

the court explained that an alternative dispute resolution provision which allocated

calculation disputes to a neutral accountant did not enable the accountant to resolve

disputes concerning the provision of proper documentation. 85 This case is also

analogous to Lytle v. Lytle Intermediate, LLC.86 In Lytle, the court concluded that

the relevant alternative dispute resolution provision authorized the neutral

accountant to determine only the applicable earnout amount, which barred the court

from sending claims concerning the provision of proper documentation to the

accountant. 87 In both cases, as here, the relevant alternative dispute resolution

83 AB at 22. 84 2025 WL 3677422 (Del. Ch. Dec. 8, 2025) 85 Id. at *6 86 2026 WL 50135. 87 Id. at *7 16 provision enabled the accounting expert to resolve issues regarding the numerical

amount of the earnout, not ancillary disputes regarding one party’s provision of

proper documentation in support of their earnout calculation.

Defendant’s remaining arguments on this point are unavailing. Defendant

argues the Auditor is well suited to ascertain which financial records should have

been maintained and provided by Defendant, but this expertise does not override the

fact cont the SPA does not allocate the issue to the Auditor.88 While the Auditor is

an accounting expert, the Court is capable of resolving this legal issue.89

Defendant also argues the Books-and-Records Issue was raised in Plaintiffs’

Notice of Non-Acceptance and therefore should go to the Auditor.90 For this point

Defendant again cites Katz. 91 While this Court in Katz noted that the relevant

disputes were raised in the formal objection to the buyer’s true-up calculation, Katz

does not provide that the presence of an issue on such an objection is dispositive.

88 While in Katz the Court noted that the issues regarding which records were kept were “technical issues” in the auditor’s bailiwick, the scope of the auditor provision there was broader than here, as noted above. The mere presence of a technical issue is not sufficient to defeat the Court’s subject matter jurisdiction if the contract does not allocate that issue to alternative dispute resolution. 89 Defendant’s reliance on Dolce v. WTS Int’l, LLC is likewise unpersuasive. OB at 19 (citing 2024 WL 714128 (Del. Ch. Feb. 20, 2024)). Dolce did not address a situation in which a party allegedly breached the relevant contract by failing to keep proper records in the first instance. Instead, the Court only addressed a party’s failure to provide such records during the alternative dispute resolution process and held that failure did not preclude the applicability of said process “after [the defendant] provides the required information.” Dolce, 2024 WL 714128, at *3. The issue here is not whether Defendant’s failure to cooperate with the alternative dispute resolution process should excuse Plaintiffs from following that process (as in Dolce), it is that Defendant allegedly chose certain accounting practices to reduce EBITDA, an issue outside of the Auditor’s authority. 90 OB at 18-19. 91 OB at 19 (citing 2025 WL 2979825). 17 The Court looks to the language of the SPA itself to ascertain what issues go to the

Auditor, not the way Plaintiffs articulated their objection to the Earnout Statement.92

Regardless of which issues Plaintiffs identified in their Notice of Non-Acceptance,

the disputes in question must be subject to resolution by the Auditor to go the

Auditor. The Court will not use the Notice of Non-Acceptance’s text as grounds to

send additional disputes to the Auditor where the Parties contracted otherwise.

Plaintiffs’ Books-and-Records Issue is not mere pleading around the scope of

the Auditor’s authority.93 The SPA does not provide that issues regarding records

maintenance go to the Auditor, and the Court will not send said issue to the Auditor

for resolution.94

2. The Earnout Statement Issues fall outside of the Auditor’s authority.

Defendant argues resolution of the Earnout Statement Issues falls within the

exclusive authority of the Auditor.95 The Earnout Statement Issues refer to various

operational changes implemented after Defendant acquired the Business: (1)

92 Lytle, 2026 WL 50135, at *5 (citing Terrell, 297 A.3d at 619). 93 Stone v. Nationstar Mortg. LLC, 2020 WL 4037337, at *8 (Del. Ch. July 6, 2020) (“Delaware courts have rejected contractual parties’ efforts to plead around the scope of a third-party decision- maker's authority by couching delegable disputes in questions of law.” (citation omitted)). 94 AM Buyer LLC v. Argosy Inv. P’rs IV, L.P. is inapplicable. 2024 WL 4024980 (Del. Super. Sept. 3, 2024), aff’d sub nom. AM Buyer LLC v. Argosy Inv. P’rs IV, L.P, 345 A.3d 958 (Del. 2025). In AM Buyer, the court determined the independent accountant had authority to resolve “all disputes” concerning the earnout, not merely the amounts in question. Id. at *11. The independent accountant’s authority was thus broader than here, allowing for the resolution of broader ancillary issues. 95 OB at 20. 18 changing the Business’s bad debt policy, (2) offering the Business’s employees a

401K match, (3) paying sales personnel bonuses, and (4) switching to a new, more

expensive supplier.96 Plaintiffs contend these issues fall outside of the Auditor’s

authority.97

As already articulated, the language of the contract governs the scope of the

Auditor’s dispute resolution authority. 98 Here, the SPA enables the Auditor to

resolve “only the amounts” in dispute from the Earnout Statement.99

Defendant stretches the SPA’s alternative dispute resolution provision too far.

