Greenstar IH Rep, LLC and Gary Segal v. Tutor Perini Corporation

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

GREENSTAR IH REP, LLC and )
GARY SEGAL, )
)
Plaintiffs, )
)
v. ) C.A. No. 12885-VCS
)
TUTOR PERINI CORPORATION, )
)
Defendant. )
TUTOR PERINI CORPORATION, )
)
Counterclaimant, )
)
v. )
)
GARY SEGAL, )
)
Counterclaim-Defendant. )

MEMORANDUM OPINION

Date Submitted: September 10, 2019
Date Decided: December 4, 2019

Kenneth J. Nachbar, Esquire and Lauren Neal Bennett, Esquire of Morris, Nichols,
Arsht & Tunnell LLP, Wilmington, Delaware and Ira Lee Sorkin, Esquire,
Amit Sondhi, Esquire, Kevin M. Brown, Esquire and Michael Meyers, Esquire of
Mintz & Gold LLP, New York, New York, Attorneys for Plaintiffs Greenstar IH
Rep, LLC and Gary Segal and Counterclaim Defendant Gary Segal.
Brian C. Ralston, Esquire and Aaron R. Sims, Esquire of Potter Anderson &
Corroon LLP, Wilmington, Delaware and Robert Nida, Esquire and Matthew J.
Luce, Esquire of Nida & Romyn, P.C., Beverly Hills, California, Attorneys for
Defendant/Counterclaimant Tutor Perini Corporation.

SLIGHTS, Vice Chancellor
 On July 1, 2011, two construction companies, Tutor Perini Corporation and

Greenstar Services Corporation, among others, signed an Agreement and Plan of

Merger (the “Merger Agreement”) whereby Greenstar became a wholly-owned

subsidiary of Tutor Perini. During negotiations, Tutor Perini questioned whether

Greenstar had overestimated the amount of cash it would eventually collect from its

customers. To address this concern, the parties agreed to several so-called “holdback

provisions” tied to Greenstar’s post-closing cash collections. These provisions

called for the sellers to receive additional consideration if Greenstar achieved certain

cash collection milestones post-closing.

As they are wont to do, the contingent consideration provisions prompted

post-closing disagreements. The sellers claimed Greenstar had collected enough to

mandate release of the holdbacks; Tutor Perini disagreed and refused to release the

holdback funds. After much back and forth, the parties agreed to resolve their

dispute by modifying the Merger Agreement’s holdback provisions, as

memorialized in a May 3, 2013, Holdback Settlement and Release Agreement

(the “Holdback Agreement”).

While intended to provide clarity, the Holdback Agreement did no such thing.

The parties were soon back at square one—disputing whether the sellers were owed

holdback funds, this time under the Holdback Agreement. That dispute led to this

litigation. According to the sellers, they are owed $8 million in holdback payments.

1
Tutor Perini maintains the sellers are owed nothing. The Court convened a trial and

this is the Court’s post-trial decision.

At the threshold, the parties do not agree how the Holdback Agreement is

meant to work. They have offered competing constructions of key terms. While

certain of the contract’s provisions are not models of clarity, the parties took the

extra step of providing an explanation of how they intended the contract to operate

given a hypothetical set of collections by Greenstar in its post-closing operations.

This explanation was incorporated into the Holdback Agreement and provides useful

insight into the parties’ intent.

Delaware law requires that our courts read all elements of an integrated

contract together when undertaking to construe the contract as a matter of law. With

this canon in mind, I am satisfied that Greenstar has achieved the collection

milestones that trigger the holdback payments, all as provided by the Holdback

Agreement with its incorporated examples. Judgment will be entered for the sellers

in the amount of $8 million.

I. BACKGROUND

The Court held a three-day trial during which it heard live testimony from

7 witnesses and received over 451 trial exhibits along with the lodged deposition

2
testimony of 14 witness.1 I have drawn the facts from the stipulations of fact entered

before trial, the testimony and exhibits presented during trial and from reasonable

inferences that flow from that evidence. 2 The following facts were proven by a

preponderance of the evidence.

A. Parties and Relevant Non-Parties

Plaintiff, Greenstar IH Rep, LLC (“IH Rep”), is a Delaware Limited Liability

Company. 3 The Merger Agreement names IH Rep as the “Interest Holder

Representative”—meaning it holds the sellers’ post-closing rights and, if owed, will

receive the holdback payments on their behalf. 4

Plaintiff, Gary Segal, is the former CEO of both Greenstar and Five Star

Electric Corporation.5 Segal’s father formed Five Star in 1959, and Segal joined the

firm in 1981.6 Upon his father’s death in 1991, Segal became Five Star’s president

1
Witness and Ex. List (D.I. 207).
2
Citations will appear as follows: “PTO __” will refer to stipulated facts in the pre-trial
order; “Tr. __ ([Name])” will refer to witness testimony from the trial transcript; “JX __”
will refer to the trial exhibits; and “([Name]) Dep. __ (D.I. __)” will refer to witness
testimony from a deposition transcript lodged with the Court for trial.
3
PTO § III.A.1 (D.I. 170).
4
Id.; JX 12 (the “Merger Agreement”) § 5.02.
5
PTO § III.A.2.
6
Tr. 4:8–10 (Segal).

3
and sole owner. 7 After assuming leadership, Segal went on to shepherd Five Star

into a period of sustained growth.8 Segal is one of the identified “stockholders”

(or sellers) in the Merger Agreement. 9

Non-party, Greenstar, wholly-owns the stock of Five Star and WDF, Inc.10

Five Star is an electrical contractor and WDF is a mechanical and plumbing

contractor.11 Non-party, Larry Roman, is WDF’s CEO. 12 He is also one of the

identified sellers in the Merger Agreement.

Around 2008, Roman and Segal noticed their respective companies

(WDF and Five Star) were subcontractors on many of the same jobs with Five Star

handling the electrical work and WDF handling the plumbing.13 Accordingly, they

decided to combine their two firms to form Greenstar, a “turnkey” solution offering

mechanical, electrical, plumbing and sprinkler contracting services “all in one.”14

7
Tr. 5–6, 9:3–5 (Segal).
8
Id. at 6–9.
9
Id. at 9–10. See also Merger Agreement §§ 1.01, 2.08(c)(i).
10
Id. at 8–9; PTO § III.B.4.
11
PTO § III.B.4.
12
Tr. 337:3–5 (Soroka).
13
Tr. 7–8 (Segal).
14
Id. at 8.

4
 Defendant, Tutor Perini, is a publicly traded Massachusetts corporation with

its principal place of business in Sylmar, California.15 Non-party, Ronald Tutor, is

the Chairman and CEO of Tutor Perini.16

B. Tutor Perini Acquires Greenstar

In 2011, Greenstar and Tutor Perini began negotiations for Tutor Perini to

acquire Greenstar, along with its subsidiaries—Five Star and WDF. 17 Greenstar was

attractive to Tutor Perini because it furthered its strategy to integrate its business

vertically by acquiring specialty contractors, particularly in the New York market.18

Following negotiations between the parties, Tutor Perini, Greenstar, a merger

subsidiary and IH Rep executed the Merger Agreement. 19 Greenstar became a

wholly-owned subsidiary of Tutor Perini, and the sellers, as identified in the Merger

Agreement (the “Sellers”), collectively received $208 million.20 The Merger

Agreement computed the purchase price by adding Greenstar’s “book value” of

15
PTO § I.A.3.
16
Id.
17
Tr. 10 (Segal); Tr. 388 (Tutor).
18
Tr. 438–39 (Tutor); Tutor Dep. 14:7–19 (D.I. 165).
19
Merger Agreement at 20 (recitals).
20
Id.; Tr. 10 (Segal).

5
$175 million to a “kicker” of $33.5 million. 21 Per the Merger Agreement, the deal

consideration was divided into a cash payment at closing, an earn-out and multiple

escrow holdbacks.22

At closing, Greenstar’s $175 million book value included an asset

representing its estimated future cash collections (or “CIE,” as further defined

below).23 Because Tutor Perini valued Greenstar based on its book value, Tutor

Perini required Greenstar to disclose its CIE on schedules and to represent that the

CIE would eventually be collected from its customers. 24

Throughout the parties’ negotiations, Tutor Perini expressed concerns about

whether much of Greenstar’s CIE was actually collectible.25 These concerns led

21
Tr. 10 (Segal). If Greenstar’s closing net worth exceeded or fell below a $140 million
target, the Merger Agreement provided that the purchase price would be adjusted. Merger
Agreement §§ 1.01 (definitions of Estimated Negative Net Worth Adjustment and
Estimated Positive Net Worth Adjustment), 2.13 (entitled “Closing Net Worth
Adjustment”). Greenstar’s closing net worth was almost $174 million at closing. Merger
Agreement § 2.13. As a result, with the kicker, the adjusted purchase price was around
$208 million. Tr. 10:13–17 (Segal).
22
Tr. 89–90 (Tutor); Tr. 627–28 (Burk).
23
Merger Agreement § 6.08; JX 33; Tr. 10–17 (Segal) (explaining construction accounting
terms); Tr. 596 (Bennett) (purchase price was based on book value which included CIE).
24
Merger Agreement §§ 6.08, 6.09; Tutor Dep. at 37:6–39:7 (D.I. 165); Tr. 466–68 (Tutor).
The disclosure letter associated with the Merger Agreement showed $34.2 million in
pending change orders and claims that Greenstar had booked as revenue (increasing
Greenstar’s book value) as of the Merger Agreement. JX 13 at 14.
25
Tutor Dep. 19:20–21:17 (D.I. 165); JX 273; Tr. 389–91 (Tutor).

