IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
SUN LIFE ASSURANCE
COMPANY OF CANADA - U.S.
OPERATIONS HOLDINGS, INC.,
Plaintiff,
V. C.A. NO.: Nl 8C-07-173 AML CCLD
GROUP ONE THOUSAND ONE,
LLC F/K/A DELAWARE LIFE
HOLDINGS, LLC,
\_/\/\_/\/\_/\/\./\/\./VV\/\/
Defendant.
Submitted: January 17, 2019
Decided: March 29, 2019
Upon Defendant’s Motion to Dismiss or, in the Alternative, to Transfer:
Denied
MEMORANDUM OPINION
Raymond J. DiCamillo, Esquire, Travis S. Hunter, Esquire, Renee M. Mosley,
Esquire of RICHARDS, LAYTON, & FINGER, P.A., Wilmington, Delaware, and
Daniel M. Abuhoff, Esquire, and Matthew D. Forbes, Esquire of DEBEVOISE &
PLIMPTON LLP, New York, NeW York, Attorneysfor Plaintiff.
Robert S. Saunders, Esquire, Matthew P. Majarian, Esquire, and Daniel S. Atlas,
Esquire of SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Wilmington,
Delaware, Attorneys for Defendant.
LeGrow, J.
This dispute arose from Defendant’s purchase of several of Plaintiff’s
subsidiaries Plaintiff and Defendant entered into a stock purchase agreement
governing the sale. Plaintiff initiated this breach of contract action against
Defendant for failing to pay over a tax refund that Plaintiff contends belongs to it
under the stock purchase agreement Defendant moved to dismiss or transfer the
action under the stock purchase agreement’s forum selection clause, Which
designates the Delaware Court of Chancery as the parties’ first choice of forum for
any action arising out of the agreement
The question presented in this case is Whether Plaintiff’s breach of contract
claim falls Within the statutory grant of authority in the LLC Act or seeks equitable
relief, thereby conferring jurisdiction on the Court of Chancery. Although the
Court generally Will respect the parties’ choice of forum, the parties cannot
contract for jurisdiction Where it otherwise is unavailable. Defendant’s broad
interpretation of the Court of Chancery’s statutory jurisdiction is unreasonable and
inconsistent With the cases and other sources interpreting the statute. Additionally,
Plaintiff’s claim is not equitable in nature because money damages adequately
Would address the harm from the alleged breach of contract. The Court of
Chancery therefore does not have subject matter jurisdiction, and Defendant’s
motion to dismiss is denied.
FACTS AND PROCEDURAL BACKGROUND
The Plaintiff, Sun Life Assurance Company of Canada (“Sun Life”), is an
insurance company incorporated in Delaware. Sun Life is a subsidiary of Sun Life
Financial, Inc. (“Sun Life Financial”), a publicly traded Canadian company. In
2012, Sun Life Financial agreed to sell its subsidiary, Sun Life Reinsurance
(Barbados) No. 3 Corp. (“BarbCo3”), to the Defendant, Group One Thousand One,
LLC (“G1001”). The parties executed a Stock Purchase Agreement (the “SPA”),
in Which Sun Life agreed to convey all its issued and outstanding shares of
BarbCo3 stock to G1001. In the SPA, the parties negotiated how they Would
handle pre and post-closing tax matters. Section 6.3 of the SPA specifically
governed Who Was entitled to post-closing tax refunds. The transaction closed on
August 2, 2013, and in November 2016 the IRS issued BarbCo3 a $10,073,433 tax
refund related to the 2011 tax year (the “Refund”). Sun Life contends it is entitled
to the Refund under Section 6.3 of the SPA, but G1001 has refused to pay the
Ref`und to Sun Life.