First, Defendant contends the SPA enables the Auditor to resolve all disputes

regarding the Earnout, not just the amounts in question, which the Court already

rejected above.100 Second, Defendant again highlights Plaintiffs’ identification of

the Earnout Statement Issues in Plaintiffs’ Notice of Non-Acceptance, but that is not

dispositive, as articulated above.101

Third, Defendant argues issues such as the bad debt policy concern technical

accounting issues suited to the Auditor’s expertise.102 The Court already explained

that the contract, not the Auditor’s expertise, governs the allocation of disputes.

96 Id. at 17. 97 AB at 16. 98 Lytle, 2026 WL 50135, at *5 (citing Terrell, 297 A.3d at 619). 99 SPA § 2.4(d)(iii). 100 OB at 21. 101 Id. 102 Id. 19 Further, Defendant misapprehends the allegation regarding the bad debt policy. As

Plaintiffs explain, the issue is not that the change to the bad debt policy violated an

accounting standard prescribed by the SPA.103 The issue is that, regardless if the

acceptability of the new policy under accounting principles, the change in policy

was implemented in order to reduce EBITDA and prevent an earnout payment, in

violation of the SPA’s mandate that Defendant not do so. 104 The reason for

Defendant’s conduct is operative here.

Here, Katz is again distinct, as the guardrails set to guide the buyer’s post-

closing conduct were limited to specifically required or prohibited actions.105 In

Katz, the relevant contract enabled the buyer to operate the business in its sole

discretion, without obligation to operate in such a way as to facilitate an earnout

beyond following the specific mandates on conduct outlined in the agreement.106

Plaintiffs’ claims do not target the specific misconduct—accounting or

otherwise—employed by Defendant: they target the reason that conduct was

implemented. The focus on the why driving Defendant’s actions takes this case

beyond the purview of the Auditor, unlike in Katz. In Katz, specific accounting

103 AB at 25. 104 Id. (citing SPA § 2.6(e)). 105 2025 WL 2979825 at *1. 106 AB Ex. A at 7 (briefing from Katz which quotes the relevant contract and identifies the broader discretion granted to the buyer: “Finally, the Purchase Agreement expressly afforded Vivo Infusion ‘the right to operate the Target Business in any way that [it] deems appropriate in [its] sole Discretion’ and made clear that it had ‘no obligation to operate the Target Business in order to achieve any payment of the True-Up Amount.’”). 20 practices were allegedly taken in direct violation of the guardrails established by the

contract, which dictated the appropriate accounting practices. 107 In Katz, the

conduct itself constituted the purported breach. Here, the contract does not identify

the specific actions allegedly taken by Defendant as wrongdoing. Instead, the SPA

says Defendant cannot take these actions to prevent an earnout payment, no matter

how facially valid the conduct may be. The intent behind Defendant’s actions gives

rise to the purported breach, not just the conduct.

This distinction reveals why the Auditor is not suited to resolve these issues,

as the Auditor could conclude the actions taken by Defendant were satisfactory as a

matter of accounting, but the Auditor would not have resolved the state of mind

issues underlying Defendant’s decisions and Plaintiffs’ breach claim. To the extent

Defendant asks the Court to dismiss the case so the Auditor can ascertain whether

Defendant took certain actions in bad faith, Defendant asks the Court to stretch the

alternative dispute resolution provision concerning “only the amounts” in dispute

beyond the breaking point.108

107 2025 WL 2979825. 108 The Court notes that the provision in Katz likewise gave the auditor authority to resolve “only the amounts” in dispute (alongside issues surrounding proper records production as discussed above). 2025 WL 2979825. There, the disputed conduct which the Court directed should go before the auditor concerned accounting philosophy and record keeping practices which allegedly directly violated the relevant agreement’s post-closing guardrails. See id. at *2. Accounting philosophy is not disputed here: Plaintiffs do not contend the accounting methodology was faulty, instead essentially contending that Defendant chose an accounting methodology which, while potentially valid, was chosen because it reduced EBITDA. Record keeping is disputed, but the special 21 Defendant’s decisions to offer the Business’s employees a 401K match, to pay

sales personnel bonuses, and to switch to a new supplier are not accounting issues.

