Agspring Holdco, LLC v. NGP X US Holdings, L.P.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

AGSPRING HOLDCO, LLC, a )
Delaware limited liability company; )
AGSPRING, LLC, a Delaware limited )
liability company; LVS II SPE XVIII )
LLC, a Delaware limited liability )
company; HVS V LLC, a Delaware )
limited liability company; and TOBI )
XXI LLC, a Delaware limited liability )
company, )
)
Plaintiffs, )
)
v. ) C.A. No. 2019-0567-AGB
)
NGP X US HOLDINGS, L.P., a )
Delaware limited partnership; )
RANDAL L. LINVILLE and )
BRADLEY K. CLARK, )
)
Defendants. )

MEMORANDUM OPINION

Date Submitted: April 16, 2020
Date Decided: July 30, 2020

Joseph C. Schoell, FAEGRE DRINKER BIDDLE & REATH LLP, Wilmington,
Delaware; Jane E. Maschka, FAEGRE DRINKER BIDDLE & REATH LLP,
Minneapolis, Minnesota; Jacob D. Bylund and David W. Creasey, FAEGRE
DRINKER BIDDLE & REATH LLP, Des Moines, Iowa; Attorneys for Plaintiffs.

James M. Yoch, Jr. and Kevin P. Rickert, YOUNG CONAWAY STARGATT &
TAYLOR, LLP, Wilmington, Delaware; Michael C. Holmes, Melissa L. James, R.
Kent Piacenti, Meredith S. Jeanes, and Jared D. Wilkinson, VINSON & ELKINS
LLP, Dallas, Texas; Attorneys for Defendant NGP X US Holdings, L.P.
Corinne Elise Amato and Eric J. Juray, PRICKETT, JONES & ELLIOTT, P.A.,
Wilmington, Delaware; Todd W. Ruskamp and Daniel J. Schwaller, SHOOK,
HARDY & BACON L.L.P., Kansas City, Missouri; Attorneys for Defendants
Randal L. Linville and Bradley K. Clark.

BOUCHARD, Chancellor
 This case concerns a transaction in which a private equity firm purchased all

of the membership interests in Agspring LLC, a business that operates grain

elevators, for nearly $300 million. Most of the consideration went to another private

equity firm that held a 98% interest in Agspring. The transaction was structured so

that Agspring’s management team would continue to operate the business after

closing, roll over their equity, and receive significant cash payments at closing.

The transaction closed in December 2015, in the midst of Agspring’s 2016

fiscal year, which ended on May 31, 2016. As of closing, based on a financial model

Agspring had provided to the buyer, the buyer understood that Agspring was

projecting it would earn $33 million of EBITDA for its 2016 fiscal year.

In June 2016, Agspring reported that its total EBITDA for the 2016 fiscal year

was only $701,900. Soon after, its top two officers gave notice of their resignations.

Upon investigating the matter, the buyer allegedly learned that Agspring had

concealed from the buyer that Agspring reduced its EBTIDA forecast for the 2016

fiscal year internally before the closing to just $20 million. Litigation followed,

although the buyer did not file its initial complaint until April 2019.

The complaint in its current form asserts claims for fraud, aiding and abetting,

conspiracy, breach of fiduciary duty, unjust enrichment, and indemnification against

the seller and Agspring’s top two officers. Defendants have moved to dismiss most

of the claims as untimely and for failure to state a claim for relief.

1
 For the reasons explained in this decision, the court grants the motion in part

but denies it in the main. Most significantly, the court concludes that plaintiffs’

claims were timely filed and that the complaint states a claim for fraud against all

defendants.

I. BACKGROUND

The facts recited in this opinion come from the Verified Amended Complaint

(the “Complaint”) and documents incorporated therein.1 Any additional facts are

either not subject to reasonable dispute or are subject to judicial notice.

A. The Players

Plaintiff Agspring LLC (“Agspring” or the “Company”) is a Delaware limited

liability company that owned and operated several midstream agricultural

commodity businesses, particularly grain elevators.2 On December 14, 2015,

American Infrastructure MLP Funds (“AIM”), a specialist private equity firm, and

Agspring LP paid nearly $300 million to acquire the membership interests in

Agspring (the “Transaction”) pursuant to a Membership Interest Purchase and

Contribution Agreement (the “MIPCA”).3

1
Verified Am. Compl. (“Compl.”) (Dkt. 28). See Winshall v. Viacom Int’l, Inc., 76 A.3d
808, 818 (Del. 2013) (“[P]laintiff may not reference certain documents outside the
complaint and at the same time prevent the court from considering those documents’ actual
terms” in connection with a motion to dismiss).
2
Compl. ¶¶ 6, 16, 33.
3
Id. ¶¶ 2, 103; id. Ex. 1 (“MIPCA”) § 2.6, Ex. C.

2
 Plaintiff Agspring Holdco, LLC, a Delaware limited liability company, is

currently the sole member of Agspring.4 In September 2017, Agspring LP was

converted into Agspring Holdco, LLC as part of a corporate restructuring.5 For

simplicity, this decision refers to these two entities interchangeably as “Holdco.”

Plaintiffs LVS II SPE XVIII LLC (“LVS”), HVS V LLC (“HVS”), and TOBI

XXI LLC (“TOBI”) are Delaware limited liability companies.6 LVS and HVS

loaned a total of $80 million to Agspring under a Term Loan Agreement in

connection with the Transaction.7 HVS and TOBI purchased a total of $45 million

of preferred equity in Holdco in connection with the Transaction, which Holdco used

to purchase its interest in Agspring.8 The Investor LLCs are managed by Pacific

Investment Management Company LLC.9 This decision refers to LVS, HVS, and

TOBI collectively as the “Investor LLCs” and to Holdco, Agspring and the Investor

LLCs collectively as “Plaintiffs.”

Defendants Bradley Clark and Randal Linville founded Agspring in 2012,

became its President and CEO, respectively, and served as two of the five members

4
Compl. ¶ 14.
5
Id.
6
Id. ¶¶ 17-19.
7
Id. ¶¶ 17-18.
8
Id. ¶¶ 18-19.
9
Id.

3
of Agspring’s board.10 Before the Transaction closed, Clark and Linville held

approximately 2% of the membership interests in Agspring.11 Clark and Linville

continued to serve as Agspring’s President and CEO for about seven months after

the Transaction closed until they resigned effective July 25, 2016, shortly after the

Company reported disastrous financial results for its 2016 fiscal year.12

Defendant NGP X US Holdings, L.P. (“NGP”) is a Delaware limited

partnership affiliated with private equity firm NGP Energy Capital Management. 13

Before the Transaction closed, NGP owned approximately 98% of the membership

interests in Agspring and controlled Agspring’s five-member board through its three

designees: Mark Zenuk, Cameron Dunn, and Richard Edwards (the “NGP Board

Members”).14

B. The Formation and Growth of Agspring

In August 2012, Clark and Linville formed Agspring with the aim of

acquiring, consolidating, and operating midstream agricultural commodity firms. 15

NGP provided approximately 96% of the Company’s initial capital ($150 million)

10
Id. ¶¶ 21-22, 28.
11
MIPCA at 1 (Second Recital).
12
Compl. ¶¶ 21-22.
13
Id. ¶ 20.
14
Id. ¶¶ 20, 28.
15
Id. ¶ 24.

4
and entered into an Advisory Services, Reimbursement and Indemnification

Agreement with Agspring.16 Under this agreement, NGP agreed to advise Agspring

concerning, among other things, financing sources and mergers and acquisitions.17

In 2013, Agspring bought three grain handling businesses in the Mississippi

River Delta, consolidating them as Big River Rice and Grain (“Big River”).18 Most

of Big River’s assets were purchased from Larry Tubbs for $29.5 million.19 To

finance the deal, an Agspring subsidiary—Agspring Mississippi Region, LLC

(“Agspring Mississippi”)—obtained a $7 million term loan from Tubbs in the form

of a promissory note (the “Tubbs Note”).20 In September 2013 and February 2014,

Agspring Mississippi sought two additional loans from Tubbs, each of which were

executed through amendments to the Tubbs Note.21

After the two amendments, the total principal on the Tubbs Note was $22

million.22 Under the Tubbs Note, Agspring Mississippi was required to pay

16
Id. ¶¶ 27, 29, 31.
17
Id. ¶ 31.
18
Id. ¶ 32.
19
Id. ¶ 34.
20
Id. ¶ 35.
21
Id. ¶ 36.
22
Id. ¶ 37.

5
approximately $100,000 per month in interest, and the entire principal as a bullet

payment in September 2023.23 Agspring is a guarantor on the Tubbs Note.24

In 2014, Agspring acquired a number of businesses, including the Idaho grain

operations of General Mills, which were rechristened as Thresher Artisan Wheat

(“Thresher”).25 Big River and Thresher are in the same business of operating grain

elevators.26

C. NGP Seeks an Exit from Agspring

Although the Company had made a number of acquisitions, Clark and Linville

complained to the NGP Board Members in 2014 that they needed more capital for

their preferred acquisition strategy and recommended that NGP exit its investment

in Agspring.27 In September 2014, Clark and Linville pressed the issue again with

the NGP Board Members at a board meeting.28

NGP authorized Clark and Linville to solicit letters of intent and told them it

would be seeking an approximate two times return on its initial investment of $150

23
Id.
24
Id. ¶ 38.
25
Id. ¶¶ 32, 39.
26
Id. ¶ 33.
27
Id. ¶ 41.
28
Id. ¶ 42.

6
million.29 Clark, Linville, NGP, and the NGP Board Members then began working

together to find a buyer to purchase Agspring for over $300 million.30

D. AIM Negotiates with NGP to Acquire Agspring

In January 2015, AIM expressed an interest in acquiring Agspring, and in

March, AIM offered a nonbinding term sheet.31 In late May, AIM signed a term

sheet with Clark, Linville, and NGP to purchase Agspring’s operating subsidiaries

for $325 million in cash.32

In May 2015, Clark and Linville discussed the EBITDA they believed

Agspring operating subsidiaries could achieve for the 2016 fiscal year, which ran

from June 1, 2015 to May 31, 2016 (“FY16”).33 Clark and Linville initially

suggested a total FY16 EBITDA for Agspring of $40 million.34 Based on these

discussions, the Company’s financial model projected total FY16 EBITDA of $38

million, with Big River accounting for $16 million of the total.35

In mid-July 2015, AIM sought a price reduction based on diligence findings

regarding Agspring’s actual and projected earnings and asked to exclude certain

29
Id. ¶¶ 42-43.
30
Id. ¶ 44.
31
Id. ¶ 46.
32
Id. ¶¶ 46-47.
33
Id. ¶¶ 56, 116.
34
Id. ¶ 56.
35
Id. ¶ 61.

7
assets from the proposed transaction.36 NGP agreed to reduce the price by $5

million, to $320 million, and the parties executed a new nonbinding term sheet that

contemplated a purchase of Agspring rather than its subsidiaries.37 The new term

sheet contemplated funding by a combination of AIM equity, preferred investor

equity, and new debt taken on by Agspring.38

During the summer and fall of 2015, Clark, Linville, and AIM secured

preferred investor and lending financing for the proposed transaction.39 To obtain

financing, Agspring was required to provide covenants to its lenders and preferred

equity holders.40 One covenant made to the Investor LLCs was a requirement that

the consolidated Agspring companies would not exceed a specified “Consolidated

Leverage Ratio,” which is the ratio between the debt of those companies and their