On July 23, 2018, Sun Life filed a one-count complaint in this Court (the
“Complaint”) for breach of contract against G1001 seeking damages in the amount
of the Refund. G1001 filed a motion to dismiss under Superior Court Civil Rule
l2(b)(3) or, in the altemative, a motion to transfer this action to the Delaware
Court of Chancery under 10 Del. C. § 1902, by reason of the SPA’s forum
selection clause. That clause creates a hierarchy of Delaware forums in Which the
parties agreed to litigate any disputes arising under the SPA. Specifically, the
forum selection clause provides each party:
[S]ubmits for itself and its property to the exclusive jurisdiction of the
Delaware Court of Chancery, or if the Delaware Court of Chancery
lacks jurisdiction of the subject matter, the United States District
Court for the District of Delaware, or if both the Delaware Court of
Chancery and the United States District Court for the District of
Delaware lack jurisdiction of the subject matter, any court of
competent jurisdiction sitting in the State of Delaware (together With
any appellate courts therefrom, the “Permitted Courts”) in any action
directly or indirectly arising out of this Agreement, including the
formation, breach, termination, validity, interpretation or enforcement
thereof, or any transaction contemplated by this Agreement.1
The parties do not dispute the validity or scope of the SPA’s forum selection
clause. The parties additionally agree that the United States District Court for the
District of Delaware lacks subject matter jurisdiction. Therefore, if the Court of
Chancery does not have subject matter jurisdiction over Sun Life’s claim, the
parties agree the Superior Court is the appropriate forum for this dispute.
The Parties’ Contentions
In its motion to dismiss, G1001 argues the Court of Chancery has statutory
and equitable jurisdiction over Sun Life’s claim and Sun Life therefore is required
under the SPA’s forum selection clause to pursue its claim in that Court. G1001
first contends 6 Del. C. § 18-111 confers jurisdiction on the Court of Chancery
lcOmplaint, EX. 1 § 12.6(b)(i).
because that statute grants the Court of Chancery jurisdiction over all contract
disputes involving an LLC. G1001 also argues the Court of Chancery has
jurisdiction over this dispute because Sun Life seeks equitable relief, specifically
an order of specific performance directing BarbCo3 to pay over the Refund.
In response to G1001’s motion, Sun Life argues the Court of Chancery does
not have jurisdiction over this action because Section 18-111 does not grant the
Court of Chancery broad jurisdiction over all contract disputes involving an LLC,
but only over contracts “explicitly contemplated” by the LLC Act. Additionally,
Sun Life asserts it is neither making an equitable claim nor seeking equitable relief,
but rather is making a straightforward breach of contract claim and seeking
monetary damages arising from that breach.
ANALYSIS
Superior Court Civil Rule 12(b)(3) governs a motion to dismiss on the basis
of improper venue. On a motion to dismiss, the Court must “assume as true all the
facts pled in the complaint and view those facts and all reasonable inferences
drawn from them in the light most favorable to the plaintiff.”2 The Court,
however, “is not shackled to the non-moving party's complaint and is permitted to
consider extrinsic evidence.”3 Under this standard, the Court should “give effect to
2 Lovernan v. Nusmile, Inc., 2009 WL 847655, at *2 (Del. Super. Mar. 31, 2009).
3 Airbase Carpet Mart, lnc. v. AYA Associates, Inc., 2015 WL 9302894, at *4 (Del. Super. Dec.
15, 2015).