True, these decisions influence the Business’s books (and Plaintiffs contend that

effect was the motivation which drove these decisions), but that does not change

their status as issues concerning the operation of the business rather than issues

concerning accounting methodology. In Katz, the Court held that the issues to be

sent to the auditor concerned “accounting practices”—not so with these issues.109

The real issue raised by the Earnout Statement Issues does not involve

accounting expertise or accounting calculations: it involves an analysis into the state

of mind of the Defendant in making certain operational decisions. This legal issue

is not suited for resolution by the Auditor, who is only allocated issues regarding the

amounts of the Earnout Statement. The Court cannot dismiss the breach of contract

claim, insofar as it concerns the Earnout Statement Issues, in favor of alternative

dispute resolution.

3. Count I states a claim for which relief can be granted.

Defendant argues Count I fails to state a claim for which relief can be

granted.110 This argument is brought pursuant to Rule 12(b)(6).111

provision enabling the auditor to resolve that issue in Katz is absent here. The difference in the alleged misconduct and distinct differences in the contracts distinguishes the two cases. 109 2025 WL 2979825 at *2. 110 OB at 22. 111 Id. 22 In Count I, Plaintiffs allege Defendant breached the SPA by taking actions

“designed or intended to decrease EBITDA,” further alleging the same actions “are

[not] actions taken in good faith.”112 The thrust of Plaintiffs’ complaint is the reason

Defendant took certain actions constitutes a breach of contract. This invokes the

even more limited pleading standard for intent and state of mind. Intent and state of

mind need only be averred generally,113 and bad faith can be alleged by showing

“facts related to the alleged act taken in bad faith, and a plausible motivation for

it.”114

Defendant argues the Books-and-Records Issue and Earnout Statement Issues

do not amount to breaches of the SPA.115 First, Defendant argues the Books-and-

Records Issue is based on the unreasonable conclusion that Defendant does not

maintain any balance sheets or general ledgers because it does not maintain such

records at the site-level.116 As Plaintiffs explain, they do not contend Defendant fails

to maintain any balance sheets or general ledgers, instead only arguing Defendant

fails to keep site-level financial records, as Plaintiffs did before the sale of the

Business.117 Crediting Plaintiffs’ clarification and the allegations in the Amended

112 AC ¶ 101 113 Del. Sup. Ct. Civ. R. 9(b). 114 Coca-Cola Beverages Fla. Hldgs., LLC v. Goins, 2019 WL 2366340, at *3 (Del. Ch. 2019) (quoting Clean Harbors, Inc. v. Safety-Kleen, Inc., 2011 WL 6793718, at *7 (Del. Ch. 2011)). 115 OB at 23. 116 Id. at 24. 117 AB at 27-29. 23 Complaint that Defendant admitted to not maintaining site-specific balance sheets

and ignored the request for site-specific general ledgers,118 the Court does not view

Plaintiffs’ proposed inference—that Defendant does not maintain site-specific

financial records119—as unreasonable, and will credit it for purposes of this motion

to dismiss.

Next, Defendant contends Plaintiffs fail to draw the connection explaining

why ceasing maintenance of site-specific financial records constitutes conduct taken

to interfere with the EBITDA calculation. 120 Plaintiffs contend site-specific

financial records are necessary for an accurate view of the business’s financial

performance, and the decision to deviate from this bookkeeping practice—a decision

taken during the earnout period when Defendant’s obligation to provide

documentation for the EBITDA analysis ripened—constitutes an act taken to impede

or interfere with the EBITDA calculation.121 The Court finds Plaintiffs’ conclusion

requires only a reasonable inference which Plaintiffs may potentially prove

following discovery.

The benchmark for pleadings in Delaware asks whether success on a claim is

possible.122 It is at least possible that Plaintiffs can prove that the change away from

118 AC ¶ 40. 119 AB at 29. 120 OB at 25. 121 AB at 27-28; AC ¶¶ 61-62 122 Cent. Mortg., 27 A.3d at 537 (reemphasizing the “reasonable ‘conceivability’” standard); id. at 537 n. 13 (“Our governing ‘conceivability’ standard is more akin to ‘possibility,’ while the federal 24 site-level accounting obfuscates the accuracy of an EBITDA calculation and that

Defendant thus chose to move away from that practice to enable an EBITDA

calculation which was lower than the reality for this business model. The Complaint

adequately pleads facts supporting this inference, showing Defendant’s decision to

move away from the old, purportedly superior practice, the relevant timing, and an

explanation as to motive: to avoid an earnout payment.123 This reasoning enables

the inference that Defendant chose a new, less accurate practice with deliberation.