EBITDA.41 Agspring also provided covenants on its minimum working capital and

asset coverage ratio.42

In October 2015, Clark and Linville advised AIM that, because of reduced

corn and soybean volumes, they expected Big River’s FY16 EBITDA to be reduced

36
Id. ¶ 49.
37
Id. ¶¶ 49-50.
38
Id. ¶ 50.
39
Id.
40
Id. ¶ 51.
41
Id. ¶¶ 51-52.
42
Id. ¶ 52.

8
by $3 million, from $16 million to $13 million.43 On or about November 4, 2015,

Clark and Linville told AIM that they now expected Big River’s 2016 EBITDA to

miss its projections by another $3 million, implying 2016 EBITDA around $10

million for Big River.44 Based on Clark and Linville’s $10 million projection for

Big River’s FY16 EBITDA, AIM and NGP agreed on a $25 million reduction of the

purchase price.45

By November 2015, Thresher also was facing financial trouble. Agspring’s

accountant noted that “Thresher had a large loss for the month that wiped out all of

the YTD income.”46 Clark and Linville lowered the internal projections for Thresher

from $22 million to $15 million, but did not disclose the reduction to AIM before

the Transaction closed.47 On November 25, Clark and Linville sent a financial

model, financial information, and a certification to AIM and the Investor LLCs.48

The financial model showed no change in Thresher’s initial FY16 EBITDA ($22

million), the reduced forecast for Big River’s FY16 EBITDA ($10 million), and total

FY16 EBITDA of $33 million.49

43
Id. ¶ 61.
44
Id. ¶ 68.
45
Id. ¶ 69.
46
Id. ¶ 82.
47
Id. ¶ 83.
48
Id. ¶ 86.
49
Id. ¶¶ 10, 77, 86-88, 116.

9
 E. The Closing and Discovery of Misrepresentations

On December 14, 2015, the Transaction closed.50 The sale was effectuated

by the MIPCA.51 The parties to the MIPCA include, among others, Holdco’s

predecessor (Agspring LP), AIM, Agspring, NGP, and certain “Management

Investors,” which include Clark and Linville.52

The Transaction was financed with $45 million in preferred equity in Holdco

from HVS and TOBI, and $80 million in loans to Agspring from LVS and HVS

governed by a “Term Loan Agreement.”53 The parties to the Term Loan Agreement

include Agspring, U.S. Bank National Association as administrative agent, and LVS

and HVS as lenders.54

Agspring also entered into an asset-based working capital credit agreement

with Macquarie Bank as administrative agent, issuing bank and as a lender (the

“ABL Credit Agreement”).55 At times, this decision refers to the Term Loan

50
Id. ¶ 103.
51
Id. ¶ 4.
52
See MIPCA, at Signature Pages.
53
Compl. ¶¶ 104, 128; see Rickert Aff. Ex. 3 (“Term Loan Agreement”) (Dkt. 58).
54
Term Loan Agreement at AGS-AAA00012901-03 (Signature Pages).
55
Compl. ¶ 125; see Rickert Aff. Ex. 4 (“ABL Credit Agreement”).

10
Agreement and ABL Credit Agreement together as the “Credit Agreements.” Clark

signed both of the Credit Agreements on behalf of Agspring.56

In connection with the Transaction, Clark and Linville contributed their

interests in Agspring (valued at $5.4 million in total) and received in exchange cash

payments of approximately $3.8 million and $3.7 million, respectively, as well as

equity interests in Holdco’s general partner.57

After the Transaction closed, Clark and Linville continued to serve as the

Company’s President and CEO, respectively, and remained on the Agspring board

of managers.58 During the ensuing months, Clark and Linville continued to represent

that Agspring’s future financial outlook was strong and blamed any financial

struggles of Agspring on market problems.59

In or around June 2016, after Agspring’s 2016 fiscal year ended on May 31,

2016, Agspring reported that its total FY16 EBITDA was only $701,900, with Big

River contributing $655,000 of that amount—a tiny fraction of the $33 million in

total EBITDA reflected in the forecast that Agspring provided to AIM and the

56
Term Loan Agreement at AGS-AAA00012901; ABL Credit Agreement at
CLARK004754.
57
Compl. ¶ 103; MIPCA §§ 2.3, 2.6(e), Ex. C.
58
Compl. ¶¶ 21-22, 106.
59
Id. ¶¶ 107, 113.

11
Investor LLCs in late November 2015 before Transaction closed.60 Soon after these

results were reported, Clark and Linville provided notice of their resignations.61

Their employment ended officially on July 25, 2016.62

On June 28, 2016, shortly after Clark and Linville gave notice of their

intention to resign, they were advised in writing “to preserve any and all

documents . . . relating in any way to Agspring’s business.”63 Despite this

instruction, Clark and Linville did not return their computers to Agspring when their

employment ended and resisted demands for the return of their computers.64

After Clark and Linville eventually returned their computers to Agspring,

Plaintiffs learned that Linville had performed a factory reset on his computer on July

11, 2016, which deleted and rendered forensically unrecoverable all documents and

data on the computer.65 Upon discovering Linville’s actions, Holdco began to

investigate the conduct of Clark, Linville, and NGP surrounding the sale of Agspring

in December 2015.66

60
Id. ¶ 116.
61
Id. ¶ 117.
62
Id.
63
Id. ¶ 121.
64
Id.
65
Id. ¶¶ 122-23.
66
Id. ¶ 124.

12
 After its 2016 fiscal year, Agspring continued to struggle financially. Its

lenders served Agspring with a notice of default almost immediately after its results

for the 2016 fiscal year were disclosed.67 The Company restructured in September

2017 and again in August 2018, but has been unable to service the $80 million in

loans from HVS and LVS it incurred in connection with the Transaction and has

been unable to pay the Tubbs Note.68

II. PROCEDURAL HISTORY

On April 12, 2019, Plaintiffs filed their initial complaint in the Delaware

Superior Court (the “Original Complaint”), which they amended on June 6, 2019,

and again on July 10, 2019.69 On July 17, 2019, the Superior Court transferred the

case to the Court of Chancery under 10 Del. C. § 1902.70

On July 24, 2019, Plaintiffs re-filed in this court their second amended

complaint from the Superior Court action.71 On October 24, 2019, Plaintiffs filed

their Verified Amended Complaint (as defined above, the “Complaint”). The

Complaint asserts six claims for fraud (Count I), aiding and abetting fraud (Count

67
Id. ¶ 144.
68
Id. ¶¶ 118, 144, 193.
69
Agspring Holdco, LLC v. NGP X US Hldgs., L.P. et al., C.A. No. N19C-04-134 AML
(“Superior Court Action”) Dkt. 1 (“Original Compl.”); id. Dkt. 7; id. Dkt. 18.
70
Superior Court Action Dkt. 19.
71
Dkt. 1. The factual allegations in the July 24 and July 10 complaints are identical.
Compare Dkt. 1 with Superior Court Action Dkt. 18.

13
II), civil conspiracy (Count III), breach of fiduciary duties (Count IV), unjust

enrichment (Count V), and indemnification under the MIPCA (Count VI).

On November 25, 2019, NGP moved to dismiss Counts I through V of the

Complaint under Court of Chancery Rule 12(b)(6) for failure to state a claim for

relief.72 On December 11, 2019, Clark and Linville moved to dismiss Counts I, III,

and IV under Court of Chancery Rule 12(b)(6) for failure to state a claim for relief.73

III. ANALYSIS

The gravamen of the Complaint is that Defendants deceived Plaintiffs to

induce them to enter into the MIPCA and related agreements by providing them with

an artificially inflated financial model containing a forecast that was millions of

dollars higher than Agspring’s actual internal model to justify the price that NGP

was demanding in the Transaction, i.e., one that would provide NGP a two times

return on its initial investment of $150 million.74 In particular, Plaintiffs contend

that in the weeks before the MIPCA was signed in December 2015, after the first

half of Agspring’s 2016 fiscal year was over, Clark and Linville represented to AIM

and the Investor LLCs that Agspring was forecasting its EBITDA for the full 2016

fiscal year at $33 million (with $22 million attributable to Thresher and $10 million

72
Dkt. 34.
73
Dkt. 39.
74
Compl. ¶¶ 180, 209.

14
attributable to Big River) when, in reality, the Company had reduced its internal

forecast for FY16 EBITDA by more than 39 percent—to approximately $20 million

(with $15 million attributable to Thresher and $5 million attributable to Big River).

According to Plaintiffs, this scheme concealed that they were grossly overpaying to

acquire Agspring and that the Company would be too leveraged to pay its existing

debt and the financing contemplated for the acquisition.

As a threshold matter, all Defendants contend that Counts I-V should be

dismissed as untimely because they were filed more than three years after the

Transaction closed on December 14, 2015. For the reasons explained in Part III.A,

the court concludes that these claims are not time-barred.

Next, NGP contends that Counts I-V each fail to state claims for relief under

Court of Chancery Rule 12(b)(6) for a variety of reasons. Clark and Linville, who

are named as defendants in three of the first five claims (Counts I, III, and IV), join

in NGP’s arguments but advance no arguments on the merits specific to themselves.