the terms of private agreements to resolve disputes in a designated judicial forum
out of respect for the parties’ contractual designation” and should dismiss a case
where the parties agreed to litigate in another forum.4
According to the SPA’s forum selection clause, the Court of Chancery is the
parties’ first choice of forum. A forum selection clause, however, cannot confer
jurisdiction or venue where it otherwise is not available.5 The Court of Chancery
is a court of limited jurisdiction and only may acquire jurisdiction if: “(1) one or
more of the plaintiffs claims . . . is equitable in character, (2) the plaintiff requests
relief that is equitable in nature, or (3) subject matter jurisdiction is conferred by
statute.”6
The burden is on the plaintiff to prove subject matter jurisdiction exists,
but the Complaint’s prayers for relief are not controlling, and the Court may look
beyond the pleadings to determine the nature of the claim.7
4 Loveman, 2009 WL 847655, at *2 (quoting Halpem Eye Associates, P.A. v. E.A. Crowell &
Associates, Inc., 2007 WL 3231617, at *1 (Del. Com. Pl. Sept. 18, 2007)); Double Z Enterprises,
Inc. v. General Marketz'ng Corp., 2000 WL 970718, at *2 (Del. Super. June 1, 2000). See also
Capital Group Companies, lnc. v. Armour, 2004 WL 2521295, at *3 (Del. Ch. Oct. 29, 2004)
(quoting M/S Bremen v. Zapata Ojj‘-Shore Co., 407 U.S. l, 15 (1972) (“Forum selection/consent
to jurisdiction clauses are ‘ presumptively valid’ and should be ‘specifically’ enforced unless the
resisting party ‘could clearly show that enforcement would be unreasonable and unjust, or that
the clause was invalid for such reasons as fraud and overreaching.”’)).
5 El Paso Natural Gas C0. v. TransAmerican Natural Gas Corp., 669 A.2d 36, 39 (Del. 1995)
(quoting Elia Corp. v. Paul N. Howara' Co., 391 A.2d 214, 215-16 (Del. Super. 1978)
(“Jurisdiction over a party or subject matter, or venue of a cause, cannot be determined by
private bargaining where there is no other basis for such jurisdiction or venue."`)).
Candlewr)od Tz`mber Group, LLC v. Pan American Energy, LLC, 859 A.2d 989, 997 (Del.
2004).
7 Appriva Shareholder Litigation C0., LLC v. EV3, Inc., 937 A.2d 1275, 1284 n.14 (Del. 2007);
Hughes T 001 C0. v. Fawcett Publications, Inc., 315 A.2d 577, 579 (Del. 1974).
5
A. The Court of Chancery does not have jurisdiction over this dispute
under Section 18-111.
G1001 asserts that Section lS-lll of the LLC Act vests the Court of
Chancery with jurisdiction to interpret, apply, or enforce the SPA. G1001
contends Section lS-lll is “expansive, and grants the Court of Chancery broad
jurisdiction to interpret and enforce any and all documents by which any
permissible purpose enumerated in the LLC Act may be accomplished.”8 Sun Life
resists such a broad reading of Section 18-111, arguing it would “drastically
undermine the limited nature of the Court of Chancery’s jurisdiction.”9
Section 18-111 grants the Court of Chancery authority to hear a variety of
LLC disputes. The statute provides:
§ 18-111. Interpretation and enforcement of limited liability company
agreement
Any action to interpret, apply or enforce the provisions of a limited
liability company agreement, or the duties, obligations or liabilities of
a limited liability company to the members or managers of the limited
liability company, or the duties, obligations or liabilities among
members or managers and of members or managers to the limited
liability company, or the rights or powers of, or restrictions on, the
limited liability company, members or managers, or any provision of
this chapter, or any other instrument, document, agreement or
certificate contemplated by any provision of this chapter, may be
brought in the Court of Chancery.
The above-quoted statutory language lists five categories of disputes over which
the Court of Chancery has jurisdiction, specifically disputes involving: (l) the
8 G1001’s opening Br. ar 10.
9 Sun Life’s Answering Br. at 11.
provisions of an LLC agreement; (2) an LLC’s duties and obligations to its
members and managers; (3) the duties and obligations between and among the
members, managers, and the LLC; (4) the rights, powers, or restrictions of the LLC
or its members or managers; and (5) any provision of the LLC Act or any other
instrument, document, agreement or certificate contemplated by any provision of
the LLC Act.