6
Tutor Perini to insist on two escrow holdbacks in the Merger Agreement,

a $17.5 million Indemnity Holdback and an $8 million Special Holdback.26 The

parties structured the holdbacks to incentivize cash collections and ensure that Tutor

Perini received the benefit of the assets it “paid for” in the Merger Agreement.27

This incentive structure made particular sense to the parties since Segal and Roman

were to continue as Five Star and WDF’s CEOs, respectively, after the merger.28

As beneficiaries of the holdback payments, they were both incentivized to pursue

cash collections with vigor.

Under the holdback structure, if Greenstar’s subsidiaries failed to reach the

CIE targets listed on Greenstar’s closing schedules, then Tutor Perini could retain

the holdbacks.29 On the other hand, if Greenstar succeeded in collecting enough

cash to hit the targets, then Tutor Perini was obliged immediately to release the

holdbacks to the Sellers.30

26
Merger Agreement §§ 1.01 (definitions of Indemnity Holdback Amount and Special
Holdback Amount), 2.12, 6.08, 6.09; Tr. 628–29 (Burk).
27
Merger Agreement §§ 1.01 (definition of “PCO Shortfall”), 6.08(c); Tr. 465–68 (Tutor).
28
Tr. 102 (Segal); Tr. 419–20, 481, 394, 489–90 (Tutor); Tr. 628–29 (Burk).
29
Holdback Agreement §§ 6.07, 6.08(a), 6.08(b); Tr. 390 (Tutor); Tr. 628–30 (Burk).
30
Tr. 61–62 (Segal).

7
 C. The Parties Reach Impasse on The Release of The Holdbacks

In April 2013, Segal and Roman believed they had satisfied the conditions for

the release of the holdbacks by converting enough of the CIE assets on Greenstar’s

closing statements into cash.31 Tutor Perini disagreed for two principal reasons.32

First, Tutor Perini questioned whether Greenstar’s post-closing cash collections

came from the receivables listed on the Merger Agreement’s schedules, which were

the assets Tutor Perini ultimately paid for. 33 Second, Tutor Perini was alarmed that

Greenstar was confronting serious cash flow difficulties because its actual cash

collections were lagging well behind its booked revenue. 34

Ultimately, the dispute over holdbacks led the parties to negotiate the

Holdback Agreement. 35 To avoid litigation, Ron Tutor proposed terms for a new

agreement that would replace the Merger Agreement’s provisions for the

$17.5 million Indemnity Holdback and the $8 million Special Holdback.36 In an

April 5, 2013 letter, Ron Tutor outlined his proposal, stating that if the Sellers agreed

31
JX 39 at 76437.
32
JX 40 at 82349.
33
Id.; Tr. 465–66 (Tutor) (explaining that “all [Tutor Perini] cares about is that we would
come out whole on what they had booked and what we had approved.”).
34
Tr. 391–94 (Tutor); JX 134 at 00715.
35
Tr. 397 (Tutor); JX 80 (the “Holdback Agreement”).
36
JX 40 at 82349–50.

8
to certain concessions, then Tutor Perini was “willing to accept more collection risk”

and release the $17.5 million Indemnity Holdback. 37 Among other things, the

Holdback Agreement would require the Sellers to return some of the $17.5 million

if “issues with collectability related to the funds released and/or held . . . result[ed]

in a loss to [Tutor Perini’s] current balance sheet position.” 38

D. The Holdback Agreement

With the assistance of counsel, on May 3, 2013, Tutor Perini, Greenstar and

IH Rep entered into the Holdback Agreement. 39 The Sellers agreed to accept a

$17.5 million promissory note in exchange for releasing their claims to the

$17.5 million Indemnity Holdback under the Merger Agreement. 40 As for the

$8 million Special Holdback, the parties agreed to condition the release of that

holdback on Greenstar’s ability to convert specific CIE assets into cash.41

To understand the mechanics of this aspect of the Holdback Agreement, it is useful

briefly to examine some of the unique aspects of construction accounting that anchor

the parties’ agreement.

37
Id.
38
Id.; JX 24 at 82271.
39
Holdback Agreement at 00137.
40
Id. § 1.
41
JX 24 at 82271; JX 40 at 82349–50.

9
 1. Construction Accounting

When a contractor bids on a project, it bases its bid price on an estimate of

future costs plus a profit margin. 42 If the contractor wins the bid, it must complete

the work covered by the contract for the contract price—no matter the actual costs.43

As a contractor builds the project, it incurs costs. As costs are incurred, the

contractor and the owner often disagree over whether those costs relate to the

original scope of work the contractor agreed to perform or work that extends beyond

what the parties expected or intended. For instance, the owner may ask the

contractor to do something different than what was in the original bid (a “change

order”)44 or extra work to address a condition that surfaces on the job beyond the

contractor’s control and increases the contractor’s costs (a “claim”). 45 Generally

42
Tr. 584 (Bennett).
43
See, e.g., JX 317 (accounting memo examining whether increased costs were within a
project’s original scope of work).
44
Tr. 11–12 (Segal) (giving, as an example, a situation in which a contractor is building a
courthouse, but the architect who drew up the plan for the courthouse forgot to include
plans for renovating a courtroom. If the owner decides to add extra work (e.g., renovation
of the courtroom), then the extra work would be a change order.); Tr. 379:21–23 (Tutor)
(“What it is, in fact, is, the owner issues a change order that states that he wants extra
worked performed and asks to give a price.”); Tr. 535 (Bennett).
45
Tr. 13 (Soroka); Tr. 381 (Tutor); Tr. 535–36 (Bennett) (giving, as an example, a situation
when another subcontractor slows down the contractor’s work—causing the contractor to
“spend extra money out of sequence or out of our control that we have to get reimbursed
for.”). In the case of a claim, the contractor must factor in both added costs and a margin
for profit. Tr. 584–85 (Bennett). See, e.g., JX 167 (describing a claim resulting from delays
caused by Hurricane Sandy “[Five Star] submitted a Request for Equitable Adjustment
(“REA”) [(a type of claim)] on the Contract in the amount of $29.4M . . . Five Star has
10
Accepted Accounting Principles (“GAAP”) allow a contractor to book (i.e., include

as revenue) the costs associated with change orders and claims if the contractor

believes it will eventually collect them from the owner.46 Yet the contractor cannot

bill for these costs (i.e., convert them into an account receivable) until the contractor

and the owner agree that the owner is responsible for them. 47 Moreover, while the

total amount of the claim asserted against the owner may include some profit margin,

GAAP only allows a contractor to book revenue up to its actual costs. 48

When a contractor recognizes unapproved or “pending” change orders or

claims, and books them as revenue before they have been billed, the contractor incurs

costs in excess of billings (or “CIE”). 49 Like an account receivable, a contractor

incurred approximately $25.6M of additional . . . costs associated with these REAs.
We have recognized $25.6M of these costs in revenue . . . which represents 100% of the
costs incurred and 85% of the current REA amount.”).
46
Tr. 14 (Soroka); Tr. 536 (Bennett).
47
Tr. 12–13, 14. (Segal); Tr. 381–82 (Tutor).
48
Tr. 122 (Therien); Tr. 167 (Soroka).
49
Tr. 15 (Soroka); Tr. 121–22 (Therien); Tr. 386 (Tutor) (“Most often, costs in excess,
candidly, is another name for a claim outstanding that’s unresolved.”); Tr. 538 (Bennett).
Another way to conceptualize CIE is to consider a “CR-1” analysis. A CR-1 analysis looks
first at all the costs incurred on the project to date. Then, the profit margin is added on top
of those costs by multiplying the current costs by the expected margin. If the sum of the
current costs plus the profit margin is not greater than current billings, then the difference
is called “costs in excess.” Tr. 386:9 (Tutor).

11
records CIE on its balance sheet as an asset. 50 But the value of the CIE asset does

not necessarily equate to the full amount of the underlying change orders and

claims. 51 Instead, “[t]he philosophy is that [a contractor] would make an estimation

of what [it] expects to recover in accordance with GAAP.” 52 In this regard, GAAP

requires the contractor to reduce the value of CIE in anticipation that its collection

may involve legal costs and disagreements with the owner (i.e., the “risk of

collectability”). 53

2. Structure of the Holdback Agreement

With this background in mind, the Holdback Agreement provides two

separate lists (appended to the agreement as Exhibits B and C), each containing

change orders and claims from Greenstar’s projects. 54 Before Tutor Perini is obliged

to release the $8 million Special Holdback, the Sellers are obliged to demonstrate

that a specified portion of those change orders and claims will be converted into

cash. 55

50
Tr. 122 (Therien); Tr. 306 (Soroka).
51
Tr. 304 (Soroka).
52
Tr. 305, 368 (Soroka).
53
Tr. 368 (Soroka); Tr. 387 (Tutor).
54
Tr. 176–77 (Soroka); Holdback Agreement at Ex. B, Ex. C.
55
Tr. 176–77 (Soroka).