These issues are addressed in Parts III.B-E. The standards governing a motion to

dismiss under Court of Chancery Rule 12(b)(6) for failure to state a claim for relief

are well settled:

(i) all well-pleaded factual allegations are accepted as true; (ii) even
vague allegations are “well-pleaded” if they give the opposing party
notice of the claim; (iii) the Court must draw all reasonable inferences
in favor of the non-moving party; and ([iv]) dismissal is inappropriate

15
 unless the “plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances susceptible to proof.”75

A. Whether Counts I-V are Time-Barred

Counts I-V consist of a mix of legal and equitable claims but they each seek

solely legal relief, i.e., money damages.76 Absent the existence of “extraordinary

circumstances,”77 which has not been argued here, or the application of tolling

doctrines, which is addressed below, the Court of Chancery should apply the statute

of limitations “strictly” to legal claims seeking legal relief and apply the statute of

limitations by analogy to equitable claims seeking legal relief “with at least as much

and perhaps more presumptive force” given the “quasi-legal status” of such claims.78

The statute of limitations for each of the claims at issue here is three years.79

“The statute of limitations begins to run at the time the cause of action accrues, which

75
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (internal citations omitted).
76
See Compl. at 73 (Request for Relief).
77
See Kraft v. WisdomTree Invs., Inc., 145 A.3d 969, 976-78 (Del. Ch. 2016) (discussing
O’Brien v. IAC/Interactive Corp., 2009 WL 2490845 (Del. Ch. Aug. 14, 2009), aff’d, 26
A.3d 174 (Del. 2011) and Levey v. Brownstone Asset Mgmt., LP, 76 A.3d 764 (Del. 2013)).
78
Id. at 983.
79
10 Del. C. § 8106; see In re Am. Int’l Gp., Inc., 965 A.2d 763, 812 (Del. Ch. 2009)
(fiduciary duty and fraud), aff’d sub nom. Teachers’ Ret. Sys. of La. v.
PricewaterhouseCoopers LLP, 11 A.3d 228 (Del. 2011) (TABLE); Clark v. Davenport,
2019 WL 3230928, at *16 (Del. Ch. July 18, 2019) (aiding and abetting); Atlantis Plastics
Corp. v. Sammons, 558 A.2d 1062, 1064 (Del. Ch. 1989) (civil conspiracy); Pulieri v.
Boardwalk Props., LLC, 2015 WL 691449, at *13 (Del. Ch. Feb. 18, 2015) (unjust
enrichment).

16
is generally when there has been a harmful act by a defendant[,] . . . even if the

plaintiff is unaware of the cause of action or the harm.”80

The parties appear to agree that Counts I-V accrued on December 14, 2015,

the date the MIPCA was signed and the Transaction closed.81 This is the correct

date because the alleged harm to Plaintiffs occurred when Holdco became the owner

of Agspring based on allegedly fraudulently statements made in the MIPCA and the

Term Loan Agreement. The Original Complaint was filed on April 12, 2019, outside

of this three-year period. Thus, for Counts I-V to survive dismissal, Plaintiffs must

plead facts sufficient to toll the statute of limitations to at least April 12, 2016.

Plaintiffs advance two theories of tolling: fraudulent concealment and

equitable tolling. “Fraudulent concealment requires an affirmative act of

concealment by a defendant—an actual artifice that prevents a plaintiff from gaining

knowledge of the facts or some misrepresentation that is intended to put a plaintiff

off the trail of inquiry.”82 “[T]he doctrine of equitable tolling stops the statute from

running while a plaintiff has reasonably relied upon the competence and good faith

80
In re Tyson Foods Inc., 919 A.2d 563, 584 (Del. Ch. 2007).
81
See C&L Opening Br. 17 (Dkt. 40); NGP Opening Br. 8-9 (Dkt. 38); Pls.’ Opp’n Br. 27
(Dkt. 46). Although Clark and Linville’s brief states that the claims against them accrued
“on or before December 14, 2015,” they provide no explanation why the harm to Plaintiffs
would have occurred before the Transaction closed and Holdco assumed ownership of
Agspring, and none is apparent to the court. See C&L Opening Br. 17.
82
Ryan v. Gifford, 918 A.2d 341, 359-60 (Del. Ch. 2007) (internal quotation marks
omitted).

17
of a fiduciary.”83 “Each of these doctrines permits tolling of the limitations period

where the facts underlying a claim were so hidden that a reasonable plaintiff could

not timely discover them.”84

Under either of these theories, “a plaintiff bears the burden of showing that

the statute was tolled, and relief from the statute extends only until the plaintiff is

put on inquiry notice.”85 In other words, neither theory “will toll the statute beyond

the point where the plaintiff was objectively aware, or should have been aware, of

facts giving rise to the wrong.”86 As the party asserting that tolling applies, Plaintiffs

“bear the burden of pleading specific facts to demonstrate that the statute of

limitations was, in fact, tolled.”87 Allegations of fraudulent concealment must be

plead with the particularity as required under Court of Chancery Rule 9(b).88

Plaintiffs contend they “were not on inquiry notice of their claims until

sometime after July 2016,” after the Company disclosed disastrous results for its

83
In re Tyson Foods, 919 A.2d at 585.
84
Krahmer v. Christie’s Inc., 903 A.2d 773, 778 (Del. Ch. 2006) (internal quotation marks
and citation omitted).
85
In re Tyson Foods, 919 A.2d at 585.
86
Id.; see also Pomeranz v. Museum P’rs, L.P., 2005 WL 217039, at *13 (Del. Ch. Jan.
24, 2005) (“Once a plaintiff is on notice of facts that ought to make her suspect wrongdoing,
she is obligated to diligently investigate and to file within the limitations period as
measured from that time.”).
87
In re Dean Witter P’ship Litig., 1998 WL 442456, at *6 (Del. Ch. July 17, 1998); see
also CertainTeed Corp. v. Celotex. Corp., 2005 WL 217032, at *6 (Del. Ch. Jan. 24, 2005).
88
Boeing Co. v. Shrontz, 1992 WL 81228, at *3 (Del. Ch. Apr. 20, 1992).

18
2016 fiscal year and Clark and Linville abruptly resigned from their positions as

President and CEO of the Company.89 The court considers this argument first with

respect to Clark and Linville, and then with respect to NGP.

1. Tolling of Claims Against Clark and Linville

In support of their fraudulent concealment theory, the Complaint pleads that

Clark and Linville took the following actions to conceal their fraud after the

Transaction closed in December 2015 and while they continued to serve as officers

of Agspring until July 2016:90

 In January 2016, Clark and Linville said in materials sent to the Investor
LLCs that Big River’s FY16 EBITDA of $10 million remained “on
target.”91

 At a January 2016 board meeting attended by the Investor LLCs, Clark
and Linville informed the attendees that (i) Big River “was back on
track and doing well,” (ii) Thresher’s FY16 EBITDA forecast would be
reduced by $2 million and “would now be $20 million,” (iii) Agspring’s
consolidated EBITDA “would soon reach the $30-33 million range”
that was projected before the MIPCA was signed, and (iv) the Company
would be able to make quarterly distributions to the Investor LLCs of
roughly $4.5 million per quarter starting in February 2016.92

 In March 2016, Agspring sent AIM a message, which it relayed to the
Investor LLCs, that the “‘market [was] causing worse performance’

89
Pls.’ Opp’n Br. 37.
90
Compl. ¶ 106.
91
Id. ¶ 108.
92
Id. ¶¶ 109, 110, 112.

19
 than expected, even though the company was in compliance with its
debt covenants.”93

 Based on information it received from Clark and Linville as of March
28, 2016, AIM told the Investor LLCs and other investors that it had
not “lost any faith in the assets and next year could easily be over
$40mm ebitda.”94

 On April 15, 2016, when the Investor LLCs asked for a comparison of
actual to forecasted financial results, Clark instructed Agspring’s CFO
(Chris Stratton) not “to send any forecast or March [2016] actuals” but
only to send “YTD through [February 2016]”95

 In July 2016, after Clark and Linville provided notice of their intent to
resign in June and were advised in writing to preserve all documents,
Clark and Linville left Agspring without returning their Company
computers and, when they ultimately did so, it was discovered that
Linville had deleted “all documents and data” on his computer, making
that information unrecoverable.96

Viewed in their totality, these allegations plead facts with sufficient

particularity to show that Clark and Linville made affirmative efforts to conceal the

fraud they allegedly committed in connection with the sale of the Company during

93
Id. ¶ 113.
94
Id. ¶ 114.
95
Id. ¶ 115. Clark and Linville contend this allegation is “deliberately misleading” because
the email underlying this allegation states not to send “any forecast or March actuals in that
package yet,” which they contend implies that “the information was withheld temporarily
because the forecast estimate was ‘sent over late.’” C&L Reply Br. 10 (Dkt. 59) (quoting
Juray Aff. Ex. 6). Although this is a reasonable inference, it is not the only reasonable
inference one could make from the email. Discovery should show if and when any forecast
and/or the “March actuals” were sent out after this email was sent, whether either was
altered, and the reason for the delay.
96
Id. ¶¶ 121-23.

20
the seven months after the Transaction closed when they were in charge of its

operations. In particular, they made statements to perpetuate the myth that the

artificially inflated forecast they provided to AIM and the Investor LLCs shortly

before the closing remained achievable when they knew otherwise. The alleged

destruction of information on Linville’s computer stands out as a deliberate effort to

impede the investigation they inferably knew was coming.97

Defendants make essentially two arguments for why Plaintiffs were on

inquiry notice before July 2016. Neither is persuasive.

Defendants’ primary argument is that Plaintiffs were on inquiry notice as of

December 14, 2015, the date the Transaction closed, because “the entire purported

factual basis” for Plaintiffs’ claims against them “is taken from documents,

communications and information” that were deemed “delivered” to Holdco under

the MIPCA when the Transaction closed.98 For support, Defendants rely heavily on

CertainTeed Corporation v. Celotex Corporation, where the court noted that

plaintiff’s fraudulent concealment claim was undermined by its “own dominion”

over facilities CertainTeed had acquired from Celotex in an asset purchase because

97
Clark and Linville quarrel that “Plaintiffs do not allege that Linville deleted any unique
documents” from his computer. C&L Reply Br. 10. This argument is mystifying. One
cannot know what is not knowable. Having pled with particularity that Linville made the
information on his Company computer forensically unrecoverable after expressly being
advised to preserve all documents, the court reasonably may infer that he sought to impede
any attempt to investigate his actions.
98
C&L Opening Br. 18-19 (citing MIPCA § 3.3(c)); NGP Opening Br. 16-17 (same).

21
plaintiff could discover “the non-compliant conditions [at those] facilities almost

immediately upon assuming ownership.”99 Significantly, the court made those

comments where, unlike in this case, CertainTeed failed to allege any “post-Closing

acts by Celotex attempting to cover up non-complaint conditions at the Facilities”100

The logic of Defendants’ argument is that, once Holdco had taken legal

possession of the Company’s records, it immediately should have begun

investigating the CEO and President of the Company it had just acquired even

though Plaintiffs had no ostensible reason to suspect them of wrongdoing at that

time, as evidenced by the fact that they structured the deal to retain the management

team. This proposition runs counter to the notion that the owners of an entity should

be able to rely in good faith on their fiduciaries.101 To my mind, it would be

inequitable to allow Defendants to “wield a limitations defense” on this theory given

the post-close allegations of concealment recited above.102

99
2005 WL 217032, at *8.
100
Id.
101
See In re Am. Int’l Gp., 965 A.2d at 812 (“But, the only reason that it took so long to
bring any of these claims is because AIG’s public filings, upon which its stockholders were
entitled to rely, concealed the wrongdoing.”); In re Tyson Foods, 919 A.2d at 591
(“Plaintiffs were entitled to rely upon the competence and good faith of those protecting
their interests”); Carsanaro v. Bloodhound Techs., Inc., 65 A.3d 618, 646 (Del. Ch. 2013)
(“The plaintiffs were entitled to rely on the board members to not use the Series D
Financing to enrich themselves and their affiliated funds.”).
102
In re Am. Int’l Gp., 965 A.2d at 813.