Indeed, Plaintiffs’ proposal for Defendant’s motive is viable, as Plaintiffs

allege Defendant avoided a $6.6 million earnout payment by ensuring EBITDA fell

to within $200,000 below the earnout target—saving $6.6 million at the cost of less

than 200,000.124 Accordingly, Plaintiffs state a claim as to the Books-and-records

Issue.

Defendant next targets the Earnout Statement Issues, arguing that the Earnout

Statement Issues constitute “challenges to the calculations and methodology

reflected in the Earnout Statement,” not disputes concerning Defendant’s “operation

of the [Business] post-closing.”125 The Court disagrees, as articulated above. The

Earnout Statement Issues concern Defendant’s operations decisions after closing,

‘plausibility’ standard falls somewhere beyond mere ‘possibility’ but short of ‘probability.’” (citation omitted)). 123 AC ¶¶ 61-62. 124 AC ¶ 31 125 OB at 25. 25 and the relevant inquiry here is not just the actions taken, but why Defendant took

those actions. Defendant focuses on the effect these operations decisions have on

EBITDA, which goes to Plaintiffs’ claim for damages, but the breach is defined by

the intent behind Defendant’s choices.

Plaintiffs can state a claim for violation of a provision restricting Defendant’s

ability to take actions with a certain intention by alleging facially benign conduct

taken at a suspicious time for nefarious purposes. Plaintiffs have done so here.

Plaintiffs allege Defendant changed the bad debt accounting policy, implemented a

401K matching program, changed suppliers to a more expensive alternative, and

implemented sales bonuses after closing in order to reduce EBITDA and prevent an

earnout.126 In other words, Defendant is alleged to have undertaken unnecessary

expenses in order to save itself from a much higher earnout payment.127 It is possible

Plaintiffs’ theory is true, and that the suspicious timing of the operational changes is

not coincidental and violates Section 2.6(e)’s mandate that Defendant not

intentionally interfere with EBITDA during the earnout period.

Plaintiffs identify the objected-to conduct, the suspicious timing, and a motive

(which can be alleged generally)128—this is sufficient under Delaware’s minimal

126 AC ¶¶ 65-69. 127 AC ¶ 31 (explaining that Defendant avoided a $6.6 million dollar earnout payment because the EBITDA was $200,000 short of the target). 128 Del. Sup. Ct. Civ. R. 9(b). 26 pleading standard. Plaintiffs state a claim for breach via the Books-and-Records and

Earnout Statement Issues.

4. Discovery is necessary to ascertain whether Count I is barred by the statute of limitations. Defendant contends Count I is barred by the three-year statute of limitations

for breach of contract actions, as the alleged breach for which Plaintiffs sued accrued

in January 2022, over 3.5 years before Plaintiffs initiated this action.129 Plaintiffs

concede that the operative contractual provision expired in January 2022, and that

they filed this action over 3.5 years later.130 Plaintiffs argue the statute of limitations

is tolled by the inherently unknowable injury doctrine, as Plaintiffs could not have

known about their injury until at least August 31, 2022—when Defendant sent the

Earnout Statement.131

Motions to dismiss based on a statute of limitations are governed by the

principles of Rule 12(b)(6) articulated above 132 “Plaintiffs bear the burden of

pleading facts that allow a reasonable inference that the statute of limitations should

be tolled.”133 “[E]ven then, relief from the statute extends only to the point in time

when Plaintiffs were put on inquiry notice.” 134 “No theory will toll the statute

129 OB at 26 (citing 10 Del. C. § 8106). 130 AB at 31. 131 AB at 31. 132 See, e.g. Erisman v. Zaitsev, 2021 WL 6134034, at *1 (Del. Ch. Dec. 29, 2021) (noting that the motion to dismiss a time barred claim was brought under Rule 12(b)(6)). 133 Id. at *13 (citations omitted). 134 Id. 27 beyond the point where the plaintiff was objectively aware, or should have been

aware, of facts giving rise to the wrong.”135 Accordingly, the court must not only

assess whether the injury was inherently unknowable, but also “when (if ever) were

Plaintiffs on inquiry notice of their claims.”136

Plaintiffs contend their injury was inherently unknowable because Defendant,

not Plaintiffs, ran the Business and Defendant did not disclose the actions it was

taking until Plaintiffs received the Earnout Statement on August 31, 2022.137 The

Court credits this position. The allegations at issue concern operational decisions

implemented at the Business after Plaintiffs turned over control, and it is possible,

on this record, that Plaintiffs could not have known what decisions were being made,

as well as the effect of those decisions on EBITDA, until they received the Earnout

Statement. Plaintiffs satisfy the first half of the inquiry.