12
 The Holdback Agreement’s Exhibit B provides a list of “Pending Claims.”56

The total dollar value of the Pending Claims is $60.529 million (the “Cash Collection

Required” or the “Bogey”). 57 If Greenstar fails to collect the full amount of the

Bogey, then any shortfall creates a “Pending Claims Uncollected Amount[]”

(or “Shortfall”).58 If a Shortfall occurs, then Tutor Perini may “offset” that Shortfall

against the $8 million Special Holdback.59 “In other words, if the [Shortfall] is equal

to or greater than $8 million, Tutor Perini owes Plaintiffs $0.” 60 Specifically,

Section 2 of the Holdback Agreement provides:

Pending Claims. . . . [T]he pending claims set forth on Exhibit B hereto
(the “Pending Claims”) are the remaining outstanding claims that could
have been made under . . . the Merger Agreement. [I]f the amounts set
forth under the “Cash Collection Required” [(i.e., the Bogey)] with
respect to the Pending Claims are not collected in full by
[Greenstar] . . . prior to July 31, 2014 (or which [Tutor Perini] believes
in good faith will not eventually be collected in full in accordance with
[Greenstar’s] customary business practices) (the “Pending Claims
Uncollected Amounts”), [Tutor Perini] shall be entitled to offset such
Pending Claim Uncollected Amounts solely against the [Holdback
Amount (i.e., $8 million)]. 61

56
Holdback Agreement § 2.
57
Id. at Ex. B.
58
Id. at § 2.
59
Id.
60
Def.’s Post-Trial Answering Br. (“DAB”) (D.I. 194) at 13.
61
Holdback Agreement § 2.

13
The Cash Collection Required are set forth on the following schedule:62

62
Id. at Ex. B.

14
 In their effort to reach the Bogey, the Sellers are not limited to collection of

the Pending Claims listed on Exhibit B. Rather, the Sellers can “credit[]” certain

“Offset Claims” against the Shortfall.63 The Offset Claims are those claims listed

on Exhibit C that “result[] in additional net profit.”64 The Holdback Agreement

describes the Offset Claims and their relationship to the Shortfall in a separate

provision of Section 2:

[A]ny “Offset Claims” that may be credited against the Pending Claims
Uncollected Amounts shall only apply to the projects and claim
amounts with respect to such projects set forth on Exhibit C hereto
(and only to the extent that such “Offset Claim” results in additional net
profit recognized by [Greenstar] after March 31, 2013 (or which
[Tutor Perini] believes in good faith will result in additional net profit
recognized in accordance with [Greenstar’s] customary business
practices[.])). 65

While the Sellers can apply collections on Exhibit C claims to reach the

Bogey, any counterclaim (i.e., a claim asserted against Greenstar on one of the

Exhibit C projects) that remains outstanding when Tutor Perini calculates the

Shortfall increases the Shortfall:

[T]he amount of any Revised Offset Claims to be credited against the
Pending Claims Uncollected Amounts shall be reduced to the extent
that any counterclaim related to the projects set forth on Exhibit C
(the “Counterclaims”) remains outstanding on, has been alleged as of,

63
Id at § 2.
64
Id.
65
Id.

15
 or has otherwise been paid by [Greenstar] prior to, the date of the
applicable calculation. 66

In other words, counterclaims against Greenstar from projects listed on Exhibit C

(below) decrease any credit from Exhibit C collections.67

Remainder of Page Intentionally Left Blank

66
Id.
67
Id. at Ex. C.

16
 The Holdback Agreement also addresses how to assess the “prospective

collectability” of claims. 68

The US GAAP position taken on [Tutor Perini’s] financial statements
regarding any Pending Claim or Offset Claim may be taken into

68
Id. at § 2.

17
 consideration, but shall not be dispositive, in assessing the prospective
collectability of any such Pending Claim or Offset Claim. 69

To summarize, for the Sellers to earn the $8 million Special Holdback,

Greenstar must collect certain claims listed on Exhibits B and C in amounts

sufficient to reach the Bogey (i.e., $60.529 million). For collections from Exhibit C

to count, they must “result in additional net profit . . . after March 31, 2013.”70 And

any counterclaims against Greenstar on projects listed on Exhibit C effectively

increase the Bogey. In making any of these calculations, Tutor Perini’s GAAP

position “in assessing the prospective collectability of any such Pending Claim or

Offset Claim may be taken into consideration, but shall not be dispositive.”71

Section 4 of the Holdback Agreement allows Tutor Perini to “offset” the total

Shortfall (after adjustments for Exhibit C Offset Claims and counterclaims) against

the $8 million Special Holdback. 72 But, to the extent the total Shortfall is less than

the Special Holdback, Tutor Perini must release the difference to the Sellers.73

69
Id.
70
Id.
71
Id.
72
Id. at § 4.
73
Id.

18
 On Exhibit D (below), titled “Example of Escrow Holdback Calculation,”

the parties agreed to two examples that illustrate how the Holdback Agreement is

intended to work: 74

Remainder of Page Intentionally Left Blank

74
Id. at Ex. D.

19
20
 As depicted in Exhibit D, the Sellers are able to rely on “any combination of

cash receipts from Exhibits B & C” to reach the Bogey. 75 Example I assumes that

Greenstar collects (i) $45,529,000 on “Pending claims / unbilled costs receipts from

Exhibit B,” and (ii) $5,000,000 on “Offset claim receipts from Exhibit C.”76 The

total collection, therefore, is $50,529,000. At this number, the Sellers would be

$10,000,000 short of the Bogey and Tutor Perini could withhold the entire

$8,000,000 Special Holdback.77 Example II is similar, but the Sellers are only

$5,000,000 short. In this circumstance, Tutor Perini would keep $5,000,000 of the

Special Holdback and pay the Sellers $3,000,000.78

E. The Parties Reach an Impasse on Release of the Special Holdback
Under the Holdback Agreement
By the fall of 2014, the Sellers believed they had reached the Bogey and

demanded that Tutor Perini release the $8 million Special Holdback. 79 Again, Tutor

Perini disagreed.80 One of the first points of contention was the source of

75
Id.
76
Id.
77
Id.
78
Id.
79
JX 136 at 00722.
80
JX 192 at 009–11.

21
Greenstar’s cash collections. 81 From Tutor Perini’s perspective, it was unclear

whether the Sellers’ Bogey calculation used the specific claims on Exhibits B and C

or unrelated cash flows. 82 The parties also disagreed over the collection standard for

Exhibit C claims. Specifically, they disputed what it meant for an Exhibit C claim

to generate additional “net profit.” 83 Finally, the parties could not agree on what

counterclaims remained outstanding as possible offsets on Exhibit C projects. 84

In a series of letters from April 17 through May 5, 2015, the breadth and

intensity of the parties’ disagreements were fully exposed.85 On May 8, however,

negotiations took a promising turn when Ron Tutor stated that he “believ[ed] equity

support[ed] the payment of $6M out of [the] $8M escrow account on the [belief] that

many of the claims, although uncollected, will be collected.”86 Unfortunately, the

promise of a negotiated resolution was fleeting. Ron Tutor apparently had a change

of heart and Tutor Perini returned to its position that Greenstar’s cash collections did

81
Id. at 0010.
82
Id.; JX 173.
83
JX 192 at 0010.
84
Id. at 0010–11.
85
JX 199; JX 214.
86
JX 227; PTO § III.B.11.

22
not support payment of any of the Special Holdback.87 Later in 2015, Tutor Perini

fired Segal as CEO of Five Star.88 This litigation followed.

F. Procedural Posture

On November 7, 2016, Plaintiffs, Greenstar IH Rep and Segal, filed the

Verified Complaint. 89 The Complaint alleged (1) breach of contract concerning

Tutor Perini’s failure to make earn-out payments under the Merger Agreement

(Counts I, II and III); 90 (2) breach of contract and promissory estoppel concerning

Tutor Perini’s failure to release the $8 million Special Holdback as required under

the Holdback Agreement and as promised by Ron Tutor (Counts IV and V); 91 and

(3) declaratory relief seeking to enjoin a previously-initiated California arbitration

by Tutor Perini against Segal in favor of the forum selection provision in the parties’

Merger Agreement (Counts VI, VII and VIII). 92

On December 22, 2016, Plaintiffs moved for judgment on the pleadings on

Counts VI, VII and VIII and asked the Court to require Tutor Perini to withdraw its

87
Tutor Dep. 146:8–150:7 (D.I. 165).
88
Tr. 445 (Tutor).
89
Verified Compl. (“Compl.”) (D.I. 1).
90
Id. ¶¶ 65–82.
91
Id. ¶¶ 83–92.
92
Id. ¶¶ 105–10.

23
California arbitration in favor of litigation in Delaware.93 By Memorandum Opinion

dated February 23, 2017, this Court held that whether the claims asserted by Tutor

Perini against Segal in the arbitration were arbitrable was a question that must be

answered by the arbitrator (Count VI). 94 Plaintiffs’ declaratory relief claims

(Counts VII and VIII) were dismissed by Order dated June 5, 2017.95

On March 9, 2017, Tutor Perini filed an Answer to the Complaint and asserted

counterclaims for fraud and offset against Segal. 96 By Memorandum Opinion dated

October 31, 2017, this Court held that IH Rep was entitled to certain earn-out

payments under the Merger Agreement and dismissed Tutor Perini’s fraud and offset

counterclaims. 97 On November 30, 2017, Tutor Perini filed a Notice of Appeal of

93
D.I. 14.
94
D.I. 20.
95
D.I. 31. Count VII sought a declaratory judgment that indemnification claims against
Segal pending in the California arbitration were not arbitrable. Compl. ¶¶ 99–104.
Count VIII sought a declaratory judgment that Tutor Perini’s claims for consequential
damages arising out of post-closing governmental investigations were governed solely by
the Merger Agreement and, thus, were not arbitrable. Compl. ¶¶ 105–10.
96
D.I. 22.
97
D.I. 38.