22
 Secondarily, Defendants argue Plaintiffs were on inquiry notice in January

2016 when Clark and Linville told the Agspring board that the FY16 EBITDA

forecast for Thresher would be reduced from by $2 million, or at least by March

2016 when Agspring employees circulated to the Investor LLCs documents

attributing the company’s “financial struggles” to “Market Headwinds.”103

Reducing the Company’s EBITDA forecast by a relatively modest amount

(approximately 6% of the $33 million EBITDA forecast provided before the closing)

and attributing poor results to market conditions, however, would not necessarily

“have led a prudent person of ordinary intelligence to inquire” into whether their

fiduciaries were engaged in wrongdoing.104

To the contrary, these events reasonably could be viewed as reassuring. At

the same meeting they told the board the FY16 EBITDA forecast for Thresher would

be reduced by $2 million, for example, Clark and Linville commented that Big River

“was back on track,” that Agspring’s consolidated EBITDA “would soon reach the

$30-33 million range” projected before the MIPCA was signed, and that the

103
Compl. ¶ 113.
104
Coleman v. PricewaterhouseCoopers, LLC, 854 A.2d 838, 843 (Del. 2004) (reversing
trial court’s grant of summary judgment based on the statute of limitations because “there
was no ‘red flag’ that clearly and unmistakably would have led a prudent person of ordinary
intelligence” to make inquiry); see also In re Tyson Foods, 919 A.2d at 591 (“reasonable
diligence” does not include an “obligation to sift through a proxy statement . . . and a year’s
worth of press clippings and other filings . . . in order to establish a pattern concealed by
those whose duty is to guard the interests of the investor.”).

23
Company’s financial position was strong enough to permit it to distribute

approximately $4.5 million per quarter to the Investor LLCs beginning the next

month.105 Similarly, as of late March 2016, AIM took from management’s

comments that the Company “could easily be over $40mm ebitda” next year.106

For the reasons discussed above, the court concludes that, insofar as Clark and

Linville are concerned, the Complaint’s allegations concerning their affirmative acts

of concealment after the Transaction closed toll the limitations period until late July

2016, when the Company learned that Linville had deleted all of his records from

his Company computer. Because all of these acts occurred while Clark and Linville

continued to serve as fiduciaries of Agspring, the statute of limitations also is tolled

under the doctrine of equitable tolling, which “stops the statute from running while

a plaintiff has reasonably relied upon the competence and good faith of a

fiduciary.”107

Clark and Linville contend that equitable tolling “only applies to claims of

wrongful self-dealing.”108 But, as then-Vice Chancellor Strine explained in In re

American International Group, Inc., “although [one] can point to some case law

support for that assertion,” that position does not appear to be “an accurate reflection

105
Compl. ¶¶ 109, 112.
106
Id. ¶¶ 113-14.
107
In re Tyson Foods, 919 A.2d at 585.
108
C&L Opening Br. 27 (citing Weiss v. Swanson, 948 A.2d 433, 451 (Del. Ch. 2008)).

24
of our law” because the “obvious purpose of the equitable tolling doctrine is to

ensure that fiduciaries cannot use their own success at concealing misconduct as a

method of immunizing themselves from accountability for their wrongdoing.”109

Indeed, in a seminal decision, our Supreme Court recognized the broader principle

that where fiduciaries “are required to answer for wrongful acts of commission by

which they have enriched themselves to the injury of the corporation,” they will be

“without the protection of the statute of limitations.”110 Here, the Transaction

enriched Clark and Linville to the tune of approximately $7.5 million in cash

payments (about $3.8 million for Clark and $3.7 million for Linville) based on an

allegedly inflated valuation of the Company that was the product of their fraud. This

is an appropriate circumstance for the application of equitable tolling in my view.

In sum, the claims in the Complaint asserted against Clark and Linville are

not time-barred based on the doctrines of fraudulent concealment and equitable

tolling.111

109
965 A.2d at 813 (collecting authorities).
110
Bovay v. H.M. Byllesby & Co., 38 A.2d 808, 820 (Del. 1944).
111
Clark and Linville do not argue, and thus waive as an issue, that any of the claims in the
Complaint asserted against them specifically should not relate back to the Original
Complaint, which was timely filed within three years of July 2016. See Emerald P’rs v.
Berlin, 726 A.2d 1215, 1224 (Del. 1999) (issues not briefed are deemed waived).

25
 2. Tolling of Claims Against NGP

All of the acts of fraudulent concealment discussed above were taken by Clark

and Linville. As discussed later in this decision, however, Plaintiffs allege facts

sufficient to state a claim that NGP knowingly engaged in a conspiracy with Clark

and Linville to make the fraudulent misrepresentations at the heart of this case.112 In

this circumstance, as our Supreme Court recognized in Laventhol, Krekstein,

Horwath & Horwath v. Tuckman, those who conspire to defraud with fiduciaries

who enrich themselves should be bound by the same standard for statute of

limitations purposes as the fiduciaries themselves.113

NGP argues this rule should not apply because the concealment by Clark and

Linville occurred after the Transaction closed, when the alleged conspiracy with

NGP terminated. The court disagrees. As Laventhol recognizes, the rule recited

above is “one of policy.”114 As a matter of policy, there is no equity in allowing one

co-conspirator to be treated differently than a second for statute of limitations

purposes merely because the second concealed the fraudulent conduct that was the

product of the conspiracy after the first exited the scene. Rather, as the Laventhol

court put it, “both classes of defendants . . . stand in the same position under the

112
See infra Part III.C.2.
113
372 A.2d 168, 170-71 (Del. 1976).
114
Id. at 170.

26
principles of law governing the merits of the complaint and there is, therefore, no

reason why the principles of law governing the applicability of the statute of

limitations should not apply in like manner.”115 For these reasons, the court finds

that, insofar as NGP is concerned, the limitations period is tolled until late July 2016,

as it is for Clark and Linville.

In the Original Complaint, which was timely filed on April 12, 2019, Holdco

asserted a claim for fraud against Clark and Linville and a claim for unjust

enrichment against NGP that was “the result of the fraud and willful misconduct

committed by Clark and Linville in fraudulently inducing plaintiff to acquire

Agspring.”116 The Complaint, which was filed on October 24, 2019, added four

claims against NGP for fraud, aiding and abetting, civil conspiracy, and breach of

fiduciary duty. NGP argues that these claims do not relate back to the Original

Complaint because that pleading “failed to allege any wrongdoing by NGP and

therefore failed to adequately notify NGP of the basis for their not-yet-filed

claims.”117 The court disagrees.

Court of Chancery Rule 15(c) allows relation back of amendments when “the

claim or defense asserted in the amended pleading arose out of the conduct,

115
Id. at 170-71.
116
Original Complaint ¶ 94.
117
NGP Opening Br. 23.

27
transaction or occurrence set forth or attempted to be set forth in the original

pleading.”118 As our Supreme Court has explained, “[t]he relation-back doctrine

obviates the force of the statute of limitations in certain situations to encourage the

disposition of litigation on its merits.”119 An amendment may “change[] the legal

theory on which the action initially was brought” so long as the “factual situation

upon which the action depends remains the same and has been brought to

defendant’s attention by the original pleading.”120

Here, the fraud alleged in the Original Complaint arose out of the same

transaction as the fraud at issue in the current Complaint—Holdco’s acquisition of

Agspring from NGP and the management investors under the MIPCA—and out of

the same conduct, albeit with additional factual details. The Original Complaint, for

example, specifically alleges that “Clark and Linville . . . intentionally

misrepresented that the financial models and forecasts of future earnings that AIM

and its lenders used to evaluate the transaction were prepared in good faith and were

based on current information” when, “unknown to buyers, Clark and Linville

118
Ch. Ct. R. 15(c)(2).
119
Chaplake Hldgs., Ltd. v. Chrysler Corp., 766 A.2d 1, 6 (Del. 2001) (internal quotation
marks and citation omitted).
120
Vadala v. Henkels & McCoy, Inc., 397 A.2d 1381, 1382-83 (Del. Super. 1979) (internal
quotation marks and citation omitted)

28
artificially manipulated Agspring’s financial model and EBITDA forecast, inflating

it by millions of dollars to ‘forecast’ a number they had preselected.”121

The same transaction and conduct underlying the fraud in both the Original

Complaint and the current Complaint also underlies the other three claims asserted

against NGP in the Complaint, i.e., the two claims based on secondary theories of

fraud (aiding and abetting and conspiracy) as well as the claim for breach of

fiduciary duty. With respect to the final claim, the Complaint specifically alleges

that by “conspiring to commit fraud and then committing fraud and misrepresenting

Agspring LLC’s financial standing and outlook, Clark and Linville, and NGP

breached their fiduciary duties to Agspring LLC and acted in bad faith.”122

Given that all four of the additional claims against NGP arise out the same

transaction and conduct plead in the Original Complaint, the Complaint relates back

to the Original Complaint under the plain language of Rule 15(c). This result accords

with the purpose of Rule 15(c)—the disposition of litigation on the merits123—and

121
Original Complaint ¶ 7; see also id. ¶¶ 8, 35, 38, 40-41.
122
Compl. ¶ 225.
123
Chaplake, 766 A.2d at 6; see also Daniel R. Coquilette, Gregory P. Joseph, Georgene
M. Vairo & Chilton Davis Varner, Moore’s Federal Practice § 15.02[1] (3d ed. 2020)
(“The Rule [15(c)] allows for liberal amendment in the interests of resolving cases on the
merits.”).

29
can hardly be a surprise to NGP, which was sued in the Original Complaint for over

$100 million in damages as the “unjust” product of a fraud claim.124

NGP’s reliance on Moore ex rel. Moore v. Emeigh does not compel a different

conclusion. There, the Supreme Court concluded that the Superior Court acted “well

within its discretion in holding that a new claim did not relate back” where the new

claim presented “an independent theory of liability based on independent facts that

were not set forth in the original complaint.”125 Here, as discussed above, the

additional claims against NGP involve a different theory of liability, but the core

facts underlying those claims arise out of the same transaction and conduct plead in

the Original Complaint, which satisfies the requirements of Rule 15(c).

In sum, for the reasons explained above, Counts I-IV of the Complaint relate

back to the Original Complaint and all of the claims in the Complaint asserted

against NGP (Counts I-V) are not time barred.

