IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
BLUE CUBE SPINCO LLC, )
Plaintiff, )
)
v. ) C.A. No. N21C-01-214 PRW
) CCLD
THE DOW CHEMICAL COMPANY, )
Defendant. )
Submitted: June 18, 2021
Decided: September 29, 2021
Upon Defendant The Dow Chemical Company’s Motion to Dismiss,
GRANTED, in part, and DENIED, in part.
MEMORANDUM OPINION AND ORDER
David E. Ross, Esquire, Adam D. Gold, Esquire, Anthony M. Calvano, Esquire,
ROSS ARONSTAM & MORITZ LLP, Wilmington, Delaware; Craig C. Martin, Esquire,
Matthew J. Thomas, Esquire, Skyler J. Silvertrust, Esquire, Chloe Holt, Esquire,
WILLKIE FARR & GALLAGHER LLP, Chicago, Illinois; Shaimaa M. Hussein, Esquire,
WILLKIE FARR & GALLAGHER LLP, New York, New York, Attorneys for Plaintiff
Blue Cube Spinco LLC.
David J. Soldo, Esquire, MORRIS JAMES LLP, Wilmington, Delaware; Joseph B.
Schmit, Esquire, Richard Weingarten, Esquire, PHILLIPS LYTLE LLP, New York,
New York, Attorneys for Defendant The Dow Chemical Company.
WALLACE, J.
This indemnification dispute follows from an asset sale through which non-
party Olin Corporation acquired business lines and landed properties in the form of
a merger vehicle—plaintiff Blue Cube Spinco LLC (the “Company” and together
with Olin, the “Buy-Side”)—created by the seller, defendant The Dow Chemical
Company. After the transaction closed, the Buy-Side sought to improve the site on
which one of those assets, a manufacturing facility in Stade, Germany (the
“Building”), resides. To do so, the Company applied for expansion permits from the
German government.
That application was denied. Apparently, Dow registered a pre-closing
partition that put the Building in violation of positive zoning law (the “Code
Violation”), disqualifying a Building project from regulatory approval while the
Code Violation persists. To cure the Code Violation, the Buy-Side concluded it must
demolish the Building’s overextended dimensions and undertake related
remediation efforts. Having fronted some consulting and reconstruction costs, the
Company turned to Dow for reimbursement and ongoing coverage, citing provisions
in the parties’ agreement that purport to impose on Dow a duty to indemnify “any
and all” losses generated by the Code Violation.
Dow refused coverage for “all” costs, prompting a series of letters through
which the parties attempted to negotiate a settlement. Unable to pin Dow to a
satisfactory figure, the Company initiated litigation. Its complaint has two claims:
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breach-of-contract (“Count I”) and declaratory judgment (“Count II”). As it did
before, the Company, through Count I, contends Dow breached its duty to cover
“any and all” “Loss”—a definition that the Company says the Code Violation plainly
meets. For Dow’s dereliction the Company alleges past and future damages. In
Count II, the Company requests a declaration that Dow must cover “any and all”
Code Violation Loss. In truth, there is no substantive difference between the Counts.
Dow has moved to dismiss both Counts under Rules 12(b)(1) and 12(b)(6).
According to Dow, the Company has failed to state a reasonably conceivable and
ripe set of claims that is based on a definite and unexcluded loss and for which an
immediate declaration is appropriate. Not wholly so.
It is reasonably conceivable that Dow must indemnify “any and all” Loss the
Company sustains in remedying the Code Violation. In other words, Count I fully
addresses the Company’s injury. For that very reason, however, the Company
doesn’t need—and can’t retain—Count II. A plaintiff can’t duplicate a breach-of-
contract claim by just recasting it in declaratory language. Accordingly, Dow’s
motion is GRANTED, in part, and DENIED, in part.
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I. FACTUAL BACKGROUND
A. THE TRANSACTION.
Olin and Dow manufacture and sell chemicals. 1 In the spring of 2015, Olin
agreed to purchase three of Dow’s molecular firms and the tangible and intangible
assets associated with those lines.2 The transaction closed on October 5, 2015 (the
“Distribution Date”), and involved a few triangulated steps. 3 First, Dow formed the
Company.4 Next, Dow divested itself of the properties Olin wanted, including the
Building (the “Transferred Assets”), and conveyed them to the Company.5 An
agreement between Dow and the Company memorialized this phase (the “Separation
Agreement”).6 Last, Olin acquired all the Company’s stock from Dow under the
terms of a contract between the three (the “Merger Agreement” and together with
the Separation Agreement, the “Transaction Documents”).7 This case principally
1
Compl. ¶ 5 (D.I. 1).
2
Id. ¶ 7.
3
Id. The transaction closed in March 2015 but did not become effective until October. Id.
4
Id.
5
Id.
6
Id.; Ex. B to Compl. (hereinafter “SA”) (D.I. 1).
7
Compl. ¶ 7; Ex. A to Compl. (hereinafter “MA”) (D.I. 1).
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concerns the Separation Agreement, which granted the Company contractual rights
that permit it to seek indemnification. 8
B. THE TERMS.
The Separation Agreement is a glossary of interwoven terms. Relevant to
Dow’s motion are provisions concerning losses, liabilities, indemnification notices,
waivers, and remedy disclaimers.
1. Losses and (Excluded) Liabilities.
Dow agreed to indemnify the Company for “any and all” “Losses” that are
“actually suffered or incurred” and attributable to an “Excluded Liability.”9
“Losses” are defined broadly to encompass: “‘Liabilities,’ claims, losses, damages,
costs, expenses, interest, awards, judgments and penalties.” 10 Liabilities, in turn, are
defined with commensurate breadth to include real and theoretical exposures:
any and all debts, liabilities and obligations, whether accrued or
unaccrued, fixed or variable, known or unknown, absolute or
contingent, matured or unmatured or determined or determinable,
including those arising under any Law . . . contract, lease, agreement,
arrangement, commitment or undertaking. 11
8
Compl. ¶¶ 8, 10.
9
SA § 1 (Definitions); id. § 4.02 (Indemnification by Dow).
10
Id. § 1 (Definitions).
11
Id.
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And the term “Law” means “any federal, national, foreign, supranational, state,
provincial or local statute, law, ordinance, regulation, rule, code, order [or]
requirement.”12
An Excluded Liability is defined negatively to mean not an “Assumed
Liability.”13 The difference is temporal. Assumed Liabilities are defined, in
pertinent part, as “all Liabilities of Dow to the extent arising out of, or relating to, .
. . the Transferred Assets, in each case on or after the Distribution Date.”14
Inferentially, then, an Excluded Liability must be an exposure caused by a
Transferred Asset and that existed before the Distribution Date.
Construed together, Dow has a duty to indemnify every Liability-produced
Loss the Company sustains, including from a Building-based Liability, that attached
before the transaction closed and regardless of whether the Liability’s monetary
value has been conclusively identified and calculated at the time coverage is sought.
2. Indemnification Notices and Waivers.
To lodge an indemnification claim, the Company must, under Section 4.06(a),
provide Dow with (i) a “prompt . . . written notice” that (ii) describes “in reasonable
detail the amount of Loss, if known” and (iii) identifies the “provisions” in the
12
Id.
13
Id.
14
Id. (emphasis added).
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Separation Agreement on which the Company bases its claim (the “Notice
Provision”).15
The Notice Provision is silent on a non-conforming notice’s consequences.
But a neighboring provision says that a non-conforming notice does not extinguish
the Company’s indemnification rights. Under the “No Waiver Provision,” the
parties agreed “no failure or delay by any party . . . in exercising any right . . . shall
operate as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or future exercise of any other right” under the Separation Agreement.16
Stated illustratively, the parties agreed a failure to exercise a right properly—e.g.,
the Company’s right to indemnification—does not waive that right—e.g., prevent
the Company from seeking indemnification. As applied, a notice that is not prompt,
reasonably detailed, or both, does not give Dow a complete defense to providing
coverage for which the Company otherwise is eligible.
3. Disclaimers.
Finally, the Separation Agreement contains two remedy disclaimers. The first
purports to eliminate Dow’s liability for certain defects in the Transferred Assets
(the “Transferred Asset Disclaimer”).
15
Id. § 4.06(a) (Notice of Loss; Third-Party Claims).
16
Id. § 8.09 (Waiver).