24
this Court’s Final Order and Judgment. 98 The Supreme Court affirmed by Order

dated May 11, 2018. 99

This left only Plaintiffs’ claims for breach of contract and promissory estoppel

related to release of the $8 million Special Holdback (i.e., Counts IV and V).100 The

Court held a three-day trial on these claims on April 18, 2019.101 After trial,

Plaintiffs filed a motion to strike one of Tutor Perini’s trial demonstratives and

related trial testimony. 102 Following post-trial briefing, the parties submitted this

matter for decision after post-trial oral argument on September 10, 2019.103

II. ANALYSIS

The Sellers allege Tutor Perini breached the Holdback Agreement by refusing

to release the $8 million Special Holdback to IH Rep.104 Specifically, they say

Greenstar has collected more than $60.529 million on the pending change orders and

claims listed on Exhibits B and C, thus mandating release of the Special Holdback

98
D.I. 45 (the Court entered a partial final judgment under Court of Chancery Rule 54(b)).
99
D.I. 76.
100
Compl. ¶¶ 83–92.
101
D.I. 182.
102
D.I. 188.
103
D.I. 222.
104
Compl. ¶¶ 83–87.

25
under Sections 2 and 4 of the Holdback Agreement. The Sellers alternatively

contend they are entitled to at least $6 million of the Special Holdback under a

promissory estoppel theory. 105 For this claim, the Sellers point to Ron Tutor’s May

8, 2015 email, stating that he “believ[ed] equity support[ed] the payment of $6M out

of [the] $8M escrow account,” as the promise upon which they detrimentally

relied.106

Tutor Perini counters that Greenstar has not collected enough cash to trigger

release of the Special Holdback. Generally, Tutor Perini argues the Sellers’ alleged

collections do not meet the requirements set out in Section 2 of the Holdback

Agreement. In response to the Sellers’ promissory estoppel claim, Tutor Perini

contends, among other things, that Ron Tutor’s May 8 email did not constitute a

promise.107

I begin and end my analysis with the Sellers’ breach of contract claim.

To prevail on a breach of contract claim, a plaintiff must prove by a preponderance

105
PTO § I.
106
JX 227; see PTO § III.B.11.
107
PTO § IV.B.5.

26
of the evidence (1) the existence of a contract; (2) the breach of an obligation

imposed by the contract; and (3) damages suffered because of the breach. 108

Tutor Perini stipulates that the Holdback Agreement is a binding contract.109

It also concedes it has not paid the $8 million Special Holdback.110 Accordingly, to

succeed, the Sellers must prove—by a preponderance of the evidence—that Tutor

Perini breached an obligation to pay the Sellers at least a portion of the Special

Holdback. For reasons explained below, I conclude the Sellers have carried that

burden under the clear and unambiguous terms of the Holdback Agreement.

A. Construction of the Holdback Agreement
“The primary goal of contract interpretation is to ‘attempt to fulfill, to the

extent possible, the reasonable shared expectations of the parties at the time they

contracted.’” 111 In the search for the parties’ shared expectations, the court’s first

and often last stop is the contract itself. 112 “If, on its face, the ‘contract is

108
eCommerce Indus., Inc. v. MWA Intelligence, Inc., 2013 WL 5621678, at *13 (Del. Ch.
Sept. 30, 2013) (citing Bakerman v. Sidney Frank Importing Co., Inc., 2006 WL 3927242,
at *19 (Del. Ch. Oct. 10, 2006)).
109
PTO § III.B.5.
110
Id. at § III.B.10.
111
Comrie v. Enterasys Networks, Inc., 837 A.2d 1, 14 (Del. Ch. 2003).
112
S’holder Representative Servs. LLC v. Gilead Scis., Ind., 2017 WL 1015621, at *16
(Del. Ch. Mar. 15, 2017), aff’d, 177 A.3d 610 (Del. 2017) (“[a] contract’s express terms
provide the starting point in approaching a contract dispute.”) (internal quotations omitted);
GMG Capital Invs., LLC v. Athenian Venture P’rs, 36 A.3d 776, 779–80 (Del. 2012)
27
unambiguous, extrinsic evidence may not be used to interpret the intent of the

parties, to vary the terms of the contract or to create ambiguity.’” 113

As is often the case in contract disputes, the parties agree the Holdback

Agreement is unambiguous. And yet, as is almost always the case in contract

disputes, the parties disagree over what the Holdback Agreement means. Of course,

the parties’ disagreement over an agreement’s proper construction, alone, does not

render it ambiguous. 114 Rather, “a contract is ambiguous only when the provisions

in controversy are reasonably or fairly susceptible of different interpretations or may

have two or more different meanings.”115 On the other hand, a contract is

unambiguous when the agreement’s “ordinary meaning leaves no room for

uncertainty,” 116 and “the plain, common, and ordinary meaning of the

words . . . lends itself to only one reasonable interpretation.”117

(“[T]he Court will give priority to the parties’ intentions as reflected in the four corners of
the agreement.”).
113
S’holder Representative Servs., 2017 WL 1015621, at *16 (quoting GMG Capital,
36 A.3d at 783).
114
Rhone-Poulenc Basic Chems. Co. v. Am. Motorist Ins. Co., 616 A.2d 1192, 1196 (Del.
1992).
115
Id.; Nw. Nat’l Ins. Co. v. Esmark, Inc., 672 A.2d 41, 43 (Del. 1996) (“Although the
parties disagree as to the proper interpretation of the contract, their disagreement does not
create an ambiguity.”).
116
Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 740 (Del. 2006).
117
Sassano v. CIBC World Mkts. Corp., 948 A.2d 453, 462 (Del. Ch. 2008).

28
 The question, then, is whether the Holdback Agreement has only one

reasonable interpretation “when read in full and situated in the commercial context

between the parties.” 118 In this regard, when assessing “commercial context,” the

court may consider the parties’ “view of the overall transaction” and associated

“description[s] of the transaction” without running afoul of the parol evidence

rule. 119

I begin the contract construction exercise by noting where the parties agree.

First, the parties agree on the basic approach for determining whether the Special

Holdback has been earned: the Sellers get credit for collections on Exhibit B claims

plus collections on Exhibit C claims minus counterclaims listed on Exhibit C that

are outstanding as of the calculation date.120 Second, they agree on the standard for

Exhibit B collections. Specifically, to count as collectable, Greenstar must realize

either an actual cash collection or “a legal entitlement to collect amounts, which

standard is satisfied only through an executed change order or a legally enforceable

118
Chicago Bridge & Iron Co. NV v. Westinghouse Elec. Co. LLC, 166 A.3d 912, 926–27
(Del. 2017) (citing In re Viking Pump, Inc., 148 A.3d 633, 648 (Del. 2016)).
119
See Chicago Bridge, 116 A.3d. at 915, 927 (finding that a contract was “unambiguous
when read in full and situated in the commercial context between the parties” and
considering the parties’ “description of the transaction”).
120
Pls.’ Post-Trial Reply Br. (“PRB”) (D.I. 202) at 3.

29
settlement or judgment.”121 Third, the parties agree that only collections specifically

related to the claims listed on Exhibits B and C should count toward the Bogey;

revenue unrelated to the claims and change orders on the agreement’s exhibits will

not count. 122

The parties’ principal dispute is over which of the Exhibit C collections to

count toward the Bogey. The disagreement concerns language in Section 2, where

the parties agreed, “‘Offset Claims’ . . . may be credited against [the Shortfall] . . .

with respect to such projects set forth on Exhibit C . . . to the extent that such ‘Offset

Claim’ results in additional net profit.” 123 The parties agree Exhibit C Offset Claims

only count to the extent they “result[] in additional net profit.”124 But they do not

agree on what the phrase “additional net profit” means in the context of this

provision.

The Sellers argue any collection from Exhibit C should count toward the

Bogey except in rare situations when a collection from an Exhibit B claim

overlapped with an Exhibit C collection. 125 This interpretation—like the general

121
DAB at 11 n.3 (citing Pls.’ Pre-Trial Br. (“PPTB”) (D.I. 173) at 51).
122
Tr. 75:3–7 (Segal).
123
Holdback Agreement § 2 (emphasis supplied).
124
Id.; DAB at 13–14; Pls.’ Opening Post-Trial Br. (“POB”) (D.I. 191) at 37.
125
POB at 37.