B. Count I: Fraud Claims Against Clark, Linville, and NGP

In Count I of the Complaint, Holdco and the Investor LLCs assert claims for

fraud against Clark, Linville, and NGP based solely on express representations in

three agreements: the MIPCA, the Term Loan Agreement, and the ABL Credit

Agreement. Count I does not assert a claim for fraud based on any extra-contractual

124
Original Complaint at 29 (Request for Relief ¶ A).
125
Moore ex rel. Moore v. Emeigh, 935 A.2d 256 (Del. 2007) (TABLE).

30
representations.126 Before turning to the specific theories of fraud subsumed within

Count I, three points of clarification are in order.

First, the Complaint does not identify a party to this action that loaned funds

under the ABL Credit Agreement, a working capital credit facility in which

Agspring (as borrower) made various representations for the benefit of lenders under

that facility. Macquarie Bank Limited is a party to the ABL Credit Agreement but

it is not a party to this action and the Complaint does not identify, much less name

as a party to this action, any other lender under the facility. Accordingly, Count I

will be dismissed insofar as it is based on a representation in the ABL Credit

Agreement because the Complaint fails to name as a party to this action any

counterparty to that agreement that could have relied on such representation.127

Second, whether by design or inadvertence, the Complaint lacks precision as

to which entity is asserting fraud claims under the other two agreements. Holdco is

a party to the MIPCA but is not a party to the Term Loan Agreement. Two of the

Investor LLCs (LVS and HVS) are parties to the Term Loan Agreement, but none

of the Investor LLCs are parties to the MIPCA. Accordingly, this decision proceeds

on the assumption that Holdco is asserting fraud claims based on representations in

126
Mot. to Dismiss Hr’g Tr. 82 (Apr. 16, 2020) (Dkt. 70).
127
The Complaint challenges only one representation in the ABL Credit Agreement, which
is the same as the one in Section 4.06 of the Term Loan Agreement discussed below.

31
the MIPCA and that LVS and HVS are asserting fraud claims based on the

representations in the Term Loan Agreement.

Third, as noted above, Clark and Linville joined in NGP’s motion to dismiss

the fraud claim but advanced no arguments of their own. Thus, Clark and Linville

have conceded issues concerning the fraud claim unique to them that NGP did not

brief, such as the issue of knowledge.

To state a fraud claim under Delaware law, a plaintiff must allege: “(i) a false

representation, (ii) the defendant’s knowledge of or belief in its falsity or the

defendant’s reckless indifference to its truth, (iii) the defendant’s intention to induce

action based on the representation, (iv) reasonable reliance by the plaintiff on the

representation, and (v) causally related damages.”128 The court analyzes the fraud

claims with respect to the MIPCA and the Loan Agreement, in turn, below.

1. MIPCA Fraud Claims

In Article IV of the MIPCA, NGP and the “Management Investors,” which

include Clark and Linville, “severally and not jointly” made a series of

representations to Holdco, as the successor to Agspring LP.129 Holdco asserts that

128
Prairie Capital III, L.P. v. Double E Hldg. Corp., 132 A.3d 35, 49 (Del. Ch. 2015)
(citing Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983)).
129
MIPCA Art. IV.

32
three of these representations support claims for fraud: Sections 4.5(c), 4.8, and

4.15(m).

NGP advances two arguments in response. NGP first argues that “Plaintiffs’

fraud claims that are based on provisions of the MIPCA are barred by the economic

loss doctrine . . . because a plaintiff may not recover in tort for breaches of contract

agreements.”130 This contention is without merit. This court’s precedents recognize

that a buyer may sue for fraud based on false representations in a contract that induce

the buyer to enter into the contract.131

NGP’s second argument is that the Complaint fails to plead fraud with the

requisite particularity. Under Court of Chancery Rule 9(b), “[i]n all averments of

fraud or mistake, the circumstances constituting fraud or mistake shall be stated with

particularity.”132 “The relevant circumstances are ‘the time, place, and contents of

the false representations; the facts misrepresented; the identity of the person(s)

making the misrepresentation; and what that person(s) gained from making the

130
NGP Opening Br. 23-24 (internal quotation marks and citation omitted).
131
See, e.g., Abry P’rs V, L.P. v. F&W Acq. LLC, 891 A.2d 1032, 1054 (Del. Ch. 2006)
(“[B]uyers claiming to be the victims of [contractual] representations have traditionally
been able to seek to avoid a contract (or in the alternative, recover damages) in either
contract or tort.”); H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 145-47 (Del. Ch.
2003) (allowing a claim for fraud to proceed based on alleged false representations made
in a purchase agreement).
132
Ch. Ct. R. 9(b).

33
misrepresentation.’”133 The key to determining whether a plaintiff has alleged

circumstances with particularity to satisfy Rule 9(b) is that “the plaintiff must allege

circumstances to fairly apprise the defendant of the basis of the claim.” 134

“When a party sues based on a written representation in a contract,” as Holdco

has done here, “it is relatively easy to plead a particularized claim of fraud.”135 This

is because the “plaintiff can readily identify who made what representations where

and when, because the specific representations appear in the contract.”136

NGP challenges the sufficiency of the Complaint’s allegations with respect to

three of the five elements of a fraud claim: the existence of a false representation,

knowledge, and damages.137 The court addresses these issues in that order.

133
Prairie Capital, 132 A.3d at 62 (quoting Trenwick Am. Litig. Tr. v. Ernst & Young LLP,
906 A.2d 168, 207-08 (Del. Ch. 2006), aff’d sub nom. Trenwick Am. Litig. Tr. v. Billett,
931 A.2d 438 (Del. 2007)).
134
H-M Wexford, 832 A.2d at 145.
135
Prairie Capital, 132 A.3d at 62.
136
Id.
137
In its briefs, NGP challenged the element of justifiable reliance based on its
understanding that Plaintiffs’ fraud claim was based, at least in part, on extra-contractual
representations. This issue became moot when Plaintiffs clarified at oral argument that
their fraud claim is not based on extra-contractual representations and is only based on
express contractual representations. See Tr. 82. To be clear, no basis would exist to
challenge Plaintiffs’ reliance on the representations in the MIPCA, which expressly
provides that Holdco has relied and would rely on those representations. MIPCA § 9.11(b);
see also Prairie Capital, 132 A.3d at 62. (“It is reasonably inferable that defendants
intended to induce reliance on the representations because they appeared in a written
agreement. For the same reason, it is reasonably inferable that the plaintiff relied on
representations when entering into the agreement.”).

34
 a. False Representation

Defendants argue that two of three MIPCA provisions at issue (Sections 4.5(c)

and 4.8) cannot give rise to a fraud claim because they are not representations of

existing fact, and that the express terms of the third provision (Section 4.15(m))

precludes Holdco’s argument. For the reasons discussed below, the court finds it is

reasonably conceivable based on the Complaint’s allegations that the representations

in Sections 4.5(c) and 4.15(m) were false when made but that Holdco has failed to

make this showing with respect to the representation in Section 4.8 of the MIPCA.

i. Section 4.5(c) of the MIPCA

Section 4.5(c) provides in relevant part that:

[T]o the knowledge of Agspring, no event has occurred or circumstance
exists that (with or without notice or lapse or time) may . . . result in a
material violation or material breach of, or give any Agspring Entity or
any other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any Material Contract.138

It is not disputed that the Tubbs Note, which had an outstanding principal

balance of $22 million and required the Company to pay $1.2 million in interest

annually,139 was a “Material Contract” when the MIPCA was signed. Holdco

contends Defendants knew when they made the representation in Section 4.5(c) that

138
MIPCA § 4.5(c).
139
Compl. ¶ 37.

35
the effect of Agspring’s poor performance during the first six months of its 2016

fiscal year, which Defendants knew about but did not fully disclose before they

signed the MIPCA in December 2015, put the Company on a downward spiral that

would cause a default of the Tubbs Note. To that end, the Complaint alleges the

Company earned only $701,900 of EBITDA (instead of a projected $33 million) for

its full 2016 fiscal year, which ended on May 31, 2016; had to restructure twice, in

September 2017 and August 2018; and failed to make payments on the Tubbs Note

starting in October 2018.140

Defendants counter that “Holdco cannot point to an ‘event or occurrence’ that

had occurred as of December 2015 that should have led NGP to conclude Agspring

would violate a loan covenant 34 months later.”141 Relying on Edinburgh Holdings

Inc. v. Education Affiliates, Inc., Defendants also contend that Section 4.5(c) cannot

give rise to actionable common law fraud because it amounts to a prediction about

the future.142

The Complaint pleads numerous facts demonstrating that Agspring

experienced a serious financial decline at Big River and “catastrophic” results at

Thresher during the six months leading up to the closing. 143 The severity of the

140
Id. ¶¶ 37, 116, 118.
141
NGP Reply Br. 21-22 (Dkt. 58).
142
2018 WL 2727542, at *12 (Del. Ch. June 6, 2018).
143
Compl. ¶¶ 70-71, 81-83.

36
decline caused the Company, unbeknownst to Holdco, to reduce its FY16 EBITDA

forecast by more than 39 percent—from $33 million to $20 million before the

closing. Given the sharpness of the financial decline the Company had experienced

before the closing and the known fact that the Company would be incurring $80

million of additional debt in connection with the Transaction,144 it is reasonably

conceivable that, contrary to the representation made in Section 4.5(c), events had

occurred that would make it unmanageable for the Company to service its debt and

result in a material breach of the Tubbs Note. Thus, the Complaint sufficiently

alleges that the express representation to which the parties agreed in Section 4.5(c)

was false when made.

Defendants’ reliance on Edinburgh does not convince me otherwise. There,

the court found that “alleged extra-contractual representations regarding revenue

projections” were not actionable because it “was not knowable at the time” whether

the revenues would be achieved.145 Here, although there is a forward-looking aspect

to the representation in Section 4.5(c), the representation is rooted in Agspring’s

financial condition at the closing based on historical events, i.e., events that had

“occurred” and were not only knowable, but allegedly known, at closing.146

144
Id. ¶ 104
145
2018 WL 2727542, at *12 (emphasis in original).
146
For the same reasons, NGP’s footnote citation to Trenwick America Litigation Trust v.
Ernst & Young, L.L.P. is inapposite. Similar to Edinburgh, the challenged statements in

37
 ii. Section 4.8 of the MIPCA

Section 4.8 of the MIPCA, which is entitled “Sufficiency of Assets,” states in

relevant part that:

At the Closing, the Agspring Assets will (a) constitute all of the assets
necessary or required to permit the Partnership to carry on the Business
in substantially the same manner as historically conducted by the
Agspring Entities prior to the Contemplated Transactions and (b)
constitute all of the assets of the Agspring Entities used in the Business
presently and as conducted since January 1, 2012, other than assets
disposed of since January 1, 2012 in the Ordinary Course of
Business.147

Holdco contends “Defendants knew, when they made the representation in

Section 4.8, that the existing assets of Agspring LLC—including Big River and

Thresher—would not constitute the assets necessary for Agspring Holdco to carry

on Agspring LLC’s business ‘in substantially the same manner as historically

conducted.’”148 When pressed, it became apparent that Holdco interprets Section

4.8 to mean, in effect, that the assets of the Company would generate financial

returns consistent with the past.149

Trenwick concerned “expectation or opinion about the future of the company and the hoped
for results of business strategies.” Trenwick Am. Litig. Tr. v. Ernst & Young LLP, 906 A.2d
168, 209 (Del. Ch. 2006), aff’d sub nom. Trenwick Am. Litig. Tr. v. Billett, 931 A.2d 438
(Del. 2007).
147
MIPCA § 4.8.
148
Pls.’ Opp’n Br. 58.
149
See Tr. 89 (asserting Section 4.8 was false because the business was not “going to be
able to carry on substantially in the same manner . . . given the amount of leverage” on the
Company and the “absolute bottom having fallen out shortly before close”).