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It reads:
EXCEPT AS MAY EXPRESSLY BE SET FORTH IN ANY
TRANSACTION DOCUMENT, ALL TRANSFERRED ASSETS ARE
BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS AND THE
PARTIES HERETO SHALL EACH BEAR THEIR RESPECTIVE
ECONOMIC AND LEGAL RISKS TO THE EXTENT RESULTING FROM
(A) ANY CONVEYANCE BEING INSUFFICIENT TO VEST IN THE
TRANSFEREE GOOD TITLE, FREE AND CLEAR OF ANY
ENCUMBRANCE; (B) ANY FAILURE TO OBTAIN ANY NECESSARY
CONSENTS OR APPROVALS OF ANY THIRD PARTIES OR
GOVERNMENTAL AUTHORITIES; AND (C) ANY FAILURE TO
COMPLY WITH THE REQUIREMENTS OF ANY LAW. 17
And the second purports to preclude the Company from seeking various species of
damages (the “Damages Disclaimer”).
IN NO EVENT SHALL ANY PARTY . . . BE LIABLE TO ANY OTHER
PARTY . . . FOR PUNITIVE, CONSEQUENTIAL, SPECIAL OR
INDIRECT DAMAGES, INCLUDING LOSS OF FUTURE PROFITS,
REVENUE OR INCOME, DIMINUTION IN VALUE OR LOSS OF
BUSINESS REPUTATION OR OPPORTUNITY, HOWEVER CAUSED
AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE)
ARISING IN ANY WAY OUT OF THIS AGREEMENT, REGARDLESS
OF WHETHER SUCH DAMAGES WERE FORESEEABLE . . . . 18
C. THE CODE VIOLATION.
Before the transaction closed, Dow partitioned the Stade site.19 In February
2015, Dow registered the partition with the German government.20 At closing, Dow
17
Id. § 7.01 (Disclaimer).
18
Id. § 7.02 (Limitation of Liability).
19
Compl. ¶ 11.
20
Id.
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appears to have represented that the Transferred Assets were compliant with Laws
“necessary to own, lease, or operate” those Assets.21
Two years after closing, the Company sought to renovate the Building and to
improve its grounds.22 To do so, the Company petitioned the German government
for expansion permits. But the German government denied the application,
explaining that the repositioned plots caused the Code Violation. 23 It seems Dow’s
partition brought the Building too close to an adjacent facility to leave room for
another extension. A “building supervisory authority” accordingly instructed the
Company that, to obtain the permits, it must cure the Code Violation.24 And
reportedly, those efforts would require the Company to reconstruct, at its own
21
MA § 4.10.
22
Compl. ¶¶ 11–15.
23
Id. ¶ 12. The Company identifies “the Bauordung [sic] Niedersachsen (Building Code Lower
Saxony)” as the property regime that allegedly proscribed Dow’s partition. Id. The Court took
judicial notice of that regime for the sole purpose of confirming its existence. See Windsor I, LLC
v. CWCap. Asset Mgmt. LLC, 238 A.3d 863, 873 (Del. 2020) (observing that, on a motion to
dismiss, this Court may consider matters extraneous to the pleadings when the matter “is not being
relied upon to prove the truth of its contents” (internal quotation marks omitted)). Ultimately, the
Company will bear the burden of introducing and establishing the Bauordnung Niedersachsen’s
contents if those contents are later found to govern a substantive issue. See Rep. of Pan. v. Am.
Tobacco Co., 2006 WL 1933740, at *5 (Del. Super. Ct. June 23, 2006) (citing Del. Super. Ct. Civ.
R. 44.1); see also Germaninvs. AG v. Allomet Corp., 225 A.3d 316, 333 (Del. 2020) (same under
identical Ch. Ct. R. 44.1); see generally Del. R. Evid. 202(e).
24
Compl. ¶ 15.
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expense, the Stade site, and to secure two easements from Dow so a team could
access the site.25
The Code Violation allegedly has not been free. The Company says it has
hired architects to reduce the Building’s swollen dimensions.26 The Company also
alleges it has retained counsel to investigate the Code Violation’s ramifications and
to pursue avenues for defending it. 27 As a byproduct of this assistance, the Company
further alleges it “currently plans” to demolish a façade at the Stade site to ensure
the Building is properly coded.28 And to achieve those and other goals, the Company
“expect[s]” it “will incur” “significant additional damages,” including more
reconstruction costs and legal fees, and possibly, “business interruption losses.” 29
D. THE INDEMNIFICATION DISPUTE.
On October 19, 2020, Olin, on behalf of the Buy-Side, sent Dow an
indemnification notice (the “October Notice”). 30 In the October Notice, Olin
described the Code Violation, listed its present and future expenses, and cited to
specific provisions in the Separation Agreement that purport to implicate Dow’s
25
Id.
26
Id. ¶ 22.
27
Id.
28
Id.
29
Id. ¶¶ 28–29.
30
Id. ¶ 23 (citing Ex. C to Compl. (hereinafter “Oct. Notice”) (D.I. 1)).
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coverage duties. Relying on the Loss and Liability definitions, Olin demanded Dow
indemnify “any and all” costs produced by the Code Violation. At that time, Olin
estimated a figure of no less than €20 million.
The October Notice arrived five years after the transaction closed. But the
October Notice suggests Dow knew about the Code Violation beforehand. For
example, the October Notice explains to Dow that Olin “ha[d] proposed a
significantly more cost-effective option [than €20 million] for Dow’s consideration
without success.” 31 The October Notice also reminds Dow that it
created property boundaries applicable to [the Company’s] Bisphenol
A building at its Stade Facility (the “Building”) . . . such that the
Building was not in compliance with applicable [l]aw as of [the closing
date]. Specifically, the property boundaries created by [Dow] caused
the [B]uilding to fail to comply with [the] local building code and fire
protection code. 32
Dow did not respond to the October Notice in writing. Instead, the October
Notice spurred the parties to resume settlement discussions that lasted until
December. 33 Those went nowhere. As a result, Olin sent Dow a second
indemnification notice on January 7, 2021 (the “January Notice”). 34 The January
31
Oct. Notice at 2.
32
Id. at 1.
33
Compl. ¶ 24.
34
Id. ¶ 25 (citing Ex. D to Compl. (hereinafter “Jan. 7 Notice”) (D.I. 1)).
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Notice reiterated the October Notice’s substance and added an ultimatum. It warned
Dow that it must accept its full indemnification duties by January 22 or risk breach.35
Dow replied to the January Notice five days later. 36 Dow first agreed to grant
the Company the easements it needed for accessing the Stade site’s violative
portions. Dow then offered to settle the Code Violation for €1.2 million. But Dow
conditioned its offer on a total release of liability for expenses above that ceiling.37
Because of that condition, Olin rejected Dow’s offer. 38
In its rejection letter, Olin conceded €1.2 million was its “current[] estimate[]”
of the Buy-Side’s costs.39 Olin then inserted a caveat, namely, a projection that costs
probably would surpass €1.2 million. To support its position, Olin pointed to
unobtained government authorizations and unconfirmed reconstruction plans.
Given those variables, Olin refused to accept anything less than Dow’s duty to
indemnify “any and all” Loss. Olin concluded by extending the January Notice’s
breach deadline to January 26.
Dow responded by agreeing to pay for some demolition expenses, but not
35
Jan. 7 Notice at 1.
36
Compl. ¶ 26 (citing Ex. E to Compl. (hereinafter “Dow’s First Resp.”) (D.I. 1)).
37
Dow’s First Resp. at 1.
38
Compl. ¶ 27 (citing Ex. F to Compl. (hereinafter “Jan. 19 Notice”) (D.I. 1)).
39
Jan. 19 Notice at 1–2.
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every item Olin enumerated.40 Dow clung to its view that €1.2 million would resolve
the matter fully, together with “final approval . . . from the local authorities, who
ha[d] been involved in mapping out” a solution.41 In other words, Dow did not
accept responsibility for “all” the Code Violation’s purported costs. So, the
Company treated Dow’s letter as a repudiation and sued.