G1001 argues the parties’ dispute falls within the fifth category because the
dispute involves interpretation and enforcement of the SPA, an agreement G1001
contends is “contemplated” by the LLC Act G1001 relies on 6 Del. C. § 18-
106(b) to argue the LLC Act contemplates the SPA. Section 18-106(b) broadly
confers on a limited liability company powers relating to the entity’s business,
purpose, or activities. The statute relevantly provides:
A limited liability company shall possess and may exercise all the
powers and privileges granted by this chapter or by any other law or
by its limited liability company agreement, together with any powers
incidental thereto, including such powers and privileges as are
necessary or convenient to the conduct, promotion or attainment of
the business, purposes or activities of the limited liability company.10
The Delaware Supreme Court recently held this provision grants “broad authority
to Delaware LLCs,” including the authority to enter into contracts.11 Thus,
according to G1001, because the LLC Act “contemplates” contracts, and the SPA
10 6 net C. § 18-106(b).
ll CompoSecure, L.L.C. v. Cara'U_Xj LLC, 2018 WL 5816740, at *7 n.36 (Del. Nov. 7, 2018)
(“The powers ‘necessary or convenient to’ the business of an LLC include the ability to enter
into contracts.”).
is a contract, the Court of Chancery may exercise jurisdiction over this dispute.12
Sun Life argues this is an unreasonable reading of Section 18-111, and the fifth
category of Section 18-1 ll only refers to internal affairs or documents “explicitly
contemplated” by the LLC Act13
There is no authority definitively addressing the scope of Section 18-1 l l’s
fifth jurisdictional category. The parties generally rely on the same group of cases
in which the Court of Chancery has exercised jurisdiction over disputes involving
LLCs. Those cases, although helpful to a certain degree, do not meaningfully
explore the scope of Section 18-111’s fifth category. In large part, this appears to
be because in most of the cases the Court of Chancery could exercise subject
matter jurisdiction over the dispute under one of Section 18-11 l’s other categories
or on the basis of that Court’s equity jurisdiction
For example, although Prairie Capital III, L.P. v. Double E Holding Corp.
involved a stock purchase agreement for the sale of LLC interests, the plaintiff in
that case requested equitable relief in the form of release of funds held in escrow.14
Likewise, in Cyber Holding LLC v. CyberCore Holding, the plaintiff requested
equitable relief in the form of specific performance of a stock purchase
12 G1001’s Opening Br. at 13-14.
13 Sun Life’s Answering Br. at ll.
14132 A.3d 35, 48 (Del. Ch. 2015).
agreement.15 ln Poppiti v. Conaty, the Court of Chancery found jurisdiction under
Section 18-111 because the underlying dispute required interpretation of the LLC’s
operating agreement, the first jurisdictional category of the statute16 Similarly, in
Laiken v. Northjields Developrnent Co., LLC, the Court of Chancery found
jurisdiction under Section 18-111, but the dispute fell squarely within the second
jurisdictional category of the statute because Laiken was a minority member of
Northfields, and the suit involved Northfields’s obligations to Laiken.17
ln other cases the parties cite, the Court of Chancery did expressly exercise
jurisdiction under Section 18-111’s fifth category. In both In re Morrow Park
Hola’ing LLC18 and Dquf v. Innovative Discovery LLC,19 the Court of Chancery
concluded that it had jurisdiction to consider a case involving interpretation and
enforcement of a redemption agreement Redemption of membership interests,
however, is an action expressly addressed and defined within the LLC Act.20
Neither case adopts G1001’s broad reading of Section 18-111’s fifth jurisdictional
category. To the contrary, the Dujj‘ Court described as “dubious” the contention
15 2016 WL 791069, at ’1‘7 (Del. Ch. Feb 26, 2016) (the dispute also involved a stock purchase
agreement for a corporation, thus, the Court of Chancery had both equitable jurisdiction and
statutoryjurisdiction under 8 Del. C. § 111).
16 2012 WL 361727, at *1 (Del. Ch. Feb. l, 2012).
17 2014 WL 662369, at *2 (Del. Ch. Feb. 20, 2014).