38
 This interpretation misconstrues the plain meaning of Section 4.8, which is

for a seller to warrant that it will transfer to a buyer at closing all of the operating

assets of a business.150 As a leading treatise explains, a “sufficiency of assets”

representation “will be important for the Buyer to receive comfort from the Seller

that the sum of what it is buying comprises all of the assets necessary to run the

business.”151 This interpretation is consistent with the qualification in Section 4.8

that it would not apply to “assets disposed of since January 1, 2012 in the Ordinary

Course of Business.”152 The Complaint does not allege that any assets of the

Company necessary to operate its business before the Transaction closed were

omitted or missing after the closing. Accordingly, Holdco’s reliance on Section 4.8

fails to state a claim for relief.

iii. Section 4.15(m) of the MIPCA

Section 4.15(m) represents “there has not been any . . . Material Adverse

Effect” at Agspring since May 31, 2015, which was the end of the Company’s 2015

150
See Weyerhauser Co. v. Lambert, 2007 WL 2826957, at *10 (N.D. Ga. Sept. 26, 2017)
(interpreting a “sufficiency of assets” representation to mean “no assets used by [sellers]
would be inadvertently omitted from the transfer” but did not “guarantee[] that [buyers]
would be able to conduct the same . . . business in the future that [sellers] had been
conducting”), aff’d sub nom. In re Paragon Trade Brands, Inc., 278 F.App’x 1000 (11th
Cir. 2018).
151
Lou R. Kling & Eileen T. Nugent, Negotiated Acquisitions of Companies, Subsidiaries
and Divisions § 11.04[g], at 11-95 to -96 (2019 ed.).
152
MIPCA § 4.8.

39
fiscal year.153 The term “Material Adverse Effect” is defined in the MIPCA as “any

change, circumstance, effect, event, occurrence or condition that, individually or in

the aggregate, has had or would reasonably be expected to have a material adverse

effect on the Agspring Entities, Agspring Assets or the Business, taken as a whole,”

subject to a series of exceptions.154

As this court has explained, “[t]he ubiquitous material adverse effect clause

should be seen as providing a ‘backstop protecting the acquirer from the occurrence

of unknown events that substantially threaten the overall earnings potential of the

target in a durationally-significant manner.’”155 Although “the ‘material adverse

effect’ standard is high, this court will find that a plaintiff has adequately pled a

material adverse effect [at the motion to dismiss stage] if the pled facts support a

reasonable inference that the misrepresentations ‘could produce consequences that

are materially adverse to the Company.’”156

Relying on an exception in the “Material Adverse Effect” definition in Section

4.15(m) concerning the “the failure or inability . . . to meet any projections, forecasts

153
Id. § 4.15(m).
154
Id. Ex. A at A-8.
155
Hexion Specialty Chems., Inc. v. Huntsman Corp., 965 A.2d 715, 738 (Del. Ch. 2008)
(quoting In re IBP, Inc. S’holders Litig., 789 A.2d 14, 68 (Del. Ch. 2001)); see also
Frontier Oil v. Holly Corp., 2005 WL 1039027, at *34 (Del. Ch. Apr. 29, 2005).
156
EMSI Acq., Inc. v. Contrarian Funds, LLC, 2017 WL 1732369, at *15 (Del. Ch. May
3, 2017) (quoting Osram Sylvania Inc. v. Townsend Ventures, LLC, 2013 WL 6199554, at
*7-9 (Del. Ch. Nov. 19, 2013)).

40
or estimates of revenue or earnings,”157 Defendants contend Plaintiffs are precluded

from asserting a claim for fraud based on that representation on the theory that

“[w]hat Plaintiffs are really complaining about are lower ‘internal forecasts.’”158

This argument, however, ignores an important carve out to the exception (italicized

below) and takes too narrow a view of the Complaint’s allegations.

The provision in Section 4.15(m) disallowing consideration of forecasts “in

determining whether a Material Adverse Effect has occurred” states in full that one

may not consider:

(i) the failure or inability of the Agspring Entities or the Business to
meet any projections, forecasts or estimates of revenues or earnings
(except to the extent that, with respect to this clause (i) the facts or
circumstances giving rise to such failure or inability may themselves be
deemed to constitute, or to be taken into account in determining
whether there has been a Material Adverse Effect)159

Drawing all reasonable inferences in Plaintiffs’ favor at this stage of the case, as the

court must, the Complaint sufficiently pleads facts concerning the circumstances that

gave rise to the Company’s failure to meet its forecast to support a reasonably

conceivable claim that the representation in Section 4.15(m) was false when made.

157
NGP Reply Br. 23 (citing MIPCA Ex. A at A-8).
158
NGP Opening Br. 30.
159
MIPCA Ex. A at A-8 (emphasis added).

41
 In particular, the Complaint alleges that in November 2015, when the

Company was close to the midpoint of its 2016 fiscal year, the performance of Big

River and Thresher since May 31, 2015 had declined dramatically:

 Big River: On November 4, Clark described reduced volumes and
margins at Big River as “a material change in performance that impacts
our compliance with the bank contract going forward.” Those results
led Agspring’s finance team to believe that Big River’s FY16 EBITDA
could be just $5 million, or only half of the forecasted amount ($10
million) that Clark and Linville reported to AIM and less than one-third
of the amount ($16 million) the Company initially projected.160

 Thresher: As reflected in consolidated financial statements for October
2015 that the Company received on November 23, Thresher suffered
“catastrophic” results that wiped out all of its year-to-date income, i.e.,
from June 1, 2015 forward. Those results caused the Company to
reduce its internal forecast FY16 EBITDA projection from $22 million
to $15 million without telling AIM.161

In sum, the Complaint alleges that the Company’s performance over the first half of

its 2016 fiscal year was so poor that it necessitated a reduction of approximately 47

percent of the Company’s total FY16 EBITDA forecast, from $38 million in May

2015 to $20 million in November 2015. This is sufficient to support a reasonable

inference of a material adverse effect at the pleadings stage.162 Accordingly,

Plaintiffs have pled that Defendants made a false representation in Section 4.15(m).

160
Compl. ¶¶ 56, 61-65, 68, 71-72.
161
Id. ¶¶ 82-83.
162
See Raskin v. Birmingham Steel Corp., 1990 WL 193326, at *5 (Del. Ch. Dec. 4, 1990)
(Allen, C.) (“While it is possible that on a full record and placed in a larger context one
might conclude that a reported 50% decline in earnings over two consecutive quarters

42
 b. Knowledge

The knowledge element of a fraud claim is not subject to the particularity

requirement of Rule 9(b). Rather, as Rule 9(b) recognizes, a “defendant’s state of

mind, including its knowledge and intent, ‘may be averred generally.’” 163 The

rationale for this rule is that “any attempt to require specificity in pleading a

condition of mind would be unworkable and undesirable.”164 “While knowledge

may be pled generally, when a plaintiff pleads a claim of fraud that charges that the

defendants knew something, it must allege sufficient facts from which it can

reasonably be inferred that this ‘something’ was knowable and that the defendants

were in a position to know it.”165

Clark and Linville advanced no argument challenging the sufficiency of the

Complaint’s allegations that they knew the representations in the MIPCA at issue

might not be held to constitute a material adverse development, it is . . . unlikely to think
that that might happen.”); see also Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347,
at *53 (Del. Ch. Oct. 1, 2018) (“In their influential treatise, Lou R. Kling and Eileen T.
Nugent observe that most courts which have considered decreases in profits in the 40% or
higher range found a material adverse effect to have occurred.”) (citing Lou R. Kling &
Eileen T. Nugent, Negotiated Acquisitions of Companies, Subsidiaries and Divisions
§ 11.04[9], at 11-66 (2018 ed.)).
Prairie Capital, 132 A.3d at 62 (quoting Anglo Am. Sec. Fund, L.P. v. S.R. Glob. Int’l
163

Fund, L.P., 829 A.2d 143, 158 (Del. Ch. 2003)).
164
Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A.2d 1199,
1208 (Del. 1993) (internal quotation marks and citation omitted).
165
Abry, 891 A.2d at 1050.

43
were false when made, thus conceding the issue. NGP does make such an argument,

but it is not persuasive.

In contending they have adequately pled knowledge with respect to NGP,

Plaintiffs cite the following allegations:

 NGP held 98 percent of Agspring’s membership interests and
controlled its board through the NGP Board Members (Mark Zenuk,
Cameron Dunn, and Richard Edwards), who accounted for three of the
five members of Agspring’s board.166

 NGP Board Members attended board meetings, regularly received
financial information, and NGP was contractually obligated to “provide
advice and consultation to Agspring LLC” concerning, among other
things, “providing general oversight of legal and accounting issues;
implementing a long-term budgeting and planning process; mergers
and acquisitions; and strategies and financing alternatives.”167

 NGP was closely involved in the sales process, which included
negotiating two price reductions directly with AIM, providing “specific
feedback to improve the [Agspring’s consolidated financial]
statements,” encouraging Agspring “employees to add back amounts to
EBITDA calculations,” and advising Agspring “employees to modify
financial documents that were later disclosed to investors so that the
company would look more attractive to potential investors.”168

 NGP “understood that attaining a specific EBITDA was essential to the
potential acquirer’s value proposition and to secure financing from the
Investor LLCs” and that “maintaining consistent financial projections
and a positive outlook was key to getting the deal closed.”169

166
Compl. ¶¶ 5, 20, 28.
167
Id. ¶¶ 30-31, 199.
168
Id. ¶¶ 49, 55, 94, 96, 197-98.
169
Id. ¶¶ 53-55, 95, 157.

44
  NGP “constantly communicated” with Clark and Linville during the
sales process, and specifically, in October 2015, Clark, Linville, and the
NGP Board Members discussed Big River’s declining volume and
margins.170