E. THIS LITIGATION.
The Company brings a two-count complaint. Count I alleges Dow breached
the Separation Agreement by failing to indemnify “any and all” Losses generated by
the Code Violation. As a remedy, the Company seeks, among other compensatory
relief, “damages in an amount to be determined at trial.”42
Count II copies the same allegations, but articulates them in declaratory
language. In Count II, the Company asks the Court to declare that Dow must pay
“any and all costs . . . that [it] has incurred or will incur in connection with remedying
the Code Violation.”43
Dow has moved to dismiss the complaint. 44 Invoking Rule 12(b)(6), Dow
40
Compl. ¶ 28 (citing Ex. G to Compl. (hereinafter “Dow’s Second Resp.”) (D.I. 1)).
41
Dow’s Second Resp. at 1.
42
Compl. ¶ 36; id. at Prayer § (c).
43
Id. ¶ 39(a).
44
Def.’s Mot. to Dismiss (D.I. 4); Def.’s Opening Br. in Supp. of Mot. to Dismiss (D.I. 4) (“Dow
Br.”)
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contends the Company’s conclusory allegations are insufficient to make reasonably
conceivable (i) the Code Violation’s existence, (ii) Dow’s breach of its coverage
duties, and (iii) the Company’s damages. As reinforcements, Dow erects the
Transferred Asset and Damages Disclaimers, as well as the Notice Provision, as
barriers to coverage. And separately, Dow invokes Rule 12(b)(1) to argue that Count
II—which Dow posits seeks exclusively future damages—fails to allege a now-ripe
controversy. Not unexpectedly, the Company opposes Dow’s motion.45
The Court heard argument.46 During the hearing, the Court questioned
whether Count II alleged relief distinct from Count I. Specifically, the Court
wondered whether the case could proceed solely on breach-of-contract grounds.47
In response, the Company insisted a declaration remains necessary because
renovating the Building is an “ongoing project” for which the Company already did
and will “incur[] costs.” 48 And when further pressed,49 the Company took a different
tack—analogizing its proposed declaration to “guardrails” that would ensure “losses,
the defined term, are indemnified here.”50
45
Pl.’s Ans. Br. in Opp’n to Def.’s Mot. to Dismiss (D.I. 10) (“BC Br.”).
46
Hr’g Tr. (D.I. 22).
47
Id. at 31.
48
Id.
49
Id. at 32.
50
Id. at 32–33.
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II. STANDARDS OF REVIEW
A. MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION.
A party may move to dismiss under Rule 12(b)(1) for lack of subject matter
jurisdiction. 51 “‘Whenever it appears by suggestion of the parties or otherwise’ that
the Court lacks subject matter jurisdiction, the Court must dismiss the claim.”52 In
considering a Rule 12(b)(1) motion, the Court “need not accept [the plaintiff’s]
factual allegations as true and is free to consider facts not alleged in the complaint.”53
Accordingly, whereas the movant “need only show that the Court lacks
jurisdiction,” 54 the non-movant bears the “far more demanding” burden “to prove
jurisdiction exists.” 55
B. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM.
Under Rule 12(b)(6), a party might also move to dismiss for failure to state a
51
Del. Super. Ct. Civ. R. 12(b)(1).
52
KT4 Partners LLC v. Palantir Techs. Inc., 2021 WL 2823567, at *24 (Del. Super. Ct. June 24,
2021) (alteration and emphasis omitted) (quoting Del. Super. Ct. Civ. R. 12(h)(3)).
53
Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275, 1284 n.14 (Del. 2007) (internal
quotation marks omitted); see Nelson v. Russo, 844 A.2d 301, 302 (Del. 2004) (“In deciding
whether the Superior Court has subject matter jurisdiction, we must look beyond the language in
the complaint . . . .”); see also Texcel v. Com. Fiberglass, 1987 WL 19717, at *2 (Del. Super. Ct.
Nov. 3, 1987) (“The gravamen of subject matter jurisdiction . . . lies not in the pleading but in the
existence of facts necessary for the court to exercise its jurisdiction.”).
54
Airbase Carpet Mart, Inc. v. AYA Assocs., Inc., 2015 WL 9302894, at *2 (Del. Super. Ct. Dec.
15, 2015), aff’d, 2016 WL 4938890 (Del. Sept. 16, 2016).
55
Appriva, 937 A.2d at 1284 n.14 (internal quotation marks omitted).
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claim upon which relief can be granted.56 In resolving a Rule 12(b)(6) motion, the
Court (1) accepts as true all well-pleaded factual allegations in the complaint;
(2) credits vague allegations if they give the opposing party notice of the claim;
(3) draws all reasonable factual inferences in favor of the non-movant; and (4) denies
dismissal if recovery on the claim is reasonably conceivable.57 The Court, however,
need not “accept conclusory allegations unsupported by specific facts or . . . draw
unreasonable inferences in favor of the non-moving party.” 58 The Court will reject
“every strained interpretation of the allegations proposed by the plaintiff.”59 Still,
Delaware’s pleading standard is “minimal.”60 Dismissal is inappropriate unless
“under no reasonable interpretation of the facts alleged could the complaint state a
claim for which relief might be granted.”61
“The complaint generally defines the universe of facts that the trial court may
56
Del. Super. Ct. Civ. R. 12(b)(6).
57
Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531, 535 (Del. 2011).
58
Price v. E.I. DuPont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011), overruled on other
grounds by Ramsey v. Ga. S. Univ. Advanced Dev. Ctr., 189 A.3d 1255, 1277 (Del. 2018).
59
Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001).
60
Cent. Mortg., 27 A.3d at 536 (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 895 (Del. 2002)).
61
Unbound Partners Ltd. P’ship v. Invoy Holdings Inc., 251 A.3d 1016, 1023 (Del. Super. Ct.
2021) (internal quotation marks omitted); see Cent. Mortg., 27 A.3d at 537 n.13 (“Our governing
‘conceivability’ standard is more akin to ‘possibility’ . . . .”).
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consider in ruling on a Rule 12(b)(6) motion . . . .” 62 But, “for carefully limited
purposes,”63 the Court “may consider matters outside the pleadings when the
document is integral to . . . a claim and incorporated into the complaint.” 64 “[A]
claim may be dismissed if allegations in the complaint or in the exhibits incorporated
into the complaint effectively negate the claim as a matter of law.”65
III. DISCUSSION
The parties’ arguments turn on the meaning of disputed terms in the
Separation Agreement. Delaware law governs the Separation Agreement,66 and in
Delaware, a contract’s proper construction is a question of law. 67 The goal of
contract interpretation “is to fulfill the parties’ expectations at the time they
contracted.”68 “A court must accept and apply the plain meaning of an unambiguous
term . . . in the contract language . . ., insofar as the parties would have agreed ex
62
In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006).
63
In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 69 (Del. 1995).
64
Windsor I, 238 A.3d at 873 (internal quotation marks omitted).
65
Malpiede, 780 A.2d at 1083.
66
SA § 8.12.
67
Exelon Generation Acquisitions, LLC v. Deere & Co., 176 A.3d 1262, 1266–67 (Del. 2017).
68
Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688, 696 (Del. 2019) (internal
quotation marks omitted).
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ante.”69 To that end, the Court “will give priority to the parties’ intentions as
reflected in the four corners of the agreement, construing the agreement as a whole
and giving effect to all its provisions.” 70 “If a writing is plain and clear on its face,
i.e., its language conveys an unmistakable meaning, the writing itself is the sole
source for gaining an understanding of intent.”71
The Court’s contract interpretation must be reasonable, reading the agreement
“in full and situated in the commercial context between the parties.” 72 Together with
that context, the parties’ business relationship “give[s] sensible life” to their
contract.73 But “background facts cannot be used to alter the language chosen by
the parties within the four corners of their agreement.”74 “When the contract is clear
and unambiguous, [courts] will give effect to the plain [] meaning of the contract’s
terms and provisions, without resort to extrinsic evidence.”75
69
Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 740 (Del. 2006).
70
In re Viking Pump, Inc., 148 A.3d 633, 648 (Del. 2016) (internal quotation marks omitted).
71
City Investing Co. Liquidating Tr. v. Cont’l Cas. Co., 624 A.2d 1191, 1198 (Del. 1993).
72
Chi. Bridge & Iron Co. N.V. v. Westinghouse Elec. Co. LLC, 166 A.3d 912, 926–27 (Del.
2017).
73
Heartland Payment Sys., LLC v. Inteam Assocs., LLC, 171 A.3d 544, 557 (Del. 2017) (internal
quotation marks omitted).
74
Town of Cheswold v. Cent. Del. Bus. Park, 188 A.3d 810, 820 (Del. 2018).