This issue is complicated by the fact Plaintiff Wong stayed on at the Business

after closing as an employee.138 Defendant argues Wong’s status at the Business

gave Plaintiffs inquiry notice regarding the operational changes about which they

now complain.139 Plaintiffs counter that Wong’s role was limited and he did not have

access to the financial and operations information which would have revealed

135 Id. (quoting In re Tyson Foods, Inc., 919 A.2d 563, 585 (Del. Ch. 2007)). 136 Id. (citation modified). 137 AB at 32; AC ¶ 30. 138 AC ¶ 48. 139 OB at 27. 28 Defendant’s alleged misconduct. 140 The Amended Complaint corroborates this,

alleging that Wong’s access to information was limited.141

On reply, Defendant contends the Plaintiffs overstate the extent to which

Wong was kept in the dark.142 Specifically, Defendant argues Wong should have

known about the implementation of 401K matching, sales personnel bonuses (as his

post-closing role was in sales), and the change in supplier (as he objected to the

change).143 Defendant’s argument asks the Court to make inferences against the

non-moving party, in violation of the Rule 12(b)(6) standard of review.144

On the 401K matching, Defendant asks the Court to accept, in the absence of

a record, that because Defendant implemented 401K matching, Wong must have

known about it. The Court is not persuaded the issue is ripe for resolution. Factual

issues remain regarding what Wong was told about the 401K matching program and

when. Further, the record does not indicate that Wong should have drawn the

connection between the implementation of such a program and the failure to meet

the earnout target.

140 AB at 32-33. 141 AC ¶ 49. 142 RB at 11. 143 Id. 144 Agahi v. Kelly, 2024 WL 1134048, at *7 (Del. Super. Mar. 15, 2024) (noting that all reasonable factual inferences should be drawn in favor of the non-moving party in a Rule 12(b)(6) standard of review). 29 Even if Wong knew about the 401K matching, he may not have known that

the program was a significant contributor to lowering EBITDA below the earnout

threshold, since he lacked access to detailed financial information in his role at the

Business.145 As noted above, the thrust of Plaintiffs breach claim is not just the

actions taken by Defendant of which Plaintiffs may or may not have been aware, but

also the intent behind those actions and how those actions effected EBITDA.

The same issues block Defendant’s arguments regarding the sales bonuses and

change in suppliers. The record does not identify when Wong knew about these

changes or identify why Wong should have known these expenditures would prevent

the earnout.146 Essentially, Defendant’s argument asks the Court to expect Wong to

have raised complaints about every major expenditure taken by the company because

he should have known the expenditures were implemented to prevent Plaintiffs from

receiving an earnout payment. The Court is not, at this stage in the proceedings,

persuaded this is reasonable.

Defendant argues that Wong had access to sufficient financial information

such that he could have identified Plaintiffs injury before the Earnout Statement was

145 AC ¶ 49. 146 The Amended Complaint notes that Wong requested that Defendant switch suppliers back to the prior, cheaper option, but does not articulate when he asked this. AC ¶ 39. He could have asked after the Earnout Statement put Plaintiffs on notice of Defendant’s alleged breach. Further, his request to switch back to the other supplier, even if it predates the Earnout Statement, does not illustrate his knowledge that the choice of new supplier served to eliminate the potential for a forthcoming earnout payment. 30 delivered.147 Again, Defendant asks the Court to make a factual leap unpermitted by

Rule 12(b)(6). The Amended Complaint pleads Wong had access to some of the

Business’s sales data,148 but that does not enable the Court to infer that the data Wong

accessed was sufficiently robust such that it enabled him to identify both the

operational changes at issue and their resulting effect on EBITDA. Defendant

further argues the SPA gave Plaintiffs information rights, including the right to