 From October through December 2015, NGP pushed Clark and Linville
to close the deal as the Company’s forecasts worsened, stating in
November “need a close now,” and “calling texting, and emailing”
Clark and Linville constantly in December 2015.171

Contrary to NGP’s contention that these allegations should be discounted as

“conclusory,” they are far more than sufficient to support a reasonable inference that

NGP was in a position to know when it signed the MIPCA the knowable reality

underlying the alleged falsity of the representations in Sections 4.5(c) and 4.15(m)

that was concealed from Plaintiffs, i.e., that Agspring’s financial results had declined

dramatically over the prior six months necessitating material reductions to its

forecast for the 2016 fiscal year, which severely threatened Agspring’s earnings and

imperiled its ability to service its debt after the closing.

c. Damages

Defendants contend Plaintiffs have not adequately plead damages. The court

disagrees. The Complaint alleges, among other things, that Agspring was worth at

least $150 million less than the nearly $300 million Holdco paid for it based on its

represented value and that Agspring has been unable to service the $80 million in

170
Id. ¶¶ 63, 91, 201.
171
Id. ¶¶ 101, 202.

45
debt it procured to finance part of the purchase price. 172 These allegations are

sufficient to plead a reasonable inference that Plaintiffs suffered damages as a result

of Defendants’ alleged fraud.173

2. Term Loan Agreement Fraud Claims

LVS and HVS, which together loaned $80 million to Agspring in connection

with the Transaction, assert that Defendants made fraudulent representations in two

provisions of the Term Loan Agreement that governs their loans. The first provision,

Section 4.06 represents, in general terms, that projections provided by Agspring

were prepared in good faith:

projections, estimates, and pro forma financial information furnished
by [Agspring] were prepared in good faith on the basis of assumptions,
data, information, tests or conditions believed to be reasonable at the
time such projections, estimates, and pro forma financial information
were furnished.174

The second provision, Section 4.17, contains various representations bearing on

Agspring’s solvency. It states in its entirety:

172
Compl. ¶¶ 193, 228, 236; MIPCA § 2.6, Ex. C.
173
See H-M Wexford LLC, 832 A.2d at 144 & n.28 (finding “it reasonably can be inferred
that . . . Wexford suffered damages in the form of an overpayment for its investment in
Encorp” based on its allegations of a “material adverse change” in Encorp’s financial
position); In re Bracket Hldg. Corp. Litig., 2017 WL 3283169, at *10 (Del. Super. July 31,
2017) (“[S]ince Bracket asserts that the fraud caused an overpayment for the Company in
excess of $50 million, it seems almost silly to dispute the damages element on a motion to
dismiss.”).
174
Term Loan Agreement § 4.06.

46
 Immediately following the making of the Loans and after giving effect
to the application of the proceeds of the Loans, (a) the fair value of the
assets of the Borrower will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable
value of the property of the Borrower will be greater than the amount
that will be required to pay the probable liability of its debts and other
liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) the Borrower will be
able to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured;
and (d) the Borrower will not have unreasonably small capital with
which to conduct the business in which it is engaged as such business
is now conducted and is proposed to be conducted following the
Closing Date.175

Clark and Linville do not contend that LVS and HVS have failed to plead

adequately all of the elements of fraud with respect to these two representations, nor

do they contend they cannot be liable personally if the Complaint’s allegations are

proven to be true even though Clark and Linville are not parties to the Term Loan

Agreement. Thus, this aspect of Count I survives as to them.

NGP similarly does not contend that LVS and HVS have failed to plead

adequately all of the elements of fraud with respect to Sections 4.06 and 4.17 of the

Term Loan Agreement. But NGP does argue that it cannot be liable for these

representations because it is not a party to the Credit Agreement.

LVS and HVS counter that that NGP may be held liable for misrepresentations

in the Term Loan Agreement under the “personal participation doctrine” because

175
Id. § 4.17.

47
“NGP directed and empowered Linville and Clark” to enter into the Term Loan

Agreement.176 “Under that doctrine, a corporate officer may be held liable in tort

only where she is ‘actively involved in the commission of the tort in that she directed,

ordered, ratified, approved or consented to the tort.’”177 The personal participation

doctrine has been applied in Delaware in the context of a limited liability

company.178

Plaintiffs’ argument raises what appears to be a novel issue the parties did not

address in their briefs, i.e., can the personal participation doctrine be applied to an

entity, as opposed to an individual, even if that entity is a controlling member of a

limited liability company? The court need not address this question because, for the

reasons discussed in Part III.C below, the Complaint sufficiently alleges that NGP

may be liable for fraudulent representations in the Term Loan Agreement under both

of the secondary liability theories asserted against NGP in the Complaint.

176
Pls.’ Answering Br. 63.
177
Gassis v. Corkery, 2014 WL 3565418, at *5 (Del. Ch. July 21, 2014) (quoting
Heronemus v. Ulrick, 1997 WL 524127, at *2 (Del. Super. July 9, 1997)) (alterations
omitted), aff’d, 113 A.3d 1080 (Del. 2015) (TABLE); see also St. James Recreation, LLC
v. Rieger Opportunity P’rs, LLC, 2003 WL 22659875, at *8 n.40 (Del. Ch. Nov. 5, 2003)
(citing to Donsco, Inc. v. Casper Corp., 587 F.2d 602, 606 (3d Cir. 1978) for the
proposition that “actual participation in wrongful acts is [a] ‘crucial predicate’ to
imposition of individual liability”); Stonington P’rs, Inc. v. Lernout & Hauspie Speech
Prods., N.V., 2002 WL 31439767, at *8 n.27 (Del. Ch. Oct. 23, 2002) (“A corporate officer
can be held personally liable for the torts he commits and cannot shield himself behind a
corporation when he is a participant.”).
178
See Spanish Tiles, Ltd. v. Hensey, 2009 WL 86609, at *2 (Del. Super. Jan. 7, 2009).

48
 *****

For the reasons explained above, the motion to dismiss Count I is granted in

part and denied in part. To be more specific, Count I states a direct claim for fraud

against all Defendants with respect to the representations in Sections 4.05(c) and

4.15(m) of the MIPCA, and against Clark and Linville with respect to the

representations in Section 4.06 and 4.17 of the Term Loan Agreement, but fails to

state a claim with respect to the representation in Section 4.8 of the MIPCA.

C. Counts II & III: Secondary Liability Claims Against NGP

In Counts II and III of the Complaint, Holdco and the Investor LLCs assert

two different but “quite similar” theories of secondary liability for fraud against

NGP: aiding and abetting and conspiracy.179 Given that Plaintiffs have stated a

direct claim for fraud against NGP for the two representations in the MIPCA that

will survive, these theories are only relevant to the two alleged misrepresentations

in the Term Loan Agreement. For the reasons discussed next, the allegations of the

Complaint support the application of both theories against NGP for that purpose.

179
Great Hill Equity P’rs IV, LP v. SIG Growth Equity Fund I, LLLP, 2014 WL 6703980,
at *22 (Del. Ch. Nov. 26, 2014) (“As noted, civil conspiracy and aiding and abetting are
quite similar. Indeed, this Court has noted that civil conspiracy claims are ‘sometimes
called aiding and abetting.’”) (quoting Weinberger v. Rio Grande Indus., Inc., 519 A.2d
116, 131 (Del. Ch. 1986)).

49
 1. Aiding and Abetting

The elements of a claim for aiding and abetting fraud are: “(i) underlying

tortious conduct, (ii) knowledge, and (iii) substantial assistance.”180 The first

element is a nonissue. Clark and Linville have conceded the viability of the fraud

claim against them with respect to the representations in Sections 4.06 and 4.17 of

the Term Loan Agreement.

Like the pleading requirements for fraud, the knowledge element of an aiding

and abetting claim under Delaware law can be averred generally, and “all that is

required to show that a defendant knew something are sufficient well-pleaded facts

from which it can reasonably be inferred that this something was knowable and that

the defendant was in a position to know it.”181 As discussed above, the Complaint’s

allegations are more than sufficient to support a reasonable inference that NGP was

in a position to know when the Transaction closed about the knowable reality of the

fraud underlying the alleged falsity of representations in the MIPCA that was

concealed from Plaintiffs, i.e., that Agspring’s financial results had declined

dramatically over the prior six months necessitating material reductions to its

180
PR Acqs., LLC v. Midland Funding LLC, 2018 WL 2041521, at *15 (Del. Ch. Apr. 30,
2018) (internal quotation marks and citation omitted).
181
See Great Hill, 2014 WL 6703980, at *20, *22 (explaining that knowledge in the context
of a civil conspiracy claim can be averred generally, and that plaintiffs in the case had
adequately plead knowledge for an aiding and abetting fraud claim “for the reasons
outlined . . . in connection with the civil conspiracy claim”) (internal quotation marks and
citation omitted).

50
forecast for the 2016 fiscal year, which severely threatened Agspring’s earnings

potential and imperiled its ability to service its debt after the closing.182 These same

allegations satisfy the knowledge element of the aiding and abetting claim with

respect to the representations in Sections 4.06 and 4.17 of the Term Loan Agreement.

As to the third element, this court recently explained in an analogous context

that “substantial assistance” means that “the secondary actor must have provided

‘assistance . . . or participation’ in aid of the primary actor’s allegedly unlawful

acts.’”183 In that vein, the Complaint alleges that NGP Board Members provided

“specific feedback to improve the [Agspring’s consolidated financial] statements,”

encouraged Agspring “employees to add back amounts to EBITDA calculations,”

and advised Agspring “employees to modify financial documents that were later

disclosed to investors so that the company would look more attractive to potential

investors.”184 The Complaint further alleges that NGP negotiated two price

reductions directly with AIM during the sale process; “constantly communicated”

with Clark and Linville during the sales process and gave them “significant heat” to

“get the deal done;”185 and was contractually obligated to “provide advice and

182
See supra Part III.B.1.b.
183
In re Oracle Corp. Deriv. Litig., 2020 WL 3410745, at *11 (Del. Ch. June 22, 2020)
(quoting Restatement (Second) of Torts § 876 cmt. d (1979)).
184
Compl. ¶¶ 55, 94.
185
Id. ¶¶ 91, 101.

51
consultation” to Agspring concerning various subjects—including “mergers and

acquisitions . . . and financing alternatives”—which, it is reasonable to infer, would

have put NGP in the thick of the Company’s negotiation strategy and tactics

throughout the sale process.186 These allegations satisfy the substantial assistance

element.

In sum, Count II states a claim for aiding and abetting fraud against NGP.

2. Civil Conspiracy

Holdco and the Investor LLCs asserts that “Clark, Linville, and NGP

conspired to fraudulently induce Agspring Holdco and the Investor LLCs to enter

into the MIPCA and Term Loan Agreement.”187 The elements for civil conspiracy

are: “(i) a confederation or combination of two or more persons; (ii) an unlawful act

done in furtherance of the conspiracy; and (iii) damages resulting from the action of

the conspiracy parties.”188 NGP does not challenge the sufficiency of the

Complaint’s allegations with respect to the second and third elements.