75
Sunline Com. Carriers, Inc. v. CITGO Petroleum Corp., 206 A.3d 836, 846 (Del. 2019)
(internal quotation marks omitted).
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“Absent some ambiguity, Delaware courts will not destroy or twist [contract]
language under the guise of construing it.” 76 Ambiguity exists only if disputed
contract language is “fairly or reasonably susceptible to more than one meaning.”77
So a contract “is not ambiguous simply because the parties disagree on its
meaning.”78 “Even if the bargain they strike ends up a bad deal for one or both
parties, the court’s role is to enforce the agreement as written.”79
As a question of law, a contract’s proper interpretation can be resolved on a
motion to dismiss. 80 But, to achieve dismissal, the motion must be supported by
unambiguous contract terms. 81 At the pleadings stage of a contract dispute, the
Court “cannot choose between two differing reasonable interpretations of
ambiguous” contract language.82 Rather, to succeed, the movant’s interpretation
76
Rhone–Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992).
77
Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012).
78
E.I. du Pont de Nemours & Co. v. Allstate Ins. Co., 693 A.2d 1059, 1061 (Del. 1997).
79
Glaxo Grp. Ltd. v. DRIT LP, 248 A.3d 911, 919 (Del. 2021).
80
E.g., Allied Cap. Corp. v. GC-Sun Holdings, L.P., 910 A.2d 1020, 1030 (Del. Ch. 2006)
(“Under Delaware law, the proper interpretation of language in a contract is a question of law.
Accordingly, a motion to dismiss is a proper framework for determining the meaning of contract
language.”).
81
E.g., VLIW Tech., LLC v. Hewlett–Packard Co., 840 A.2d 606, 615 (Del. 2003); see also
GMG Cap. Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 783 (Del. 2012)
(“[W]here two reasonable minds can differ as to the contract’s meaning, a factual dispute results
. . . .”).
82
Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609,
613 (Del. 1996); see also Appriva, 937 A.2d at 1292 (“Even if [the] Court consider[s] the
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must be “the only reasonable construction as a matter of law.” 83 Otherwise, “for
purposes of deciding” the motion, the language must be resolved in the non-
movant’s favor.84
A. COUNT I STATES A CLAIM.
“To state a breach-of-contract claim, a claimant must allege: (1) the existence
of a contractual obligation; (2) a breach of that obligation; and (3) damages resulting
from the breach.” 85 Wielding various Separation Agreement provisions, Dow
contends the Company pleads none of these elements because (1) the Code Violation
is not covered by the Separation Agreement; (2) even if it were, the Company failed
to provide Dow with “prompt” and “reasonabl[y] detail[ed]” notice of it; and (3) the
damages the Company seeks are non-existent or have been contractually disclaimed.
But, as explained below, the Company’s well-pleaded allegations and the Separation
Agreement’s language undermine Dow’s bid for dismissal. The Company has stated
a reasonably conceivable breach-of-contract claim.
[movant’s] interpretation more reasonable than the [non-movant’s], on a Rule 12(b)(6) motion it
[is] error to select the ‘more reasonable’ interpretation as legally controlling.”).
83
VLIW Tech., 840 A.2d at 615.
84
Id.; see also Veloric v. J.G. Wentworth, Inc., 2014 WL 4639217, at *8 (Del. Ch. Sept. 18, 2014)
(“At the motion to dismiss stage, ambiguous contract provisions must be interpreted most
favorably to the non-moving party.”).
85
Intermec IP Corp. v. TransCore, LP, 2021 WL 3620435, at *10 (Del. Super. Ct. Aug. 16, 2021)
(internal quotation marks omitted).
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1. The Code Violation Is Covered Unless It Is Later Found Excluded.
Before the transaction closed, Dow partitioned the land surrounding the
Building. After the transaction closed, the Company was denied a permit to expand
the Building because German authorities, citing a specific property regime,
determined the Building was reconfigured in a way that violated positive zoning law.
To realign the Building with the law, the Company retained counsel, for
investigation and defense, and architects, for charting a reconstruction plan. Having
consulted those groups, as well as the German government, the Company concluded
it must reposition or demolish at least one structure on the Stade site and obtain two
easements from Dow. Dow acknowledged all this in its replies to the Company’s
Notices, granting the two easements along the way. Taken together, these
allegations support the reasonable inference that the Code Violation exists, and more
important, that it existed before Dow sold the Building to the Buy-Side.
The Code Violation is reasonably conceivable. So the Court next must
determine whether the Code Violation conceivably triggers Dow’s duty to indemnify
(i) an Excluded (ii) Liability that has caused the Company (iii) to “actually suffer[]
or incur[]” (iv) Loss. It does.
To begin, Dow does not dispute the Code Violation’s “Excluded” status. Nor
could it. A Liability is Excluded—that is, eligible for coverage—if it attached to a
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Transferred Asset before the Distribution Date, i.e., October 5, 2015. 86 Here, the
complaint alleges that Dow’s partition registered in February 2015. That means the
Code Violation occurred eight months before the Distribution Date. Accordingly, it
plainly meets the “Excluded” part of the Excluded Liability definition.
Closing the circle, the Code Violation also is a Liability. A Liability is defined
to include, for example, “any and all . . . liabilities . . . whether . . . known or . . .
determined . . . arising under any Law.”87 As explained, the Code Violation is
reasonably conceivable. At this stage, that makes it a “known or . . . determined”
“liabilit[y]”—i.e., a concrete exposure to legal accountability.88 Too, the Code
Violation plainly “aris[es] under” a Law. In the indemnification context, “arising
under” has been defined, among other ways, as “originat[es] from.” 89 Applying that
definition, the Code Violation unambiguously arises under a “foreign . . . or local
86
SA § 1 (Definitions).
87
Id.
88
See Liability, BLACK’S LAW DICTIONARY (11th ed. 2019).
89
Sycamore Partners Mgmt., L.P. v. Endurance Am. Ins. Co., 2021 WL 4130631, at *12 (Del.
Super. Ct. Sept. 10, 2021) (“Sycamore II”) (quoting Pac. Ins. Co. v. Liberty Mut. Ins. Co., 956
A.2d 1246, 1256 n.42 (Del. 2008)); see Goggin v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA,
2018 WL 6266195, at *4 (Del. Super. Ct. Nov. 30, 2018) (“‘Arising out of’ is a term that ‘lends
itself to uncomplicated, common understanding . . . .’ [I]t means ‘incident to, or having a
connection with.’” (citations omitted) (first quoting Eon Labs Mfg., Inc. v. Reliance Ins. Co., 756
A.2d 889, 893 (Del. 2000); then quoting Pac. Ins. Co., 956 A.2d at 1256 & n.42)); see also Arise,
BLACK’S LAW DICTIONARY (11th ed. 2019) (“To originate; to stem (from).”).
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statute . . . ordinance, regulation, . . . code, order, [or] requirement”—i.e., the German
property code.90 Accordingly, the Code Violation is an (Excluded) Liability.
Last, the Code Violation must cause the Company to “actually suffer[] or
incur[]” “Loss.”91 Because the Code Violation plainly is an Excluded Liability, its
costs— even if “unaccrued, . . . variable, . . . unknown, . . . contingent, . . . unmatured
. . . or determinable”—necessarily are defined Losses.92 The Separation Agreement,
though, does not define “suffer[]” or “incur[].” But dictionaries do. And “[u]nder
well-settled law,” the Court may use the dictionary to define generic terms. 93
Take “suffer.” Dictionaries define “suffer” as “to experience or sustain . . .
injury,” including “damages.”94 In turn, dictionaries define “injury” to include
“pecuniary injury,” which is “any harm” “that can be adequately measured or
compensated by money.”95 The Company alleges the Code Violation requires for
90
SA § 1 (Definitions); Compl. ¶ 12.
91
Id. § 1 (Definitions), 4.02 (Indemnification by Dow).
92
Id. § 1 (Definitions).
93
Lorillard Tobacco, 903 A.2d at 728; see Norton v. K–Sea Transp. Partners L.P., 67 A.3d 354,
360 (Del. 2013) (“We give words their plain meaning unless it appears the parties intended a
special meaning.”); cf. Penton Bus. Media Holdings, LLC v. Informa PLC, 252 A.3d 445, 461
(Del. Ch. 2018) (“When established legal terminology is used in a legal instrument, a court will
presume that the parties intended to use the established legal meaning of the terms.”); Viking Pump,
Inc. v. Liberty Mut. Ins. Co., 2007 WL 1207107, at *13 (Del. Ch. Apr. 2, 2007) (“[W]here a word
has attained the status of a term of art and is used in a technical context, the technical meaning is
preferred over the common or ordinary meaning.”).