access quarterly reports, 149 but the Amended Complaint does not indicate what

information was provided via those documents, preventing the Court from

ascertaining whether the quarterly reports put Plaintiffs on inquiry notice of

Defendant’s breaches.150

147 RB at 12. 148 AC ¶¶ 48-49 149 RB at 12-13 (citing SPA § 2.6(b)). 150 Defendant cites HUMC Holdco, LLC v. MPT of Hoboken TRS, LLC, in which the Court of Chancery dismissed a counterclaim as barred by laches, employing a statute of limitations by analogy. 2022 WL 3010640, at *10-15 (Del. Ch. July 29, 2022). The court in HUMC relied on Vice Chancellor Slights’ opinion in AM Gen. Hldgs. LLC v. The Renco Gp., Inc. for the proposition that information rights in a contract prevent the tolling of a statute of limitations, since the information provided by the contract would reveal the relevant wrongdoing. 2016 WL 4440476 (Del. Ch. Aug. 22, 2016). In Renco and HUMC, the plaintiffs alleged their information rights were wrongly blocked by the defendant, and the court explained that, as soon as the defendant blocked the plaintiffs’ information rights, the plaintiffs were no longer blamelessly ignorant of the defendants’ wrongdoing. HUMC, 2022 WL 3010640, at *14 (citing Renco, 2016 WL 4440476, at *15). The issue here is not that the defendant allegedly blocked the plaintiffs’ information rights prior to delivering the Earnout Statement, it is that the Court cannot ascertain what information was provided by Defendant. Discovery will clarify what information Plaintiffs received and whether that information put them on inquiry notice of Defendant’s misconduct.

Erisman v. Zaitsev is likewise inapposite, as there tolling was barred because the misconduct would have been revealed had the plaintiffs invoked their rights under the relevant agreements (which they failed to do) or had simply observed obvious phenomenon. 2021 WL 6134034, at *13-14 (Del. Ch. Dec. 29, 2021). Because the Court here does not yet know what financial information 31 Factual issues block resolution on whether Plaintiffs were on inquiry notice

of Defendant’s breaches before Plaintiffs received the Earnout Statement in 2022.

Accordingly, Plaintiffs have pled sufficient facts to enable the Court to make the

reasonable inference that tolling is appropriate. The Court may revisit this issue after

discovery reveals further information.

II. Count II is dismissed in part.

Defendant contends Plaintiffs’ declaratory judgment claim should be

dismissed.151 In Count II, Plaintiffs essentially seek a three part declaration: (1) that

Defendant materially breached the SPA by providing an Earnout Statement which

was neither prepared in good faith nor accompanied by reasonably detailed

supporting documentation; (2) that Defendant’s material breach obviates the need to

follow the provisions in the SPA sending claims to the Auditor; and (3) that Plaintiffs

are entitled to site-specific financial records which Defendant must provide in order

to cure its material breach.152

Defendant focuses on Plaintiffs’ allegation of material breach, contending

Plaintiffs cannot claim a material breach of the SPA since they continued to perform

was received by Plaintiffs and whether the circumstances surrounding Defendant’s facially innocuous conduct revealed obvious wrongdoing, factual issues prevent a finding as in Erisman.

After trial, the record may yet show, by a preponderance of the evidence, that Plaintiffs’ claim is barred by the statute of limitations. See Weinstein v. Luxeyard, Inc., 2022 WL 130973, at *4 (Del. Super. Jan. 14, 2022) (holding plaintiff’s claims were barred by statute of limitations post-trial). 151 OB at 27. 152 AC ¶ 109. 32 under the contract after the alleged material breach.153 Plaintiffs counter they are not

asserting a material breach while simultaneously seeking to enforce a benefit

provided under the SPA.154

The Court agrees with Defendant: Plaintiffs cannot argue that the SPA was

materially breached when Defendant provided the Earnout Statement because they

subsequently operated as though the contract was still in effect.

As the Court of Chancery explained in Post Holdings, Inc. v. NPE Seller Rep

LLC, when a party suffers a material breach by the other party, they must choose to

continue performing the contract or cease performing and sue for total breach.155 A

party cannot indicate an intention to continue operating under the contract and then

reverse course and argue the contract should no longer be enforced against them

because of the counterparty’s breach.156

Here, Plaintiffs seek the Court’s declaration that the alternative dispute

resolution procedure no longer binds Plaintiffs because of Defendant’s material

breach. Plaintiffs’ argument fails because Plaintiffs continued to operate as though

the contract was still in effect, negotiating with Defendant over the information

Defendant would provide pursuant to contractual obligations and submitting the

153 OB at 28. 154 AB at 36. 155 2018 WL 5429833, at *5 (Del. Ch. Oct. 29, 2018) (citing 14 Williston on Contracts § 43.15 (4th ed. 2018)) 156 Id. 33 Notice of Non-Acceptance of the Earnout Statement.157 Post Holdings is on point,

as Plaintiffs continued to operate under the SPA and now allege the SPA is still a

valid contract,158 evincing their intention to enforce the SPA rather than seek to void

its mandates.159 Plaintiffs cannot seek to have their obligations under the SPA lifted

by reason of Defendant’s purported material breach—they have waived that power,

to the extent they had it.160

Plaintiffs contend Defendant is trying to simultaneously argue the contractual

disputes in this case must go before the Auditor while also arguing the time for the