111 2018 wL 2110940 (Del. Ch. Mar. 28, 2018).
19 2012 wL 6096586(De1. Ch. Deci 7, 2012).
20 6 Del. C. § 18-702. See also Di{f;‘,` 2012 WL 6096586, at *6 (“Section 18-702 explicitly
contemplates that redemption agreements may be entered into by members and managers of an
LLC as part of their internal dealings with the LLC.”).
9
that the Court of Chancery could exercise jurisdiction over any type of agreement
or contract entered into by an LLC under the authority of Section 18-106.21
As G1001 correctly points out, the fact that the Court of Chancery never
expressly has adopted G1001’s broad interpretation does not mean the
interpretation is incorrect G1001 argues Section 18-111’s literal interpretation,
particularly the expansive meaning of “contemplated,” compels the conclusion that
the statute unambiguously confers jurisdiction upon the Court of Chancery for all
agreements into which an LLC might enter. G1001 posits that the Court of`
Chancery is the “default” forum for resolving LLC disputes and that the General
Assembly’s use of the phrase “contemplated by” reinforces that default forum
status.22
If Section 18-111 is unambiguous, there is no room for judicial
”24 lt is
interpretation23 and “the plain meaning of the statutory language controls.
true that, if the word “contemplated” is given its broadest colloquial meaning,
Section 18-lll would encompass this dispute because Section 18-106(b)
21Dujj", 2012 WL 6096586, at *6 n.28.
11 see Eg;`Amchem Nor¢h Ame.'»:t-a, ma v. Jqf]ar:, 727 A.2d 286, 292 (Da. 1999).
23 Both parties argued the statute is unambiguous The parties’ interpretation, however, is not
controlling. See Sunline Commercial Carriers, Inc. v. CITGO Petroleum Corporation, 2019 WL
1068183, at *8 n.68 (Del. Mar. 7, 2019) (“But whether a contract is unambiguous is a question of
law; this Court cannot find an ambiguous contract unambiguous because each party interprets the
contract differently to find it unambiguous Indeed, in many contract disputes, both parties argue
for different interpretations, but claim that the contract is unambiguous.”) (citing Motorola, Inc.
v. Amkor Techs., Inc., 849 A.2d 931, 937-38 (Del. 2004) (finding a contract ambiguous despite
the fact that both parties argued that it was unambiguous)).
11 ams-on v. Engze)m»-z, 733 A.2d 944, 946 (Del. 1999).
10
“contemplates” that LLCs will enter into agreements to further their business
purposes. lt is a recognized cannon of statutory interpretation, however, that if the
literal interpretation of the statute would be absurd, the statute is ambiguous25
Here, the literal interpretation G1001 advances is absurd because it would grant the
Court of Chancery unfettered jurisdiction over every action touching, however
tangentially, any contract involving an LLC.26 Under that literal interpretation,
actions involving employment agreements, vendor contracts, consumer disputes,
and debt collection all would fall under the Court of Chancery’s jurisdiction simply
because one of the parties to the contract was an LLC. The same actions involving
a corporation as the contracting party, however, would not fall within the Court of
Chancery’s jurisdiction. Had the General Assembly intended to confer jurisdiction
over nearly any matter in which an LLC is a party, it would have done so more
clearly. Such an unprecedented expansion of the Court of Chancery’s jurisdiction,
however, would contravene the General Assembly’s consistent effort to preserve
that Court’s historically limited jurisdiction and its reputation as the preeminent
forum to resolve corporate disputes. Additionally, it is unlikely the General
25 A. W. Financial Services, S.A. v. Empire Resources, Inc., 981 A.2d 1114, 1130 (Del. 2009) (“A
statute is ambiguous not only if it is ‘reasonably susceptible to different conclusions or
interpretations,’ but also if ‘a literal interpretation of the words of the statute would lead to an
absurd or unreasonable result that could not have been intended by the legislature.”’). See also
CML V, LLC v. Bax, 28 A.3d 1037, 1041 (Del. 2011); Distefano v. Watson, 566 A.2d 1, 4 (Del.