30
structure of the Holdback Agreement—focuses on cash collections.126 In this regard,

the Sellers emphasize that the collection standard for Exhibits B and C is the same

(i.e., cash in the door or a legal entitlement to cash). 127

The Sellers’ construction lines up well with the calculation examples provided

on Exhibit D. Indeed, that exhibit directly supports the premise that any Exhibit B

and C cash collections should be added together when determining whether the

Bogey has been hit: “Total cash collection requirement per Exhibit B (can be made

up of any combination of cash receipts from Exhibits B and C).” 128

126
Specifically, the Sellers make the point that any attempt to place outsized emphasis on
the words “net profit” as used in Section 2 would be inappropriate given that the agreement,
as a whole, places much more emphasis on cash collections. Holdback Agreement § 2,
Ex. D. GMG Capital, 36 A.3d at 779 (“The meaning inferred from a particular provision
cannot control the meaning of the entire agreement if such an inference conflicts with the
agreement’s overall scheme or plan.”).
127
PPTB at 51.
128
Holdback Agreement at Ex. D (emphasis supplied). Tutor Perini argues the Sellers
place too much weight on Exhibit D. See DAB at 17 (“Exhibit D simply presents two
examples of how the calculation of the [Bogey] can be reached.”). This argument misses
the mark because it ignores the express terms of the contract. The Holdback Agreement
makes clear that Exhibit D is just as much a part of the agreement as Exhibits B and C.
See Holdback Agreement § 9(e) (“This agreement and the other documents referred to
herein and therein embody the complete agreement[.]”) (emphasis supplied). Exhibit D
contains clarifying language—together with its examples—that must be read along with
Section 2. “Contract[s] must [] be read as a whole, giving meaning to each term.” Sunline
Commercial Carriers, Inc. v. CITGO Petroleum Corp., 206 A.3d 836, 846 (Del. 2019).
Thus, the general, undefined term “net profit” must be construed in light of the specific
clarification provided in Exhibit D. Id. (holding that “general terms of the contract must
yield to more specific terms.”).

31
 The comments on Exhibits B and C (below) also support the Sellers’ position

that collections on Exhibit B and C claims, added together, will be credited against

the Bogey without condition.129

Exhibit B Exhibit C

Claims / Claim
Job Exhibit B Comment Exhibit C Comment
Unbilled Amount
@
3/31/13
Freedom $5 $29.436 Collection of $5M Claim amount settled
Tower130 included in 2012 revenue less $5M previously
for [] general condition recognized will be
claim of $29.4M (See offset amount (see
Exhibit C). Exhibit B).
Jamaica $5.8 $23.086 Collection of $5M Claim amount settled
2E 131 included in 2012 revenue less $5M previously
for [] general condition recognized will be
claim of $23.1M (See offset amount (see
Exhibit C). Exhibit B).
Jamaica $15.541 $7.3 Collection of amount
2G related to request for []
delay as of 3/31/13.

129
Post-Trial Oral Arg. (D.I. 224) at 15–16; Holdback Agreement at Ex. B, Ex. C
(emphasis supplied).
130
JX 16 at 0082827–28 (accounting memo showing that Five Star had submitted a
$29.4 million claim of which $5 million was booked as of March 31, 2013).
131
JX 170 at 0187440–41 (accounting memo showing that Five Star had submitted a
$23.3 million claim of which $5.8 million was booked).

32
The Sellers contend that these three claims on Exhibit C included amounts that had

already been booked when the Holdback Agreement was executed. 132 They say the

Exhibit B amount was the portion of the claim that Greenstar had booked, and the

Exhibit C amount was the total amount Greenstar could identify—but which may

not have been booked as CIE.133 They note that Exhibit C’s two comments explicitly

state that the “Claim amount settled [(i.e., collected)] less [the amount] previously

recognized will be [the] offset amount.”134 In other words, the Sellers may credit all

Exhibit B and C collections—allocated first to Exhibit B with any overflow going

to Exhibit C in the event of overlap.

According to the Sellers, the purpose of the “net profit” requirement for

Exhibit C is to avoid double counting.135 The net profit requirement thus recognizes

and accounts for the fact that Exhibit C claims sometimes include claims on

132
PRB at 4–5. Tutor Perini disputes whether these three projects were the only Exhibit C
claims with booked amounts as of the Holdback Agreement’s execution. See DAB at 14–
15. Ultimately, I need not reach the question of exactly which Exhibit C claims were
booked or unbooked because the main purpose of the net profit requirement is to avoid
double counting the same cash collections on both Exhibits B and C.
133
The Sellers credibly explain that the parties broke the claims into two exhibits for
accounting reasons. Exhibit B claims were booked as revenue when the Holdback
Agreement was executed while Exhibit C claims were, for the most part, not. See PRB
at 4; Tr. 465–66 (Tutor); Tr. 20–21, 25 (Segal); Tr. 673 (Burk). Tutor Perini’s counter-
argument that the Sellers have “strip[ped] out the distinction between the two [exhibits]”
is factually unpersuasive. See Post-Trial Oral Arg. (D.I. 244) at 96.
134
Holdback Agreement at Ex. C.
135
PPTB at 42–43.

33
Exhibit B.136 In such cases, if Greenstar collects the full amount of the Exhibit C

claim, only that portion which “results in additional net profit . . . after the [Holdback

Agreement’s execution]” (i.e., the unbooked portion) will count as an Exhibit C

Offset Claim. 137 The remainder is credited under Exhibit B. Thus, according to the

comments in the exhibits, when there is overlap between Exhibits B and C, the

Exhibit C “claim amount settled less [] previously recognized will be [the] offset

amount.”138

136
See, e.g., Holdback Agreement at Ex. C. Tutor Perini argues that the Sellers’
interpretation “contradicts the entire purpose and structure of the Agreement [because] if
any collections on Exhibits B and C projects counted to reduce the [Bogey] . . . there would
have been no reason to separately break out certain claims and projects on Exhibits B and
C and to impose a distinct ‘additional net profit’ requirement . . . .” DAB at 16–17. Tutor
Perini’s argument fails to recognize the commercial context of the Holdback Agreement.
See Chicago Bridge, 166 A.3d at 926–27. The Holdback Agreement clearly states that the
“pending claims . . . set forth on Exhibit B . . . are the remaining outstanding claims that
could have been made under . . . the Merger Agreement.” Holdback Agreement § 2. Thus,
the two different schedules divide claims still outstanding from the 2011 Merger
Agreement (i.e., Exhibit B) from the total outstanding claims on the projects
(i.e., Exhibit C)—which sometimes included the claims listed on Exhibit B. The net profit
requirement avoided double counting. Tutor Perini acknowledges as much in its briefs.
See DAB at 5–6 (“The first schedule, Exhibit B, reflected $60.529 million of specific
claims, unbilled costs, and previously recorded losses that still had not been resolved as of
April 24, 2013. . . . The second schedule, Exhibit C, reflected the total claims for the listed
projects as of April 24, 2013.”) (citations omitted). While at times overlapping, the two
Exhibits clearly served separate functions. See iBio, Inc. v. Fraunhofer USA, Inc., 2016
WL 4059257 at *5 (Del. Ch. July 29, 2016) (“Contractual interpretation operates under the
assumption that the parties never include superfluous verbiage in their agreement, and that
each word should be given meaning and effect by the court.”).
137
Holdback Agreement § 2, Ex. B, Ex. C. This dynamic comes to light when examining
the comments on Exhibits B and C.
138
Id. at Ex. C.

34
 The Sellers’ proffered interpretation aligns with the ordinary meaning of

“net profit.”139 Here again, it is important to focus on the commercial context of the

contract.140 The Holdback Agreement itself requires “the Pending Claims [to be]

collected in full.” 141 There is no mention of Greenstar’s broader operational

profitability. The genesis of the cash collection requirement is what Ron Tutor

described as Tutor Perini’s “collection risk” and the concomitant need for the

acquired businesses to collect what Tutor Perini “paid for.”142 This collection risk

is a key component of the Holdback Agreement’s commercial context.

All things equal, the collection of unbooked claims increases net profit

because collections increase revenue without increasing costs. 143 Moreover, even if

139
AT&T Corp. v. Lillis, 953 A.2d 241, 252 (Del. 2008) (stating that courts are “constrained
by a combination of the parties’ words and the plain meaning of those words where no
special meaning is intended.”) (internal quotations omitted). A common definition of net
profit is, “the money made by a company or part of a company for a particular period after
all costs, taxes, etc. have been paid.” Net Profit, CAMBRIDGE DICTIONARY (last visited
Oct. 4, 2019), https://dictionary.cambridge.org/us/dictionary/english/net-profit.
140
Chicago Bridge, 166 A.3d at 926–27.
141
Holdback Agreement § 2 (emphasis supplied).
142
JX 40; JX 227; Tr. 465–66 (Tutor).
143
Tr. 587–88, 602 (Bennett); Tr. 312–13 (Soroka) (“Q. If you decrease revenue, and all
other things are equal, you’re going to decrease profit. Correct? A. That is correct.
Q. And if you increase revenue, all other things being equal, you’re going to increase
profit. Correct? A. That is correct. Q. . . . [I]f you’ve already done the work, you have a
pending change order, you know, the owner says, ‘Yeah, that was in the original scope of
work. I’m not paying for that.’ And you agree with the owner and you say, ‘Okay, I’m
writing that off.’ That’s going to reduce revenue. Correct? A. That would reduce revenue,
35
a claim amount were booked (and thereby already increased revenue and

profitability), failure to collect a booked amount would cause a write-down and

corresponding reduction in profitability. 144 As a result, the only way the collection

of an Exhibit C claim would not increase profitability is if it had already been

accounted for on Exhibit B—a nuance the Sellers capture specifically in their

proposed construction by prohibiting double counting.145

After carefully considering the Sellers’ proffered construction of the disputed

provisions of the Holdback Agreement, I am satisfied it is reasonable and well

supported by the express terms of the contract and its incorporated examples,

particularly “when read in full and situated in the commercial context between the

parties.”146 To answer the ambiguity question, however, I must determine whether

the Sellers’ construction is the only reasonable construction or whether Tutor Perini

has proffered a reasonable construction as well.