Auditor to resolve this case has passed.161 Defendant responds that this argument is

unripe, as Defendant has not tried to argue that Plaintiffs waived the right to bring

their claims before the Auditor.162

The Court need not wade deep into this line of argument. As articulated

above, the Books-and-Records Issue (along with other issues concerning

Defendant’s obligations to provide financial records supporting their Earnout

157 See e.g. AC ¶¶ 32-41. 158 AC ¶ 98. 159 Post Hldgs., Inc. v. NPE Seller Rep LLC, 2018 WL 5429833, at *5 (Del. Ch. Oct. 29, 2018) (rejecting material breach claim where the plaintiffs alleged that the contract in question is a “valid, binding and legally enforceable written contract.”). 160 Defendant also argues the alleged breach cannot be declared material. OB at 29. This argument is mooted by the Court’s finding that Plaintiffs waived their right to terminate because of the alleged material breach. Because Plaintiffs cannot terminate their obligations under the SPA, Defendant’s argument that the breach is immaterial has become immaterial. 161 AB at 34-35. 162 RB at 16-17. 34 Statement) and the Earnout Statement Issues are not subject to resolution by the

Auditor.163

Of the questions presented by Plaintiffs’ Count II, the only portion which the

Court could address (given Plaintiffs’ waiver of the right to terminate the agreement

for alleged material breach and avoid its contractual obligations) is the question of

whether the failure to provide site-specific financial information in support of

Defendant’s EBTIDA calculation constitutes a breach (materiality notwithstanding)

of the SPA’s provisions governing the information Defendant would provide with

the Earnout Statement. This declaration would not provide Plaintiffs with any

substantive remedy, as Count II is not styled as a breach of contract claim for

damages. Accordingly, the parties are directed to meet and confer regarding how

Count II should proceed, considering the Court’s findings herein, and articulate

positions within 30 days of this Memorandum Opinion’s publication.

III. Count III is dismissed.

Defendant argues Count III, in which Plaintiffs allege a breach implied

covenant of good faith and fair dealing, should be dismissed. 164 In Count III,

Plaintiffs allege there is a gap in the SPA: the SPA provides Plaintiffs are responsible

163 See Supra § I. 164 OB at 30. 35 for underpaid taxes before the acquisition,165 but does not explicitly address what

happens if Plaintiffs overpay taxes before the acquisition, resulting in a refund.166

Defendant contends this claim fails because the SPA addresses the treatment

of taxes but does not provide for Plaintiffs to receive tax refunds, so Plaintiffs cannot

seek to rewrite the SPA using the implied covenant. 167 Essentially, Defendant

contends the SPA’s silence on the treatment of tax refunds is a deliberate omission,

not a gap for the Court to fill. Plaintiffs argue the economic realities of the instant

pass-through entity—in which the owners are financially responsible for the entity’s

taxes and should therefore receive any refund—support the logical inference that the

SPA contains an unintentional gap to be filled, positing that the parties “did not

‘anticipate’ refunds.”168

Plaintiffs overstep the bounds of the implied covenant. Under Delaware law,

every contract contains an implied covenant of good faith and fair dealing. 169 The

implied covenant can only fill “gaps” in a contract to accommodate a factual

development that “could not be anticipated, not developments that the parties simply

failed to consider.”170 The potential for overpayment of taxes and a subsequent

165 AC ¶ 113 (citing SPA § 9.2) 166 Id. ¶ 114. 167 OB at 30. 168 AB at 40-41. 169 Johnson & Johnson v. Fortis Advisors LLC, 352 A.3d 229, 251 (Del. 2026) (citation omitted). 170 Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010) (citation omitted, emphasis added); See also Johnson & Johnson v. Fortis, 352 A.3d at 255 (restating the principles articulated in Nemec while noting “hindsight cannot correct oversight”). 36 refund was fully anticipatable by the parties: far from being unheard of, tax refunds

are a common occurrence. Accordingly, the Court cannot fill in the purported “gap”

suggested by Plaintiffs here.

Indeed, the language of the SPA itself indicates the parties did anticipate tax

issues, supporting the Court’s view that the relevant development could have been

anticipated. Section 7.2 provides a robust provision addressing the various tax

concerns of the deal.171 Section 9.2(a)(iii) provides that Plaintiffs will indemnify

Defendant for underpaid taxes.172 Clearly, the parties anticipated issues surrounding

taxation and addressed what would happen in the event of underpayment. Taxes can

be paid exactly, overpaid, or underpaid; all three options are predictable. The SPA’s

silence as to what would happen in the event of overpayment therefore does not

constitute an unforeseeable development, instead constituting an omission which

cannot be altered.