1 989).
26 Under this interpretation, Court of Chancery jurisdiction would also apply to all contracts
involving a limited partnership See 6 Del. C. § 17-111 (containing language analogous to
Section 18-111).
11
Assembly intended this interpretation because allowing an LLC to litigate basic
contract or consumer actions in the Court of Chancery would eliminate the right to
a jury trial in those cases. lt would be absurd to conclude that the General
Assembly intended to work a sea-change in the Court of Chancery’s jurisdiction
simply by using the word “contemplates.”
The limited authority available on this issue supports the conclusion that
G1001’s literal interpretation of the statute is absurd. First, although the Duff
Court did not reach the broader interpretation of Section 18-111 that G1001 now
advocates, the Court nonetheless described that interpretation as “dubious.”27
Additionally, G1001’s interpretation cannot be reconciled with the Dqu Court’s
holding that Section 18-111 applies to documents “explicitly contemplated” by the
Act28 Like the Duyj”Court, Donald J. Wolfe, Jr. and Michael A. Pittenger’s well-
recognized treatise, “Corporate and Commercial Practice in the Court of
Chancery,” also accords Section 18-111 a narrower interpretation, stating that the
statute grants the Court of Chancery jurisdiction to resolve disputes concerning
“agreements that are explicitly contemplated by the [LLC Act].”29 Additionally,
the treatise notes that this provision is narrower than 8 Del. C. § lll(a), the
provision of the Delaware General Corporation Law (DGCL) granting Court of
11 Dujj‘, 2012 wL 6096586,31*6 n.28.
11 1a ar *6.
29 DoNALD J. WoLFE, JR. & MICHAEL A. PITTENGER, CoRPoRATE AND CoMMERCIAL PRACTICE IN
THE CoURT oF CHANCERY § 2.02[d] n.92 (2d ed. 2018).
12
Chancery jurisdiction, because Section 18-111 does not, for example, “explicitly
confer jurisdiction as to certificates of merger, conversion, or domestication.”30
Having concluded Section 18-111 is ambiguous because its literal
interpretation leads to an absurd result, the Court must determine the statute’s
meaning in a way that promotes its apparent purpose and harmonizes it with other
31 Additionally, the Court must reconcile
statutes within the statutory scheme.
Section 18-111’s language with its legislative intent and, if reasonably possible,
interpret the statute in way that will not render the first and fourth jurisdictional
categories of Section 18-111 surplusage32 Legislative intent may be deduced from
a statute’s synopsis.33 Section 18-111 was amended in 2009 to add the fifth
jurisdictional category, and the bill synopsis states the purpose of the amendment
was to “clarify the jurisdiction of the Court of Chancery with respect to matters
pertaining to Delaware limited liability companies.”34
ln other words, nothing within Section 18-111’s legislative history indicates
it was intended to expand substantially the Court of Chancery’s jurisdiction. The
30 Id_
31 Division of Family Services v. 0 ’Bryan, 164 A.3d 58, 62 n.18 (Del. 2017) (quoting Dawson v.
State Farm Mat. Auto. Ins. Co., 980 A.2d 1035, 1038-39 (Del. Super. 2009) (“[T]he Court must
construe the statute in a way that will promote its apparent purpose and harmonize it with other
statutes within the statutory scheme. ln other words, the statute must be read as a whole in a
manner that avoids absurd results.”)).
32 Dis!efairo, 566 A.2d at 4; CML V, LLC, 28 A.3d at 1041 (“We also ascribe a purpose to the
General Assembly’s use of particular statutory language and construe it against surplusage if
reasonably possib|e.”).
13 maherbe v. Greenspun, 939 A.2d 1284, 1289-90(De1. 2007).