94
Suffer, BLACK’S LAW DICTIONARY (11th ed. 2019).
95
Injury, in id.; Pecuniary Injury, in id.
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its clearance third-party expertise, including from attorneys and architects. They
don’t work for free. Their retainers, then, are pecuniary injuries that would not have
been “experience[d]” or “sustain[ed]” without the Code Violation. 96 Accordingly,
the Code Violation has caused the Company to suffer Loss. Having passed all parts
of the Separation Agreement’s indemnity test, the Code Violation is indemnifiable.
Dow’s contrary arguments train myopically on the word “incur.” 97 But, as a
disjunctive “or” separates “suffer” and “incur,” proof of either is sufficient.98
Indeed, dictionaries define “incur” tautologically to mean “to suffer . . . a liability or
expense.”99 So, because the Code Violation’s costs have been suffered, they also
have been incurred.100 As a result, Dow’s principal argument—i.e., that “future”
costs cannot be “actually . . . incurred”—is unsupported by the terms it drafted. 101
96
Suffer, in id.
97
Dow Br. at 11–13.
98
See, e.g., Indian Harbor Ins. Co. v. SharkNinja Operating, LLC, 2020 WL 6795965, at *4 (Del.
Super. Ct. Nov. 19, 2020) (declining to consider parties’ arguments to the extent the arguments
focused on contract terms separated by a disjunctive “or” after concluding one term was sufficient).
99
Incur, BLACK’S LAW DICTIONARY (11th ed. 2019); accord Horton v. Organogenesis Inc.,
2019 WL 3284737, at *4 (Del. Ch. July 22, 2019).
100
Interpreting two terms redundantly is unproblematic where, as here, doing so plainly reflects
the parties’ mutual intent to ensure with “belt-and-suspenders” a contractual outcome will be
guaranteed. E.g., Sycamore II, 2021 WL 4130631, at *12 n.98 (discussing circumstances under
which redundant interpretations are permissible and collecting authority); see U.S. W., Inc. v. Time
Warner Inc., 1996 WL 307445, at *15 (Del. Ch. June 6, 1996) (“While redundancy is sought to be
avoided in interpreting contracts, this principle of construction does not go so far as to counsel the
creation of contract meaning for which there is little or no support in order to avoid redundancy.”).
101
Compare Dow Br. at 12, with SA §§ 1 (Definitions), 4.02 (Indemnification by Dow).
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In sum, the Code Violation is an Excluded Liability attributable to a
Transferred Asset (the Building) that has caused the Company to suffer or incur
Losses. By consequence, Dow must indemnify “any and all” of the Code Violation’s
costs. Dow, though, allegedly has refused to pay those costs. Accordingly, Dow is
in breach unless other terms in the Separation Agreement relieve it of its coverage
duties. Recognizing this, Dow deploys the Transferred Asset Disclaimer, the Notice
Provision, and the Damages Disclaimer. None supports dismissal.
2. The Transferred Asset Disclaimer is Ambiguous.
Dow first advances the Transferred Asset Disclaimer. That exclusion is
divided into two parts: a declaration and an exception. Through the declaration,
the parties acknowledged Dow had conveyed to the Company “all” Transferred
Assets on an “as is” and “where is” basis, regardless of whether a particular Asset is
“in violation of any Law” or cannot “obtain any necessary consents or approvals of
any . . . governmental authorities.”102 And through the exception, the parties agreed
the Disclaimer does not apply to the extent it is inconsistent with a provision in either
the Separation or Merger Agreement.103 To no one’s surprise, Dow focuses on the
102
SA § 7.01.
103
Id. (excluding coverage “except as set forth in any Transaction Document”). The concept that
two agreements comprising the same transaction must be interpreted together is well-received.
E.g., RESTATEMENT (SECOND) OF CONTRACTS § 202(2) (AM L. INST. 1981); accord Trexler v.
Billingsley, 2017 WL 2665059, at *4 n.21 (Del. June 21, 2017).
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declaration 104 and the Company presses the exception.105
Dow contends the Disclaimer reflects bilateral loss-shifting. According to
Dow, the Disclaimer plainly excludes the Code Violation because it derives from a
Transferred Asset that was sold to the Company “where is.” In Dow’s view, the
Company assumed the risk the Building would be in violation of a Law or shunned
from government imprimatur and so the Company cannot now complain just
because those possibilities materialized. Failure to enforce the Disclaimer this way,
Dow asserts, would render it superfluous and allow the Company’s “general”
exception to swallow the “specific” rule.106 Dow’s reading is reasonable.
But the Company responds with a reasonable read of its own. The Company
posits the Disclaimer’s exception would be meaningless if the Disclaimer’s
declaration swept as broadly as Dow suggests. That is so, to the Company, because
Dow’s Disclaimer would preclude coverage for “any and all” Excluded Liability
Losses—despite express language requiring their coverage—and nullify contrary
representations Dow seems to have made in the Merger Agreement about the
Building’s compliance with Law.107 The Company accordingly reasons the
104
Dow Br. at 10–11; Def.’s Reply Br. in Supp. of Mot. to Dismiss at 3–9 (D.I. 11) (“Dow Reply
Br.”).
105
BC Br. at 11–15.
106
See generally DCV Holdings, Inc. v. ConAgra, Inc., 889 A.2d 954, 961 (Del. 2005).
107
E.g., MA § 4.10.
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Disclaimer’s exception “subordinates” the declaration in a way that carves Losses
like those generated by the Code Violation out from exclusion. 108
Both parties have proposed incomplete, but reasonable, interpretations of the
Transferred Asset Disclaimer. At this stage, however, the Court can’t choose the
one it likes better. 109 Instead, the Court must deny Dow’s motion so the parties can
take discovery on their mutual intent in wording the Transferred Asset Disclaimer.
3. The Notice Provision Is Not a Condition Precedent to Coverage.
In a second attempt to ward off its coverage duties, Dow incants the Notice
Provision. Notwithstanding its active engagement with the Company’s Notices,
Dow now says it has no duty to indemnify the Code Violation because the Company
failed to provide Dow with “prompt” and “reasonabl[y] detail[ed]” notice of it. In
essence, then, Dow is arguing the Notice Provision is a condition precedent to
coverage. It isn’t.
The existence of a condition precedent is a question of contract interpretation,
and therefore, of law. 110 “A condition precedent is an act or event, other than a lapse
108
See generally Gotham Partners, L.P. v. Hallwood Realty Partners, L.P., 2000 WL 1476663,
at *9 n.23 (Del. Ch. Sept. 27, 2000).
109
Vanderbilt Income, 691 A.2d at 613; see Appriva, 937 A.2d at 1292 (“Even if the Superior
Court considered the defendants’ interpretation more reasonable than the plaintiffs’, on a Rule
12(b)(6) motion it was error to select the ‘more reasonable’ interpretation as legally controlling.”);
see also CLP Toxicology, Inc. v. Casla Bio Holdings, LLC, 2021 WL 2588905, at *12 (Del. Ch.
June 14, 2021) (“[O]n a motion to dismiss, the Court can’t just choose between two differing
reasonable interpretations of . . . ambiguous language.”).
110
E.g., Casey Emp. Servs., Inc. v. Dali, 1993 WL 478088, at *4 (Del. Nov. 18, 1993).
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of time, that must exist or occur before a duty to perform something arises.”111
“Under Delaware law, conditions precedent are not favored . . . because of their
tendency to work a forfeiture.” 112 Given that tendency, “a condition precedent must
be expressed clearly and unambiguously.” 113 “For a condition to effect a forfeiture,
it must be unambiguous. If the language does not clearly provide for a forfeiture,
then a court will construe the agreement to avoid causing one.” 114
The Notice Provision does not clearly express a condition precedent. Most
notably, the Provision does not tie to its mandatory notice procedures any
consequences for failing to lodge an indemnification notice properly. When a
provision guised by a party as a condition precedent does not identify the way in
which it can be enforced, it will not be recognized as a condition precedent.115 That
is especially so where, as here, interpreting the provision as a condition precedent
would cause a total forfeiture of a sophisticated indemnification scheme executed in
111
Aveanna Healthcare, LLC v. Epic/Freedom, LLC, 2021 WL 3235739, at *25 (Del. Super. Ct.