By emphasizing the economic realities of a pass-through entity in order to

advocate for the provision of the tax refund to Plaintiffs, Plaintiffs ask the Court to

“rebalance[e] economic interests after events that could have been anticipated, but

were not, that later adversely affected one party to a contract.”173 The Supreme

171 SPA § 7.2. 172 Id. § 9.2(a)(iii). 173 Nemec, 991 A.2d at 1128; See also Johnson & Johnson v. Fortis, 352 A.3d at 255 (restating the principles articulated in Nemec while noting “hindsight cannot correct oversight”). 37 Court of Delaware, in Johnson & Johnson v. Fortis, reiterated that the implied

covenant cannot be employed in this way. 174 While the Court recognizes the

economic realities of taxation of pass-through entities, the Court cannot rewrite the

Parties’ agreement and grant the tax refund to the Plaintiffs where a tax refund was

predictable but the parties elected not to provide that it would go to Plaintiffs.

Instead, the Court assumes the Plaintiffs could and should have acknowledged the

possibility for a tax refund during negotiations over the SPA and chose not to push

to have a refund released to Plaintiffs: potentially a bargaining-table concession that

the Court will not reverse here. Plaintiffs’ implied covenant claim fails and is

dismissed.

IV. Count IV is dismissed.

Defendant seeks dismissal of Plaintiffs’ unjust enrichment claim, which is

pled in the alternative to Plaintiffs’ implied covenant claim.175 Defendant contends

the SPA governs the Parties’ relationship on this issue, necessitating dismissal of the

unjust enrichment claim.176 Plaintiffs contend the SPA’s silence as to the treatment

of a tax refund indicates the SPA does not govern the parties relationship on this

issue, enabling the bringing of the unjust enrichment claim.177

174 Johnson & Johnson v. Fortis, 352 A.3d at 255. 175 OB at 31. 176 OB at 31. 177 AB at 41-43. 38 “A claim for unjust enrichment must be dismissed if there is a contract that

governs the relationship between parties that gives rise to the unjust enrichment

claim.” 178 Courts have allowed unjust enrichment claims to proceed where an

express contract does not “adequately address the parties’ rights and duties at

issue.”179

The SPA, by Plaintiffs’ own admission, “comprehensively addresses” the

treatment of pre-closing taxes.180 Plaintiffs’ unjust enrichment claim is thus belied

by their own contention: if the SPA comprehensively addresses tax issues, it cannot

fail to adequately address the parties’ rights and duties regarding tax issues. The

Parties could have addressed what would happen if the pre-closing taxes were

overpaid (a predictable development) and either chose not to or failed to do so.

Essentially, by bringing an unjust enrichment claim in the alternative to the

implied covenant claim, Plaintiffs seek to circumvent the Supreme Court of

Delaware’s guidance that the implied covenant cannot be used to rebalance

economic interests after a contract is executed.181 The Court will not condone this

loophole. The unjust enrichment claim fails for the same reason as the implied

covenant claim: the parties could have included a provision remitting a refund to

178 Talkdesk, Inc. v. DM Trans, LLC, 2024 WL 2799307, at *11 (Del. Super. May 31, 2024) (citation modified). 179 Avantix Lab’ys, Inc. v. Pharmion, LLC, 2012 WL 2309981, at *12 (Del. Super. June 18, 2012). 180 AB at 39. 181 Nemec, 991 A.2d at 1128; See also Johnson & Johnson v. Fortis, 352 A.3d at 255 (restating the principles articulated in Nemec while noting “hindsight cannot correct oversight”). 39 Plaintiffs but did not do so, and the Court will not rewrite the deal in order to correct

this purported oversight. Effectively, there is no gap to fill in the SPA on this issue,

so the SPA comprehensively addresses the relationship of the Parties on this issue,

necessitating dismissal. Count IV is dismissed.

CONCLUSION

For the reasons explained above, Defendant’s Motion to Dismiss is

GRANTED in part and DENIED in part. Specifically, the Court DENIES the

Motion as to Count I, GRANTS the Motion as to Count III and IV, and GRANTS

IN PART the Motion as to Count II. The Parties are directed to meet and confer

regarding unresolved issues for Count II and provide a joint letter within 30 days of

this Memorandum Opinion.

IT IS SO ORDERED.