14 Del. s.B. 82 syn., 145111 Gen. Assem. (2009).
13
fifth category likely was intended to be a catch-all provision to capture other
agreements or documents not encapsulated within the first four jurisdictional
categories of Section 18-111. The fifth category clarified the Court of Chancery’s
jurisdiction to interpret and apply any provision of the LLC Act or a document,
certificate, agreement, or instrument contemplated by the Act The only
reasonable interpretation of the statutory language at issue is that the General
Assembly intended it to apply to a document or instrument expressly or explicitly
contemplated by the Act, since interpreting or enforcing such a document also
likely would require the Court of Chancery to interpret or enforce the Act. That is,
where the Act explicitly defines a particular power or obligation of an LLC or its
members, and a document or instrument is created arising from that power or
obligation, the Court of Chancery has jurisdiction over a dispute involving that
instrument This interpretation avoids an absurd result and eliminates the artificial
distinction between an action to interpret or enforce the LLC Act and one to
interpret or enforce a document expressly referenced or contemplated by the Act.
The SPA, however, is not expressly referenced or contemplated by the LLC
Act. The broad power to contract arising from Section 18-106(b) is not explicit in
the statute. Nothing in the LLC Act overtly references a stock purchase agreement
This is not to say that it would be absurd to give the Court of Chancery jurisdiction
over a stock purchase agreement such as the one at issue here. The General
14
Assembly has done that for certain categories of stock purchase agreements under
the DGCL.35 The General Assembly has not, however, accorded the Court of
Chancery jurisdiction over all Stock purchase agreements or asset purchase
agreements, and there is no way to read the current version of Section 18-111’s
fifth category in a manner that would accord the Court of Chancery jurisdiction
over stock purchase agreements but not all other contracts into which an LLC
might enter.36
For the foregoing reasons, and because the SPA is not expressly
contemplated by the LLC Act, the Court of Chancery does not have statutory
jurisdiction over this dispute under Section 18-111.
B. Sun Life’s claims are not equitable in nature.
Sun Life maintains that it has pleaded one claim for money damages arising
from breach of contract, which is not an equitable claim. G1001, however, argues
Sun Life essentially is making a claim for specific performance (i.e. release of the
tax refund from BarbCo3). ln considering whether Sun Life’s claims are equitable
in nature, the Court must look beyond the form of pleadings and “focus upon the
allegations of the complaint in light of what the plaintiff really seeks to gain by
bringing his or her claim.”37 lf` Sun Life’s breach of contract claim is equitable in
15 8 Del. C. § 111(3)(2).
36 See ia'.
37 Cana'lewooa' Timber Group, LLC, 859 A.2d at 997.
15
nature, there must not be an adequate remedy at law available.38 The Court
therefore must decide whether Sun Life’s claims may be remedied by monetary
damages, or if Sun Life actually is making a claim for specific performance
G1001 argues “Delaware case law makes clear that a post-closing dispute
regarding a tax refund received by a non-party to the action should be adjudicated
pursuant to the Court of Chancery’s equitable jurisdiction, rather than as an action
39
at law.”
Delaware law, however, is not nearly so clear or unequivocal. With two
exceptions, every case G1001 cites for this principle involved money held by an
escrow agent40 Those cases do little to address the issue in this case, because it is
settled that specific performance is the appropriate form of relief to compel the
release of funds held by an escrow account41 This case, in contrast, does not
involve funds held in an escrow account
111 El Paso Nazuml Gas Co., 669 A.2d at 39.
39 G1001’s Opening Br. at 16.
40 Haney v. Blaclchawk Nerwork Hola'ings, lnc., 2017 WL 543347 (Del. Super. Feb. 8, 2017)
(where the disputed funds were held in an escrow account); QC Hola'ings, Inc. v. Allconnect,
Inc., 2018 WL 4091721 (Del. Ch. Aug. 28, 2018) (where the disputed funds were held in an
escrow account); United BioSource LLC v. Bracket Holding Corp., 2017 WL 2256618 (Del. Ch.