For its part, Tutor Perini reads the net profit requirement to mean that

collections on Exhibit C claims only count toward the Bogey if the projects

yes. Q. And the expected change in revenue in my example would decrease profitability.
Correct? A. That is correct.”).
144
Tr. 312–13 (Soroka).
145
Tr. 29–30 (Segal).
146
Chicago Bridge, 166 A.3d at 926–27.

36
themselves generate net profit.147 Specifically, according to Tutor Perini, “[w]hether

an Exhibit C Offset Claim has generated ‘additional net profit’ is determined by

calculating the P&L impact that the resolution of the claim has on the project.”148

Under this construction of Section 2, there is no single formula for determining net

profit. Rather, “[t]he specific method by which this calculation is performed

depends on various factors unique to each job.”149 To account for the fact that its

net profit definition cannot be applied consistently across all projects, Tutor Perini

claims the Holdback Agreement grants it significant discretion as the “arbiter of net

profits” to decide when a job has yielded “additional net profit” such that collections

on Exhibit C claims may be counted toward the Bogey. 150

Even a cursory glance reveals that Tutor Perini’s proffered construction adds

limitations to Exhibit C collections that appear nowhere in the Holdback

Agreement. 151 The parties took pains to set out the mechanics for calculating the

147
Holdback Agreement § 2; DAB at 13.
148
DAB at 21 (emphasis supplied).
149
Id.
150
Id. at 21 n.8.
151
The Holdback Agreement has an integration clause. Holdback Agreement § 9(e) (“This
Agreement and the other documents referred to herein and therein embody the complete
agreement and understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written or oral,
which may have related to the subject matter hereof in any way.”). Delaware law disfavors
adding limitations to a contract not found in its language. Emmons v. Hartford
37
Shortfall but, tellingly, Tutor Perini’s net profit formulation is missing.152

The omission of Tutor Perini’s case-by-case approach from the Holdback

Agreement is stark and likely reveals the parties’ appreciation that any such

approach would drag out the determination of the Special Holdback indefinitely as

the parties await completion of long-term construction projects to assess net

profitability. As discussed below, this strung out process not only would conflict

with the contract’s overall scheme for incentivizing collections, it would render the

specific examples the parties agreed to in Exhibit D (that contemplate a more

predictable approach to determining net profit) meaningless.

First, the Holdback Agreement describes the accounting standards that would

govern the “prospective collectability of any [] Pending Claim or Offset Claim.”153

In this regard, Tutor Perini’s “US GAAP position taken on [Tutor Perini’s] financial

statements . . . may be taken into consideration” but it is not “dispositive.”154 This

language makes clear that (1) collectability is the focus, and (2) Tutor Perini’s

Underwriters Ins. Co., 697 A.2d 742, 746 (Del. 1997) (“[A] [c]ontract interpretation that
adds a limitation not found in the plain language of the contract is untenable.”).
152
In short, the Holdback Agreement does not “confer[] discretion on one party.” See, e.g.,
Miller v. HCP & Co., 2018 WL 656378, at *10 (Del. Ch. Feb. 1, 2018) (analyzing an
agreement that gave a party the right to “determine in its sole discretion the manner in
which [a sale] shall occur”).
153
Holdback Agreement § 2 (emphasis supplied).
154
Id.

38
determinations of net profit per job are not controlling. The parties gave no

indication in the Holdback Agreement that Tutor Perini had been granted unchecked

discretion as an “arbiter” of net profit. 155 And there is no basis to inject that authority

into the agreement after the fact.

Second, Exhibit D provides two calculation examples—neither of which even

mention the word “profit” or “profitability.” To the contrary, Exhibit D states the

“[t]otal cash collection requirement . . . can be made up of any combination of cash

receipts from Exhibits B & C,” and “cash collected” should be added to “offset claim

receipts.” 156 Again, the focus is on cash collections. Nothing in these examples

suggests that collections are subject to Tutor Perini’s discretionary determination of

whether the collections increased net profit on a job-by-job basis. 157

155
DAB at 21 n.8.
156
Holdback Agreement at Ex. D (emphasis supplied).
157
Id. Tutor Perini argues, “[i]t is naïve and detached from reality to suggest that net profits
on the Exhibit C Offset Claims can be determined by looking only at two static numbers
on Exhibits B and C without accounting for any subsequent events and other variables on
the project.” DAB at 15–16. According to Tutor Perini, the variables that might impact
the profitability on a project are “infinite” and must be accounted for in the net profit
determination. Tr. 168 (Soroka) (stating that infinite variables could impact profitability).
What the Holdback Agreement actually says, however, is that “[t]otal cash collections . . .
[c]an be made up of any combination of cash receipts from Exhibits B & C.” Holdback
Agreement at Ex. D. To reiterate, Delaware courts will not “add[] a limitation not found
in the contract language.” Nw. Nat’l Ins., 672 A.2d at 44. Yet Tutor Perini would have the
Court add, as a limitation on Exhibit C collections, an unspoken condition that they satisfy
a project-by-project net profitability test of Tutor Perini’s own design. This interpretation
“adds a limitation” to “the common and ordinary meaning of the word ‘[net profit]’ as used
in the [Holdback] Agreement” that does not square with the contract’s express terms. Id.

39
 Third, Tutor Perini’s construction ignores the commercial context in which

the parties agreed to modify the prerequisites to earning the Special Holdback.158

Ron Tutor, himself, explained that the Holdback Agreement was meant to address

Tutor Perini’s “collection risk”159 and to “motivate [Segal] to collect our [] cash.”160

Stated simply, Tutor Perini wanted to realize Greenstar’s balance sheet net worth in

full by collecting amounts Greenstar claimed it was owed.161 Tutor Perini’s

litigation construct of needing to realize net profit on as yet completed jobs as a

predicate to paying the Special Holdback not only finds no support in the contract,

it does not comport with the commercial context the parties were addressing when

they entered into the Holdback Agreement. In other words, Tutor Perini’s proffered

construction is not reasonable.

******

Having concluded the Sellers have offered the only reasonable construction

of the Holdback Agreement, I am satisfied the contract is not ambiguous and that

the Sellers’ construction must prevail. Cash collections associated with claims listed

158
Chicago Bridge, 166 A.3d at 926–27.
159
JX 40 at 82349.
160
Tr. 490 (Tutor).
161
Tr. 468 (Tutor).

40
on Exhibit C meet the Exhibit C collection standard as long as such receipts are not

double-counted with actual receipts from Exhibit B.

B. Tutor Perini Must Release All of the $8 Million Special Holdback

Deciding the proper construction of “net profit” does not end the parties’

dispute. Even when applying the Sellers’ construction of net profit, Tutor Perini

argues the Sellers still have not proven their entitlement to the $8 million Special

Holdback. Resolving this dispute requires a careful review of Greenstar’s projects,

as listed on Exhibits B and C, to determine whether the Sellers have proven, by a

preponderance of the evidence, that Greenstar collected at least $52.529 million

(net of outstanding counterclaims) in order for the Sellers to recover at least some of

the Special Holdback. 162

162
Holdback Agreement at Ex. D; PRB at 28. See DAB at 6 (citing JX 82 § 2), 24–25
(“The parties agreed in the Holdback Agreement that any counterclaims that are pending,
have been alleged, or have otherwise been paid reduce the offset credit to which Plaintiffs
are entitled.”) (citing Segal Dep. 103:18–104:4 (D.I. 165); Vaiana Dep. 188:14–189:15
(D.I. 165)).

41
 The parties dispute approximately $34 million of collections across four

named projects: 156 Stations ($10.5 million),163 Freedom Tower ($5 million),164

Jamaica 2G ($16.582 million) 165 and John Jay ($1.538 million).166 The parties also

dispute the total amount of counterclaims pending against Greenstar on Exhibit C

claims. For reasons stated in detail below, the preponderance of the evidence proves

that Sellers are entitled to all of the $8 million Special Holdback.

163
DAB at 26 (“Exhibit C listed $11.884 million under 156 Stations, which represented
the amount of a judgment secured by Five Star on the 156 Stations project. It is undisputed
that this judgment was subsequently settled on March 30, 2015 for $10.5 million.”).
The dispute is whether the full amount of the $11.884 judgment on Exhibit C had been
booked as of 3/31/13. Tutor Perini argues that it was. Id. (citing Tr. 546:12–550:21
(Bennett); JX 48; JX 411). Accordingly, it argues that collection of this amount from
Exhibit C did not increase “net profit” and, therefore, should not be credited toward the
Bogey. Id. at 27.
164
Both parties agree that the Sellers are entitled to credit at least $12 million in collections
on this project. See id. at 27. The dispute is over $5 million in “pre-[hurricane] Sandy
claims” related to the total claim of $29.4 million on Exhibit B. Holdback Agreement at
Ex. B; id. at 28; PRB at 21.
165
DAB at 38–42.
166
Id. at 42–43. There are other disputed collections, counterclaims and contract
construction issues. See, e.g., PRB at 21, 28–29 ((i) Amtrak ($1.651 million disputed),
(ii) Newtown Creek counterclaim ($9.173 million disputed), (iii) whether the Sellers are
entitled to credit “prospective collections” from Exhibit C). I need not resolve these
disputes, however, given my finding that the Sellers have hit the Bogey with collections on
other claims associated with other projects.