July 29, 2021) (internal quotation marks omitted); see RESTATEMENT (SECOND) OF CONTRACTS
§ 224.
112
Thomas v. Headlands Tech Principal Holdings, L.P., 2020 WL 5946962, at *5 (Del. Super.
Ct. Sept. 22, 2020) (alteration and internal quotation marks omitted).
113
Aveanna Healthcare, 2021 WL 3235739, at *25.
114
QC Holdings, Inc. v. Allconnect, Inc., 2018 WL 4091721, at *7 (Del. Ch. Aug. 28, 2018)
(internal quotation marks and citation omitted).
115
See Eurofins Panlabs, Inc. v. Ricerca Bioscis., Inc., 2014 WL 2457515, at *3–4 & n.21 (Del.
Ch. May 30, 2014).
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connection with an acquisition of various chemically-sensitive and intellectual
properties, and that would expose the buyer to an array of environmental
liabilities. 116
Even so, the No Waiver Provision confirms that failure to satisfy the Notice
Provision does not relieve Dow of its indemnification duties. “Generally, no waiver
provisions give a contracting party some assurance that its failure to . . . strict[ly]
adhere[] to a contract term . . . will not result in a complete and unintended loss of
its contract rights if [a party] later decides strict performance is desirable.”117 So a
no waiver provision “protects the waiving party by stating [its] individual waivers
shall not operate” to “permanently” waive the right to which it otherwise is
entitled.118
The No Waiver Provision does just that. Under the No Waiver Provision, the
parties agreed any “delay” by the Company in exercising its “right” to
indemnification would not “operate as a waiver” of its “right” to indemnification
116
See, e.g., SA § 4.09 (Environmental Liabilities); see also QC Holdings, 2018 WL 4091721, at
*6–7 (rejecting as “commercially irrational” a condition argument that, if accepted, would have
deprived a counterparty of a multi-million dollar option when the subject contract was “silent” on
whether the subject provision was a condition).
117
Rehoboth Mall Ltd. P’ship v. NPC Int’l, Inc., 953 A.2d 702, 704 (Del. 2008) (second omission
in original) (internal quotation marks omitted).
118
Id. at 704–05; see, e.g., Aveanna Healthcare, 2021 WL 3235739, at *30 (rejecting waiver
argument based on a notice provision because the parties’ agreement contained a no waiver
provision and distinguishing precedent in which a waiver was found but also in which the subject
agreement did not contain a no waiver provision).
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should Dow, as it in fact did, later decide a notice is deficient. 119 Accordingly,
viewed in the context of the entire Separation Agreement,120 the parties plainly did
not intend for the Notice Provision to be a condition precedent to coverage.
To the extent Dow is arguing the Notice Provision imposes a standalone duty
on the Company that it breached by providing its Notices five years post-closing,121
its theory would not support dismissal. The proper vehicle for launching a
counterclaim or raising a defense for the first time is an answer, not a pre-answer
motion. Dow might pursue a whole or partial setoff as this case proceeds. For now,
though, Dow’s counterclaims or defenses aren’t in the case. So the Court won’t
119
SA § 8.09. Also, in the Notice Provision itself, there is a provision that states an untimely
notice does not relieve Dow of its coverage duties unless the delay is prejudicial. Id. § 4.06(b).
The Company, however, has been proceeding, without explanation, as if only Section 4.06(a)
applies. Section 4.06(a), though, does not contain the same statement and prejudice exception.
See id. § 4.06(a). When asked about Section 4.06(b)’s role, the Company responded elliptically,
suggesting 4.06(b) is limited to its terms, but that its prejudice component can be imported into
Section 4.06(a). Hr’g Tr. at 35–36. Given that the Company (and Dow) has not illuminated
Section 4.06(b) to the Court’s satisfaction, the Court does not rely on it here.
120
See, e.g., Elliott Assocs., L.P. v. Avatex Corp., 715 A.2d 843, 854 (Del. 1998) (“[A] court
interpreting any contractual provision . . . must give effect to all terms of the instrument, must read
the instrument as a whole, and, if possible, reconcile all the provisions of the instrument.”); E.I.
du Pont de Nemours & Co. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985) (“[T]he meaning
[that] arises from a particular portion of an agreement cannot control the meaning of the entire
agreement where such inference runs counter to the agreement’s overall scheme or plan.”); see
also Sonitrol Holding Co. v. Marceau Investissements, 607 A.2d 1177, 1183 (Del. 1992) (“Under
general principles of contract law, a contract should be interpreted in such a way as to not render
any of its provisions illusory or meaningless.”).
121
Hr’g Tr. at 21.
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consider them any further. 122
The Notice Provision isn’t a condition precedent.123
4. The Damages Disclaimer Does Not Support Dismissal.
In a last gasp, Dow invokes the Damages Disclaimer. This Disclaimer
precludes the Company from obtaining “indirect damages,” including “lost profits”
and “business opportunity” losses.124 Seizing on a phalanx of cherry-picked
allegations, Dow contends, because some parts of the Company’s damages seem
premised on “business interruption[s]” and economic harm flowing consequentially
from the Code Violation, the Company has not, to that extent, pleaded recoverable
direct damages.125 Dow’s arguments fail.
As an initial matter, Dow’s attempt to dismiss “parts” of the Company’s
damages allegations runs contrary to black-letter procedural law. Under Delaware
122
In any event, courts do not typically consider affirmative defenses on a motion to dismiss. See,
e.g., Reid v. Spazio, 970 A.2d 176, 183–84 (Del. 2004) (“In ruling on a motion to dismiss[,] . . .
the Court is generally limited to facts appearing on the face of the pleadings. Accordingly,
affirmative defenses . . . are not ordinarily well-suited for treatment on a motion to dismiss. Unless
it is clear from the face of the complaint that an affirmative defense exists and that the plaintiff can
prove no set of facts to avoid it, dismissal of the complaint based upon an affirmative defense is
inappropriate.” (citations omitted)); accord Cedarview Opportunities Master Fund, L.P. v.
Spanish Broad. Sys., Inc., 2018 WL 4057012, at *13 (Del. Ch. Aug. 27, 2018).
123
And in light of that, the Court need not yet decide whether the Company’s notice was, in fact,
prompt and reasonably detailed.
124
SA § 7.02.
125
E.g., Dow Br. at 16; Dow Reply Br. at 17–18; Hr’g Tr. at 19–20.
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law, “a motion to dismiss under Rule 12(b)(6) doesn’t permit piecemeal dismissals
of parts of claims.”126 Instead, a movant must seek dismissal of an entire claim for
its motion to be deemed procedurally valid. 127 Dow’s improper effort to “trim
down” Count I is, therefore, dispositive of its motion on that count.128
That aside, courts, at the pleadings stage, decline invitations to categorize
damages. 129 And their rejections are even more forceful where, as here, the movant
frames its request in the distinction between direct130 and indirect131 damages.132
126
inVentiv Health Clinical, LLC v. Odonate Therapeutics, Inc., 2021 WL 252823, at *6 (Del.
Super. Ct. Jan. 26, 2021) (alteration and internal quotation marks omitted).
127
See id. (“Put simply, the Court must consider a claim or counterclaim [in] its entirety when
ruling on a Rule 12(b)(6) motion to dismiss.”).
128
Id.
129
See, e.g., Horton, 2019 WL 3284737, at *4 (“At the pleadings stage, allegations regarding
damages can be pled generally.” (alteration and internal quotation marks omitted)).
130
See generally WSFS Fin. Corp. v. Great Am. Ins. Co., 2019 WL 2323839, at *4 (Del. Super.
Ct. May 31, 2019) (“Direct damages are those inherent in the breach. [They] are the necessary
and usual result of the defendant’s wrongful act; they flow naturally and necessarily from the
wrong.”).
131
See generally id. at *5 (“Consequential damages . . . are those that result naturally but not
necessarily from the wrongful act, because they require the existence of some other contract or
relationship. [They] are not recoverable unless they are foreseeable and are traceable to the
wrongful act and result from it.” (citation omitted)); Mass. Mut. Life. Ins. Co. v. Certain
Underwriters at Lloyd’s of London, 2010 WL 2929552, at *21 (Del. Ch. July 23, 2010)
(“Consequential damages are those [that] are reasonably foreseeable, but [that] do not result
directly from the act of a party.” (internal quotation marks omitted)).