With respect to the first element, “[e]ven to prevail at trial the [plaintiff does]

not need to prove the existence of an explicit agreement; a conspiracy can be inferred

186
Id. ¶ 31.
187
Id. ¶ 209.
188
Great Hill, 2014 WL 6703980, at *20 (internal quotation marks and citation omitted).

52
from the pled behavior of the alleged conspirators.”189 “[T]o survive a motion to

dismiss, all that is needed is a reasonable inference that [the defendant] was part of

this conspiracy.”190 Although the “circumstances constituting the fraud or

conspiracy to commit fraud” must be pled with particularity under Rule 9(b),191

“[t]he existence of a confederation may be pled by inference [and] is not subject to

the specificity requirement of Rule 9(b).”192 In short, “[w]hat matters for purposes

of the motion to dismiss” a civil conspiracy claim is whether the complaint alleges

“sufficient facts to support an inference that [Defendants] . . . acted in concert” with

one another.193

Here, the facts recited above concerning NGP’s “substantial assistance” with

respect to the aiding and abetting claim support a reasonable inference that

representatives of NGP worked closely with Clark and Linville throughout the sale

process for the purpose of getting a deal done with AIM at a valuation NGP desired

and that NGP was aware of the internal reductions to Agspring’s FY16 EBITDA

189
In re Am. Int’l Gp., 965 A.2d at 806 (citing Empire Fin. Servs., Inc. v. Bank of N.Y., 900
A.2d 92, 97 n.16 (Del. 2006)); see also LVI Gp. Invs., LLC v. NCM Gp. Hldgs., LLC, 2018
WL 1559936, at *16 (Del. Ch. Mar. 28, 2018).
190
In re Am. Int’l Gp., 965 A.2d at 806.
191
Great Hill, 2014 WL 6703980, at *20 (citing Albert v. Alex. Brown Mgmt. Servs., Inc.,
2005 WL 2130607, at *11 (Del. Ch. Aug. 26, 2005)).
192
Id. (citing In re Am. Int’l Gp., 965 A.2d at 806).
193
Prairie Capital, 132 A.3d at 64; see also id. at 63 (explaining that a civil conspiracy
claim, but not an aiding and abetting claim, is premised on “someone who takes action ‘in
concert with the other pursuant to a common design.’”).

53
forecasts that Clarke and Linville concealed from Plaintiffs while providing them

inflated ones. Therefore, Count III states a claim for civil conspiracy against NGP.194

D. Count IV: Fiduciary Duty Claim Against Clark, Linville, and NGP

In Count IV, Agspring asserts a claim for breach of fiduciary duty against

Clark and Linville, as directors and officers of Agspring, and against NGP, as the

controlling member of Agspring before the Transaction closed. That much is clear.

Deciphering the point of the claim from the papers has been far more challenging.195

194
Citing Metro Life Ins. Co. v. Tremont Gp. Hldgs., Inc., 2012 WL 6632681, at *19 (Del.
Ch. Dec. 20, 2012), NGP contends that a “meeting of the minds” is required to state a claim
for civil conspiracy. NGP Opening Br. 45. Metro Life articulated the elements of a civil
conspiracy claim as follows: “(1) two or more persons; (2) an object to be accomplished;
(3) a meeting of the minds between or among such persons relating to the object or a course
of action; (4) one or more unlawful acts; and (5) damages as a proximate result thereof.”
2012 WL 6632681, at *19. It appears that the first three elements of this formulation cover
the same terrain as the first element of the three-element test quoted above. Under either
formulation, Plaintiffs have stated a claim of civil conspiracy for the reasons explained
above.
195
The briefs advance a mishmash of arguments. The above explanation is the court’s
distillation of Plaintiffs’ key argument. In response, Clark and Linville assert that any
purported pre-closing misrepresentations they made are barred by laches. C&L Reply Br.
25. The alleged harm, however, accrued when the Transaction closed and the statute of
limitations for Plaintiffs’ claims was tolled thereafter until late July 2016. See supra Part
III.A.1. NGP advances four theories for why the Complaint fails to allege that NGP
breached its duty of loyalty, i.e., that (i) the Complaint does not allege NGP provided any
falsified projections, (ii) NGP did not make any representations in the Credit Agreements,
(iii) “Plaintiffs do not explain how such alleged misrepresentations constitute a breach of
any fiduciary duty NGP owed to Agspring,” and (iv) Plaintiffs have not met the pleading
standard for bad faith. NGP Reply Br. 34-35. The flaw in all of these arguments is that
the Complaint sufficiently alleges that NGP knowingly conspired with Clark and Linville
to misrepresent the financial condition of the Company, which caused the lenders to
finance the Transaction based on misrepresentations in the Term Loan Agreement and
caused the Company to become overleveraged and unable to service its debt.

54
Best the court can tell, Agspring contends that Defendants engaged in a scheme to

provide an artificially inflated financial model to Agspring’s lenders in connection

with the Transaction to provide comfort to the lenders that the Company would

generate sufficient EBITDA to finance the Transaction at NGP’s desired valuation,

which would allow NGP to secure an unfair price and allow Clark and Linville to

pull out substantial cash payments at closing for themselves—about $7.5 million.

The Company was harmed, it is alleged, because it became overleveraged and was

unable to service its debt.196

The Complaint pleads that Clark and Linville (i) knew that Agspring had to

provide covenants to secure financing,197 (ii) were concerned about the Company’s

ability to comply with those covenants,198 (iii) knew they had to provide better-

looking financials than were warranted to justify the valuation NGP desired,199

(iv) represented to the lenders that “no new forecast was needed” despite knowing

that Big River’s financial health had declined,200 and (v) provided artificially-

inflated financial information to the lenders;201 and that Clark ultimately signed the

196
Compl. ¶¶ 227-28.
197
Id. ¶¶ 51, 53.
198
Id. ¶¶ 58, 64.
199
Id. ¶ 66.
200
Id. ¶¶ 66, 67.
201
Id. ¶¶ 86-90.

55
Credit Agreements on behalf of the Company in his capacity as President of

Agspring.202 For the reasons explained in Part III.C, the allegations of the Complaint

also are sufficient to state a claim against NGP for aiding and abetting Clark and

Linville in committing fraud in connection with the Term Loan Agreement and,

more generally that Clark, Linville, and NGP engaged in a conspiracy to induce the

Investor LLCs to enter into the Term Loan Agreement.203

Although the court is skeptical that Plaintiffs’ fiduciary duty claim, as just

articulated, adds much if anything to the mix of this case beyond what their fraud-

related claims cover, the claim is reasonably conceivable and its dismissal “will

confer no benefit in terms of [the] litigants’ economy” because the fiduciary duty

claim and the fraud claim will require similar discovery. 204 Accordingly, Count IV

survives.

E. Count V: Unjust Enrichment Claim Against NGP

In Count V, Holdco and the Investor LLCs assert a claim for unjust

enrichment claim against NGP. The elements of an unjust enrichment claim are:

“(1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment

202
Id. ¶ 151; see Term Loan Agreement at AGS-AAA00012901; ABL Credit Agreement
at CLARK004754.
203
See supra Part III.C.1-2.
204
Great Hill, 2014 WL 6703980, at *22.

56
and impoverishment, (4) the absence of justification, and (5) the absence of a remedy

provided by law.”205

“In evaluating unjust enrichment claims, Courts conduct a threshold inquiry

as to whether a contract already governs the parties’ relationship.”206 “If a contract

comprehensively governs the parties’ relationship, then it alone must provide the

measure of the plaintiff’s rights and any claim of unjust enrichment will be

denied.”207 “If the validity of that agreement is challenged, however, claims of

unjust enrichment may survive a motion to dismiss.”208

Section 9.8(a) of the MIPCA states that “the remedies provided for in this

Article IX shall be the sole and exclusive remedies of the Partnership Indemnified

Parties, the AIM Indemnified Parties and the Agspring Indemnified Parties with

respect to this Agreement.”209 It further states that “nothing in this Section 9.8

shall . . . preclude any party from seeking any remedy based upon fraud or willful

misconduct.”210 The MIPCA defines the term “Agspring Indemnified Parties” to

205
Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010).
206
Great Hill, 2014 WL 6703980, at *27 (internal quotation marks and citation omitted).
207
Id. (internal quotation marks and citation omitted).
208
Id. (citing Bakerman v. Sidney Frank Importing Co., Inc., 2006 WL 3927242 (Del. Ch.
Oct. 10, 2006)).
209
MIPCA § 9.8(a).
210
Id.

57
include NGP and the term “AIM Indemnified Parties” to include Holdco, as the

successor to Agspring LP.211

The MIPCA is a 61-page contract with representations, warranties, covenants,

and indemnities that comprehensively govern the relationship between Holdco and

NGP relating to the Transaction. It also expressly addresses the remedies available

to both parties, including the ability of Holdco to maintain a claim for fraud against

NGP, which Holdco has stated here for the reasons explained above. Plaintiffs have

not sought rescission, or to otherwise challenge the validity, of the MIPCA. They

seek only money damages.212 Under these circumstances, based on the principles

set forth above, the MIPCA defines the measure of Holdco’s rights vis-à-vis NGP

and its claim for unjust enrichment fails to state a claim for relief.

NGP is not a party to the Term Loan Agreement. “Delaware courts

consistently have held that where a contract exists no person can be sued for breach

of contract who has not contracted either in person or by an agent, and . . . that the

doctrine of unjust enrichment cannot be used to circumvent this principle merely by

substituting one person or debtor for another.”213 “The rationale for this rule is that

211
Id. § 9.3.
212
Compl. at 73 (Request for Relief ¶¶ A-F).
213
Vichi v. Koninklijke Philips Elecs., N.V., 62 A.3d 26, 59 (Del. Ch. 2014) (internal
quotation marks and citation omitted); see also Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d
872, 891-92 (Del. Ch. 2009) (“[U]njust enrichment cannot be used ‘to circumvent basic

58
the inability of a party to a contract to fulfill an obligation thereunder cannot serve

as a basis to conclude that other entities, who are not party to the contract, are liable

for that obligation.”214 For this reason, LVS and HVS fail to state a claim for unjust

enrichment against NGP with respect to the subject matter of the Term Loan

Agreement.

IV. CONCLUSION

For the foregoing reasons, the court grants in part and denies in part

Defendants’ motions to dismiss. Counsel are directed to confer and submit a form

of implementing order consistent with this decision within five business days.

contract principles [recognizing] that a person not a party to [a] contract cannot be held
liable to it.’”).
214
Vichi, 62 A.2d at 59 (internal quotation marks and citation omitted, emphasis in
original).

59