42
 1. $45 Million of Undisputed Collections
Before addressing the disputed collections, I recount the collections upon

which the parties agree. Tutor Perini gives the Sellers credit for the following

receipts (assuming the Sellers’ construction of “net profit” is correct):167

Project Undisputed Credit 168
Freedom Tower $12 million 169
9/11 Memorial $15.068 million 170
Bowery Bay $1.215 million 171
Scada 24 $1.25 million 172
Scada 27 $1.5 million 173

167
See PRB at Ex. 1.
168
This column includes amounts collected that Tutor Perini does not dispute the Sellers
may credit assuming the Sellers’ proposed construction of “net profit” is correct.
169
DAB at 27 (“Exhibit B required Five Star to collect $5 million, which was the recorded
amount on the $29.4 million claim reflected on Exhibit C for the Freedom Tower project.
The $29.4 million claim was settled for $12 million in Q1 2016.”) (citations omitted).
I address disputed amounts with respect to Freedom Tower below.
170
Id. at 29 (“There is no dispute that the $3.268 million on Exhibit B for the 9/11 Memorial
project was collected. It is also undisputed that the $18.005 million claim on Exhibit C
was settled in Q1 2015 for $11.8 million.”) (citations omitted).
171
Id. at 30 (“The comment associated with Bowery Bay provides that the $1.863 million
on Exhibit B represents ‘amounts relating to pending change orders.’ Five Star collected
$1.799 million in connection with the final close-out of the project, but it is undisputed that
only $1.215 million was attributable to pending change orders.”) (citation omitted).
172
Id. at 31 (“A claim for $5.764 million appears on Exhibit C. It is undisputed that Five
Star collected $1.4 million in connection with the final close-out of the project . . . and that
only $1.25 million of that amount was attributable to the claim.”) (citation omitted).
173
Id. at 31–32 (“A claim for $5.229 million appears on Exhibit C. It is undisputed that
Five Star collected $1.98 million in connection with the final settlement of this project . . .
and that only $1.5 million of that amount was attributable to the claim.”) (citations
omitted).

43
 Heschel $.388 million 174
Community Health $.107 million 175
Eagle $.111 million 176
Metro Campus $.057 million 177
PS 95X $.155 million 178
Young Womans $.020 million 179
Ward Island Interim (78H) $2.99 million 180
Ward Island BNR (87G) $.241 million 181
John Jay $1.562 million 182

174
Id. at 33 (“A claim for $1.411 million appears on Exhibit C. The parties agree that
$388,070.14 was collected on the claim in Q2 2015 in connection with the settlement of
the project.”) (citations omitted).
175
Id. at 34 (“A claim for $129,000 appears on Exhibit C. The parties agree that the claim
was settled for $107,030 in Q3 2018.”) (citations omitted).
176
Id. at 34 (“A claim for $212,000 appears on Exhibit C. The claim was settled for
$111,184 in Q3 2014.”) (citation omitted).
177
Id. at 35 (“A claim for $794,000 appears on Exhibit C. The parties agree that the claim
was settled in Q2 2016 for $57,753.”) (citation omitted).
178
Id. at 35 (“A claim for $526,000 appears on Exhibit C. The parties agree that the claim
was settled in Q1 2018 for $155,000.”) (citation omitted).
179
Id. at 36 (“A claim for $20,000 appears on Exhibit C. The parties agree that the claim
was settled for $20,000 (full value) in Q4 2014.”) (citations omitted).
180
Id. at 37 (“Exhibit B required WDF to collect $2.478 million related to a delay claim.
The delay claim was reflected on Exhibit C in the amount of $6.043 million. The parties
agree that the $2.478 million on Exhibit B was collected and that the settlement of the delay
claim resulted in additional net profits in the amount of $511,929.45. Accordingly, the
parties agree that Plaintiffs are entitled to a total credit of $2.99 million for this project.”)
(citations omitted).
181
Tutor Perini disputes how much of the collections on this project the Sellers may credit
toward the Bogey. But Tutor Perini acknowledges that at least $.241 million is attributable
to Exhibit B. See Id. at 37–38.
182
Id. at 42 (“Accordingly, WDF has collected a total of $1,562,192 on Exhibit B.”)
(citations omitted).

44
 Five Stations / Three Stations $1.75 million 183
Bronx Zoo $.5 million 184
150 Amsterdam $1.35 million 185
Tallman Island (P) and (H) $3.8 million 186
Fulton Street $.983 million 187
SUM $45.047 million

In sum, Tutor Perini concedes the Sellers may credit at least $45.047 million toward

the Bogey.

Remainder of Page Intentionally Left Blank

183
Id. at 44 (“It is undisputed that the claims on both projects were settled in February 2018
for a combined total of $1.75 million and, for that reason, Tutor Perini has given Plaintiffs
credit for that amount on Exhibit B.”) (citations omitted).
184
Id. at 44–45 (“[I]t is true that the claim on Exhibit C settled for $500,000 in December
2015.”). This project provides a concrete example of the double counting problem. See id.
(“While it is true that the claim on Exhibit C settled for $500,000 in December 2015 [],
that amount was applied against a booked position of $324,000 (for which Plaintiffs
received credit on Exhibit B)[.]”). The Sellers may credit only $500,000 of collections
toward the Bogey.
185
Id. at 45 (“It is undisputed that WDF collected a total of $1.35 million in connection
with the settlement and final close-out of the project in Q3 2017.”) (citations omitted).
186
Id. at 46 (“It is undisputed that the claims were settled in Q3 2018 for a total of
$3.8 million.”) (citations omitted).
187
Id. (“A claim for $1.3 million appears on Exhibit C. It is undisputed that the claim was
settled in Q3 2016 for $982,945.12.”) (citations omitted).

45
 2. The Sellers May Credit $10.5 Million From 156 Stations

The 156 Stations project has claim amounts listed on both Exhibits B and C.188

Exhibit B Exhibit C
Project
Claims / Unbilled @ 3/31/13 Claim Amount
156 Stations $ 1 million 189 $ 11.884 million

The parties agree Greenstar has collected $10.5 million of the $11.884 million value

listed on Exhibit C,190 while the $1 million amount listed on Exhibit B remains

outstanding. 191 Despite this common ground, Tutor Perini disputes whether the

Exhibit C collection meets the “net profit” requirement under the Sellers’

definition.192 Specifically, Tutor Perini argues the Sellers should not get credit for

the $10.5 million because the full amount of the Exhibit C claim was allegedly

booked as revenue when the parties executed the Holdback Agreement.193

188
Holdback Agreement at Ex. B, Ex C.
189
The comment from Exhibit B states “reserve for possible legal costs to finalize
settlement and payment to PSE.” Holdback Agreement at Ex. B.
190
DAB at 26 (citing JX 198; JX 203; JX 208).
191
Id. (citing JX 198; JX 203; JX 208; Tr. 234 (Soroka)).
192
Id. at 27; Post-Trial Oral Arg. (D.I. 224) at 110.
193
DAB at 26 (citing Tr. 546–50 (Bennett); JX 48; JX 411). The Sellers dispute whether
the full amount of the claim was booked. See PRB at 10 (questioning whether Defendant’s
evidence on this topic was properly entered into the record). I need not reach that question
because I am persuaded the Holdback Agreement unambiguously allows the Sellers to
credit their actual collections on the 156 Stations project to the extent they did not overlap
with collections on claims listed on Exhibit B.

46
Therefore, according to Tutor Perini, even under the Sellers’ definition of

“net profit,” the $10.5 million collection could not meet the Exhibit C collection

standard because it had already increased revenue when it was booked.194 The

Sellers respond by exposing that Tutor Perini’s reading renders the $11.8 million

claim on Exhibit C superfluous. As the Sellers correctly observe, by Tutor Perini’s

lights, even if Greenstar had collected the full $11.884 million listed on Exhibit C,

the Sellers could never get credit for that claim. 195

As the Sellers point out, there would be no reason to include a value on

Exhibit C if it was uncollectable for purposes of reaching the Bogey under any set

of facts.196 To reiterate, the purpose of the “net profit” requirement for Exhibit C is

to avoid double counting when an Exhibit C claim is inclusive of an Exhibit B

claim. 197 There is no double counting problem with the 156 Stations claim listed on

194
Holdback Agreement § 2.
195
POB at 46–48; PRB at 9–10, 23–24.
196
See Charney v. Am. Apparel, Inc., 2015 WL 5313769, at * 13 (Del. Ch. Sept. 11, 2015)
(declining to adopt an interpretation that “would lead to absurd results to which no
reasonable person would have agreed.”); Kuhn Const., Inc. v. Diamond State Port Corp.,
990 A.2d 393, 396–97 (Del. 2010) (“We will read a contract as a whole and we will give
each provision and term effect, so as not to render any part of the contract mere
surplusage.”).
197
See, e.g., Holdback Agreement at Ex. B, Ex. C (Freedom Tower contained a
$29.436 million Exhibit C claim which included a $5 million Exhibit B claim). The
comments to Exhibit C clarify, “[c]laim amount settled less $5M previously recognized
will be offset amount (see Exhibit B).” Holdback Agreement at Ex. C (emphasis supplied).

47
Exhibit B. The $1 million listed for 156 stations was a “reserve for possible legal

costs to finalize settlement and payment.” 198 The Exhibit C claim did not include

the $1 million legal fees listed on Exhibit B. 199 Because there is no double counting

issue, the Sellers may credit the $10.5 million they actually collected from Exhibit C

toward the Bogey.