132
E.g., Pharm. Prod. Dev., Inc. v. TVM Life Sci. Ventures VI, L.P., 2011 WL 549163, at *7 (Del.
Ch. Feb. 16, 2011) (“[T]he distinction between general and [consequential] damages is a
contextual one [that] takes on added importance at the pleadings stage where all that is required of
the plaintiff is that she give notice to the defendant of the nature of the claims against him and the
relief she seeks.”).
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Indeed, “courts have had difficulty establishing a workable distinction between
direct and consequential damages, and the results vary with the facts.”133 Given that,
the relevant question at the pleadings stage of a contract dispute is not whether a
particular species of damages alleged can be cataloged with scientific precision, but
rather, whether the plaintiff made a “short and plain statement” of a conceivable
injury that might be measured in cash by a fact-finder. 134
The Company did. Though Dow ignores and, at times, might be said to
mischaracterize, the complaint,135 the Company has alleged actual damages incurred
in retaining legal and engineering professionals for remedying the Code Violation.136
Whether those damages are direct or indirect will be revealed as the case proceeds.137
“A contractual restriction on consequential damages,” like the Damages Disclaimer,
133
Bonanza Rest. Co. v. Wink, 2012 WL 1415512, at *3 (Del. Super. Ct. Apr. 17, 2012); see Twin
Coach Co. v. Chance Vought Aircraft, Inc., 163 A.2d 278, 286 (Del. Super. Ct. 1960) (declining
to resolve distinction between direct and consequential damages on a challenge to the pleadings—
a task this Court found “virtually impossible” to do “as a matter of law”).
134
Del. Super. Ct. Civ. R. 8(a); accord Alston v. Admin. Off. of the Cts., 2018 WL 1080606, at *1
(Del. Feb. 23, 2018) (describing Rule 8(a) as a “minimal threshold” designed to give “notice” and
affirming dismissal because the underlying complaint “contained . . . no demand for relief”).
135
Compare Dow Br. at 16 (claiming the Company seeks damages for “an expansion project”),
with Compl. ¶ 14 (mentioning an “expansion project” as a background fact).
136
E.g., Compl. ¶¶ 22–23.
137
See, e.g., eCom. Indus., Inc. v. MWA Intel., Inc., 2013 WL 5621678, at *47 (Del. Ch. Sept. 30,
2013) (explaining the circumstances under which lost profits might be direct, as opposed to
consequential, damages); see generally WSFS Fin., 2019 WL 2323839, at *4 (“The term ‘actual
damages’ encompasses both ‘direct’ and ‘consequential’ damages.”).
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“standing alone, does not preclude recovery of . . . consequential damages.”138
The Damages Disclaimer does not support dismissal. And neither does any
other provision Dow has called up. Accordingly, its prayer to dismiss Count I is
DENIED.
B. COUNT II DOES NOT SURVIVE UNDER RULE 12(B)(6).
Finally, the Court turns to Count II. According to Dow, Count II—and,
presumably, given its previous arguments, Count I—is unripe because the Company
alleges speculative relief. As support for this contention, Dow excerpts from the
complaint instances in which the Company uses the future tense to describe some of
its damages. 139 Using its understanding of the Company’s proposed recovery, Dow
concludes a declaratory judgment would be improper because there is no
controversy supporting one yet. Dow is wrong about ripeness, but right about Count
II’s fitness.
1. Count II Is Ripe.
The Court’s power to issue a declaratory judgment derives from the
Declaratory Judgment Act (the “DJA”).140 A declaratory judgment “is designed to
138
Bonanza Rest., 2012 WL 1415512, at *3 (citing Rexnord Corp. v. DeWolff Boberg & Assocs.,
Inc., 286 F.3d 1001, 1004 (7th Cir. 2002)).
139
E.g., Compl. ¶¶ 28, 39(a) & Prayer § (a).
140
DEL. CODE ANN. tit. 10, ch. 65 (2020).
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promote preventative justice.”141 It is “[b]orn out of practical concerns,”142 affording
efficient relief where a traditional remedy is otherwise unavailable. 143 To that end,
the DJA may be engaged to assuage “uncertainty and insecurity with respect to
rights, status and other legal relations.”144
“Not all disputes, however, are appropriate for judicial review when the
parties request it.”145 A declaratory judgment action presupposes a still-evolving
controversy, imposing jurisdictional limitations.146 And Delaware “law requires that
a dispute . . . be ripe for adjudication,” i.e., involve an actual controversy, before a
party may seek a declaration. 147 Pronouncing a declaration before the facts have
ripened “not only increases the risk of an incorrect judgment in the particular case,
141
Schick Inc. v. Amalgamated Clothing & Textile Workers Union, 533 A.2d 1235, 1237–38 (Del.
Ch. 1987) (quoting Stabler v. Ramsey, 88 A.2d 546, 557 (Del. 1952)).
142
Id. at 1238.
143
See id. (“The notion laying behind [declaratory judgments] is that legitimate legal interests are
sometimes cast into doubt by the assertion of adverse claims and that, when this occurs, a party
who suffers practical consequences ought not to be required to wait upon his adversary for a
judicial resolution that will settle the matter.”).
144
DEL. CODE ANN. tit. 10, § 6512.
145
Town of Cheswold, 188 A.3d at 816.
146
E.g., Schick, 533 A.2d at 1238–39 (“A number of important concerns have led courts . . . to
decline [declaratory judgment] jurisdiction in instances in which a controversy is deemed to have
not yet matured to a point at which judicial action is appropriate.”).
147
Crescent/Mach I Partners, L.P. v. Dr Pepper Bottling Co. of Tex., 962 A.2d 205, 208 (Del.
2008).
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but risks, as well, an inappropriate or unnecessary step in the incremental law
building process itself.” 148
“A case is ripe for judicial review when the dispute has matured to the point
where the [claimant] has suffered or will imminently suffer an injury.” 149 In other
words, a case “will be deemed ripe if litigation sooner or later appears to be
unavoidable and where the material facts are static.”150 In contrast, “[a] dispute will
be deemed not ripe where the claim is based on uncertain and contingent events that
may not occur, or where future events may obviate the need for judicial
intervention.”151 Ascertaining the difference “involves interest balancing, weighing
‘the interests of the court . . . in postponing judicial review until the question arises
in some more concrete and final form’ against ‘the interests of those who seek relief
from the challenged action’s immediate and practical impact upon them.’” 152
148
Schick, 533 A.2d at 1239; accord Stroud v. Milliken Enters., Inc., 552 A.2d 476, 480 (Del.
1989);.see also XL Specialty Ins. Co. v. WMI Liquidating Tr., 93 A.3d 1208, 1217 (Del. 2014)
(“The underlying purpose of the [ripeness] principle is to conserve limited judicial resources and
to avoid rendering a legally binding decision that could result in premature and possibly unsound
lawmaking.” (citing Stroud, 552 A.2d at 480)).
149
Town of Cheswold, 188 A.3d at 816.
150
XL Specialty, 93 A.3d at 1217.
151
Id. at 1217–18 (internal quotation marks and citation omitted).
152
Goldenberg v. Immunomedics, Inc., 2021 WL 1529806, at *19 (Del. Ch. Apr. 19, 2021)
(quoting Schick, 533 A.2d at 1239).
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Regardless of the Company’s grammar, the Court already has concluded its
damages—and the facts giving rise to them—are ripe. By alleging consultation and
reconstruction costs suffered from a reasonably conceivable breach-of-contract, the
Company has pleaded matured relief that it will put a number on at some point. After
all, at the pleadings stage, damages need not be conclusively calculated. In some
sense, all complained-of damages are “speculative” until the true amount emerges
in discovery and ultimately is set at trial. So that’s no reason to dismiss.
More important, the Separation Agreement, by definition, permits recovery of
future damages. As observed, the Separation Agreement makes indemnifiable “any
and all” Excluded Liabilities, “whether accrued or unaccrued, fixed or variable,
known or unknown, absolute or contingent, matured or unmatured or determined or
determinable.”153 That language distinguishes this case from other cases that found
abstract or unidentified damages insufficient to support a claim.154 In a word, Dow
153
SA § 1 (Definitions).