May 23, 2017) (where the subsidiary was holding the tax refund in a separate interest-bearing
account). ln the cases G1001 cites that did not involve an escrow agent, the Court of Chancery
clearly had jurisdiction based on 8 Del. C. § 111. See Cyber Hola'ing LLC, 2016 WL 791069
(parties were in dispute over payment of “tax savings” received after execution of a stock
purchase agreement not a “tax refund,” regardless, the Court of Chancery had jurisdiction based
on 8 Del. C. § 111 because the stock purchase agreement was for a corporation); Fa'G Logistics
LLC v. A&R Logistics Holdings, Inc., 131 A.3d 842 (Del. Ch. 2016) (defendant, not a third party,
was holding the tax refund, although, the Court of Chancery had jurisdiction based on 8 Del. C. §
111 because the dispute involved a merger agreement for a corporation).
41 QC Hora;ngs-. mc., 2013 wi, 4091?21, at *11.
16
G1001 heavily relies on United BioSource LLC v. Bracket Hola’ing Corp.,
where the Court of Chancery confronted a similar tax refund dispute arising under
a stock purchase agreement for an LLC.42 ln that case, the Court of Chancery
exercised jurisdiction based on a specific performance claim.43 Several facts make
United BioSource distinguishable from this case. First, the non-party subsidiary
that received the tax refund at issue in United BioSource was holding the funds in a
separate, interest-bearing account.44 Additionally, the defendant and non-party
subsidiary’s parent company were proposing to sell the non-party subsidiary,
creating a danger that the plaintiff would be unable to collect a judgment.45
Relying on these facts, the Court of Chancery concluded the plaintiff had no
adequate remedy at law and specific performance therefore was the appropriate
form of relief.46 Neither of the facts the United BioSoarce Court relied on are
present in this case. Nothing in the record indicates the tax refund is in a separate
account, that there is a proposed sale of BarbCo3, or that such a sale would make
collection of a damages award uncertain. G1001’s reliance on United BioSource
therefore is misplaced.
The other cases on which G1001 relies make clear that in some
circumstances the Court of Chancery may exercise jurisdiction over a post-closing
41 2017 WL 2256618.
43 Ia'. at *4.
44 Id
451d
461d
17
dispute, such as a tax refund paid to a non-party. Like United BioSource, however,
each case turns on the Court’s conclusion that specific performance or other
equitable relief was necessary because money damages were not a sufficient
remedy.47 Here, in contrast, Sun Life’s claim for money damages under the
contract adequately would address any claimed harm. Sun Life seeks money
damages from the party that allegedly contractually was obligated to pay over the
Refund. G1001 argues, however, that G1001’s obligation, if any, is to pay over the
Refund that BarbCo3 received, not the equivalent amount of money, and therefore
complete relief cannot be obtained without an order of specific performance
directing BarbCo3 to pay over the Ref`und.48 This argument is untenable First,
G1001 is the contractually-obligated party. ln addition, there is nothing in the
record indicating the Refund is separated or segregated or that collection of a
money judgment would be improbable Judgment in an amount equivalent to the
Refund therefore adequately and completely would remedy the harm to Sun Life of
non-payment
47 Haney, 2017 WL 543347, at *4 (discussing concern over whether the escrow agent would
comply with a legal judgment and turn over the escrow funds); QC Hola'ings, Inc., 2018 WL
4091721, at *1 1 n.44 (reasoning that a claim for the release of escrow funds is equitable in
nature because a damages award would still require specific performance or an affirmative
injunction, therefore a legal judgment alone would not be an adequate remedy).
111 01001 ’s opening Br. at 18-19.
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CONCLUSION
For the foregoing reasons, G1001’s Motion to Dismiss f`or improper venue
or, in the altemative, to Transfer this action to the Court of Chancery pursuant to
10 Del. C. § 1902 is DENIED. IT IS SO ORDERED.
19