3. The Sellers May Credit $5 Million from Freedom Tower

Tutor Perini disputes whether a “$5 million change order [collected by

Greenstar and applied toward the Bogey by the Sellers] . . . relat[ed] to the claim

listed on Exhibit B and C.”200 In other words, the parties do not dispute that money

came in the door in collection of this claim. The dispute lies in whether this money

relates to an Exhibit B claim or to unrelated work on the Freedom Tower project.

Tutor Perini cites Ryan Soroka’s trial testimony for the proposition that the

$5 million receipt was unrelated to Exhibit B. 201 Specifically, Soroka testified that

he “recall[ed]” that “$5 million of [] claims for Freedom Tower were paid in 2015”

and that “[w]e’ve given credit in full” for that amount.202 Yet credible testimony

198
Holdback Agreement at Ex. B (comments for 156 Stations).
199
DAB at 26 (citing JX 189; JX 203; JX 208).
200
DAB at 29.
201
Id.
202
Tr. 317:9-20 (Soroka) (“Q. Right. So the $5 million of pre-Sandy claims for Freedom
Tower were paid in 2015. Correct? A. That’s what I recall. Q. And at that point, the
48
from Messrs. Tutor, Segal, Therien and Soroka reveals that Greenstar did collect the

$5 million on Exhibit B.203 With this testimony, the Sellers have proven by a

preponderance of the evidence that they may credit the full $5 million toward the

Bogey.

4. The Sellers May Credit $13.541 Million on Jamaica 2G

Tutor Perini claims the Sellers are entitled to no credit for Jamaica 2G while

the Sellers argue they are entitled to credit $16.682 million. 204 Tutor Perini’s

litigation position contradicts its pre-litigation position, per Ron Tutor’s March 2015

letter, that the Sellers could credit at least $13.541 million of $18.7 million in total

collections on the Jamaica 2G project.205 At trial, Tutor Perini attempted to walk

back its previous calculation by claiming the 2015 letter represented a “best case

scenario for [the Sellers]” and that the letter was unreliable on its own terms. 206 The

booked amount that existed as of March 2013 was collected in full. Correct? A. We’ve
given credit in full. I can’t specify that that specific $5 million was included in the
$12 million which was the ultimate settlement. However, in the—for purposes of the
updated exhibit, we’ve given credit to that regard as collected in full.”). Indeed, Tutor
Perini actually “give[s] credit” for the additional $5 million in its briefing. DAB at 29 n.15,
Ex. 1.
203
Tr. 498:12–13 (Tutor); Tr. 45:7–8 (Segal); Tr. 133:5–7, 135:15–17 (Therien), Tr. 317
(Soroka).
204
See DAB at 38–42; PRB at 24.
205
JX 181 at 00170.
206
DAB at 40 (citing Id.).

49
walk back is not credible. Tutor Perini’s contemporaneous memoranda—prepared

in the midst of the parties’ pre-litigation discussions—characterizes the $13.541

million as a “[c]ollection on [p]reviously [o]utstanding UCO’s/unbilled.”207 This

characterization of the collection on a clear (or at least clearer) day is credible; the

Sellers are entitled to credit at least $13.541 million toward the Bogey consistent

with Tutor Perini’s own calculations.208

5. The Sellers May Credit $1.6 Million on John Jay

For John Jay, Tutor Perini does not dispute that the Sellers are entitled to credit

$1.562 million in collections from Exhibit B. 209 The dispute centers on collections

of the $1.6 million claim from Exhibit C and whether such collections properly relate

to the Holdback Agreement. 210 In support of their position that this collection should

be credited to Exhibit C, the Sellers point to testimony from Roman (WDF’s long-

time CEO) in which he confirmed that he had checked on “certain claims on John

207
JX 181 at 00172. Tutor’s testimony was that the credit of $13.541 million came about
after “accounting’s exhaustive review and my [(Ron Tutor’s)] review of accounting.”
Tr. 474:5–6 (Tutor).
208
Given that I find Tutor Perini must release the entire Special Holdback, I need not
address the remaining disputed collections on Jamaica 2G.
209
DAB at 42 (“WDF has collected a total of $1,562,192 on Exhibit B.”).
210
Id. at 43.

50
Jay” and had confirmed that “somewhere between $1.6 million and $1.7 million was

settled.”211

Tutor Perini attacks this testimony as “speculative” and unsupported by

corroborating documents.212 I disagree. Roman’s testimony was precise and

credible. And there is nothing in the record to contradict it. Accordingly, the Sellers

may credit $1.6 million on the John Jay project’s Exhibit C claim toward the

Bogey. 213

6. The Counterclaims Do Not Prevent the Sellers From Reaching the
Bogey

Tutor Perini’s Post-Trial Answering Brief states there are only two

counterclaims remaining: Newtown Creek 31E ($9.173 million) and John Jay

($11.5 million). 214 As for John Jay, the credible testimony, particularly from

Roman, indicates that this counterclaim is “gone.”215 Roman would know about this

counterclaim as WDF’s CEO and, again, Tutor Perini cites no persuasive evidence

211
Roman Dep. 47:5–9 (D.I. 165).
212
DAB at 43.
213
Here, I am adopting the low-end of Roman’s testimony regarding how much of the
claim Greenstar collected.
214
DAB at Ex. 1. Given how I resolve other disputes, I do not reach whether the Newtown
Creek 31E counterclaim is still outstanding such that it offsets Greenstar’s collections.
215
PRB at 27; Roman Dep. at 202:21–24 (D.I. 165)).

51
to contradict Roman’s testimony. 216 Since the credible evidence reveals that the

John Jay counterclaim is no longer outstanding, it cannot offset Greenstar’s

collections.

7. Calculating the Bogey

To require Tutor Perini to release the entire $8 million Special Holdback, the

Sellers needed to prove, by a preponderance of the evidence, that Greenstar collected

the Bogey ($60.529 million) after a reduction for outstanding counterclaims.217

216
Tr. 510:8–9 (Foncello) (stating Roman is WDF’s CEO). Indeed, Tutor Perini’s only
attempt to rebut Roman’s testimony appears in its Post-Trial Answering Brief, at
footnote 26, where it states, “[t]he amount of the counterclaim has been increased to
$11.5 million” without citing any evidence. DAB at 42 n.26. Tutor Perini’s trial
demonstrative (the “Amended Soroka Demonstrative”) (D.I. 183) references a
$11.5 million counterclaim on the John Jay project. D.I. 183. The only citation provided
for this assertion is “status of counterclaim derived from counsel.” D.I. 183 at Ex. A.
The Amended Soroka Demonstrative is (i) not evidence and (ii) based on hearsay
communications with counsel that Tutor Perini has not sought to offer into evidence. It is
not competent, therefore, to rebut the Sellers’ evidence. During post-trial oral argument,
defense counsel argued Soroka’s testimony established that the John Jay counterclaim still
existed. See Post-Trial Oral Arg. (D.I. 224) at 122–23 (citing Tr. 265 (Soroka)). Soroka’s
testimony was, “If I recall that—I believe that [the John Jay counterclaim] amount is
unchanged from the initial agreement.” Tr. 265 (Soroka). I credit Roman’s testimony over
Soroka’s for three reasons. First, Roman’s testimony was more definitive. Second, as
WDF’s CEO, Roman is more likely to know the status of the counterclaim when compared
to Soroka (who is removed from WDF’s day-to-day operation). Tr. 161–62 (Soroka)
(Soroka joined Tutor Perini in 2011 to become Director of Technical Accounting.
He stayed in that role for two years. He left Tutor Perini in 2013 and returned in 2015 to
assume the role of Vice President of Finance Operations. In April 2017, he became Tutor
Perini’s Chief Accounting Officer.). Third, I find the conspicuous lack of documentary
evidence on the status of the John Jay counterclaim falls at Tutor Perini’s feet. Tutor Perini
cannot attack the Sellers’ witness testimony as lacking in documentary support when it is
the entity that controls the relevant documents.
217
Holdback Agreement § 2.

52
The Holdback Agreement unambiguously provides that cash collections toward the

Bogey can be “made up of any combination of cash receipts from Exhibits B &

C.” 218 The preponderance of the evidence shows the Sellers are entitled to credit:

• $45.047 million in undisputed cash collections

• $10.5 million from 156 Stations

• $5 million from Freedom Tower

• $13.541 million from Jamaica 2G

• $1.6 million from John Jay

I also find the preponderance of the evidence proves that the John Jay

counterclaim is no longer outstanding—leaving only the $9.173 million

counterclaim from Newtown Creek. After doing the math, the Sellers may credit

$66.515 million toward the $60.529 million Bogey. 219 Because the Sellers have

exceeded the Bogey, Tutor Perini must release the entire $8 million Special

Holdback.220

218
Holdback Agreement at Ex. D.
219
$75.688 (total claims) - $9.173 (Newton Creek counterclaim) = $66.515.
220
Given this finding, I do not address Plaintiffs’ post-trial motion to strike Ryan Soroka’s
trial demonstrative (D.I. 188).

53
 III. CONCLUSION

The Sellers have proven that they are entitled to the entirety of the Special

Holdback. Accordingly, final judgment will be entered for Plaintiffs on Count IV

of the Complaint. The parties shall confer and submit a conforming final judgment

within ten (10) days.

54