154
See, e.g., Goldenberg, 2021 WL 1529806, at *20 (dismissing claim to a royalty payment as
unripe where the court found “[i]t possible that the [c]ompany may never generate royalties” and
had no contractual obligation to do so); Wunderlich v. B. Riley Fin., Inc., 2021 WL 1118006, at
*4 (Del. Ch. Mar. 24, 2021) (dismissing indemnification claim as unripe because the underlying
liability “had not been asserted,” and there were no liabilities accruing otherwise); B/E Aerospace,
Inc. v. J.A. Reinhardt Holdings, LLC, 2020 WL 4195762, at *5 (Del. Super. Ct. July 21, 2020)
(dismissing claim involving exhaustion of funds escrowed for indemnification where it could take
“until the 2040s to exhaust” the funds); Horton, 2019 WL 3284737, at *4 (dismissing
indemnification claim as unripe because claimant had not yet incurred any damages from an
impending litigation); Hill v. LW Buyer, LLC, 2019 WL 3492165, at *9 (Del. Ch. July 31, 2019)
(dismissing indemnification claim based on future taxes as unripe where the payors “ha[d] yet to
pay or be assessed any taxes that may fall under” the claim).
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signed up for this.155 And it is not the Court’s job to reallocate risk Dow voluntarily
accepted.156
2. But, Count II Is Impermissibly Duplicative of Count I.
Count II is ripe for the same reasons Count I is ripe. But therein lies a
problem: Count I and Count II really are the same claims. As a result, though Count
II technically is ripe, it reproduces the same core elements of, and so rises or falls
with, Count I. That means a decision on Count I would moot157 Count II, revealing
the latter as a duplicate. This unnecessary (and perhaps even harmful 158) two-for-
155
See NAMA Holdings, LLC v. World Mkt. Ctr. Venture, LLC, 948 A.2d 411, 419 (Del. Ch. 2007)
(“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.”), aff’d, 2008 WL 571543 (Del. Mar. 4, 2008).
156
Wal–Mart Stores, Inc. v. AIG Life Ins. Co., 872 A.2d 611, 624 (Del. Ch. 2005) (“The proper
way to allocate risks in a contract is through the bargaining process. It is not the court’s role to
rewrite the contract between sophisticated market participants, allocating the risk of an agreement
after the fact . . . .”), rev’d in part on other grounds, 901 A.2d 106 (Del. 2006); see W. Willow-Bay
Ct., LLC v. Robino-Bay Ct. Plaza, LLC, 2007 WL 3317551, at *9 (Del. Ch. Nov. 2, 2007) (“The
presumption that the parties are bound by the language of the agreement they negotiated applies
with even greater force when the parties are sophisticated entities that have engaged in arms-length
negotiations.”), aff’d, 2009 WL 4154356 (Del. Nov. 24, 2009); DeLucca v. KKAT Mgmt., L.L.C.,
2006 WL 224058, at *2 (Del. Ch. Jan. 23, 2006) (“[I]t is not the job of a [Delaware] court to relieve
sophisticated parties of the burdens of contracts they wish they had drafted differently but in fact
did not.”).
157
Mootness raises a question of subject matter jurisdiction. E.g., B/E Aerospace, 2020 WL
4195762, at *2 (summarizing applicable authority). As a result, the Court may investigate a
potentially-moot claim sua sponte. E.g., KT4 Partners, 2021 WL 2823567, at *24 (“[T]he Court
may question its own subject matter jurisdiction sua sponte at any time. The Court is
independently obligated to ensure that it has jurisdiction over the parties’ claims if any doubt
exists.” (omission and internal quotation marks omitted)).
158
See n.163, infra.
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one, Delaware law, does not allow.
A declaratory judgment “is a statutory action” and so “is meant to provide
relief in situations where a claim is ripe but would not support an action under
common-law pleading rules.”159 It follows, then, that there is no need for a
declaratory judgment where a claimant does have recourse to the common law.160
Put differently, where a claimant merely has repackaged in the language of a
declaration an adequately-pleaded affirmative count, the “declaration” is duplicative
and not viable.161 Indeed, a duplicative declaration “does not add anything”162 but,
instead, counteracts the efficiency-based rationale animating declaratory judgment
159
Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2014 WL 6703980,
at *29 (Del. Ch. Nov. 16, 2014) (citation omitted).
160
Cf. Schick, 533 A.2d at 1238 (“The notion laying behind [declaratory judgments] is that
legitimate legal interests are sometimes cast into doubt by the assertion of adverse claims and that,
when this occurs, a party who suffers practical consequences ought not to be required to wait upon
his adversary for a judicial resolution that will settle the matter.”).
161
See, e.g., Trusa v. Nepo, 2017 WL 1379594, at *8 n.71 (Del. Ch. Apr. 13, 2017) (dismissing a
declaratory count as duplicative because it rested on “the necessary determinations the Court
would make in resolving” the complaint’s affirmative counts); see US Ecology, Inc. v. Allstate
Power Vac, Inc., 2018 WL 3025418, at *10 (Del. Ch. June 18, 2018) (same), aff’d, 2019 WL
24460 (Del. Jan. 17, 2019); Great Hill, 2014 WL 6703980, at *29 (same); Veloric, 2014 WL
4639217, *20 (same); cf. Sweetwater Point, LLC v. Kee, 2020 WL 6561567, at *12 (Del. Super.
Ct. Nov. 5, 2020) (“Where a declaratory judgment does not set forth a distinct cause of action and
the other claims fail, the declaratory judgment claim must fail.”).
162
ESG Cap. Partners II, LP v. Passport Special Opportunities Master Fund, LP, 2015 WL
9060982, at *15 (Del. Ch. Dec. 16, 2015); cf. DEL. CODE ANN. tit. 10, § 6508 (authorizing courts
to provide “supplemental relief” on a cognizable declaration “whenever necessary and proper”).
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jurisdiction. 163 Accordingly, to survive dismissal, a declaratory count must be
“distinct” from the affirmative counts in the complaint 164 such that a decision on the
affirmative counts would not resolve the declaratory count.165
Count II just isn’t sufficiently distinct from Count I. Through Count II, the
Company seeks a declaration that Dow is liable for “any and all Losses” incurred
from the Code Violation. But, in Count I, the Company seeks the same thing, except
in the language of breach. Indeed, the Company defended Count II as “guardrails”
that ensure “losses, the defined term, are indemnified here.”166 Count I serves that
very purpose.
163
E.g., IDT Corp. v. U.S. Specialty Ins. Co., 2019 WL 413692, at *15 (Del. Super. Ct. Jan. 31,
2019) (observing, in the declaratory judgment context, that “the prospective of duplicative efforts
. . . are contrary to the notion of judicial economy and the need to conserve the Court’s resources”);
see also Burris, 583 A.2d at 1372 n.6 (“[I]f a practical evaluation of the peculiar facts and
circumstances of the case lead the Court to believe . . . a declaratory action will [not] serve a
practical and useful purpose[,]” the declaratory action should be dismissed.).
What’s more, in certain cases, such duplication has the potential for visiting far greater mischief
than any potential good. Here, for instance, the Court notes—though the Company tries mightily
to suggest otherwise—the nature and language of the supplemental declaration sought would really
amount to a judicially-scrivened “blank check” to cover any future expenditures the Company
might divine or categorize as attributable to the Code Violation. Hr’g Tr. at 31–33.
164
Sweetwater, 2020 WL 6561567, at *12, *17; Trusa, 2017 WL 1379594, at *8 n.71; Veloric,
2014 WL 4639217, *20.
165
See, e.g., Goldenberg, 2021 WL 1529806, at *20 (reasoning that, where a decision sub judice
establishes, or creates law of the case capable of establishing, the right the claimant has sought
through a declaration, the declaration request is moot because relief has been or will be afforded
affirmatively).
166
Hr’g Tr. at 33 (emphasis added).
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A successful breach-of-contract claim would afford the Company “any and
all” coverage it proves—there would be nothing more to declare.167 And an
unsuccessful breach-of-contract claim would defeat the declaration—there could be
no required indemnification. 168 Because the declaration is premised on the same
interpretative outcome, it is duplicative.169 Given the Separation Agreement’s broad
“any and all” language, the Company’s desired contract remedy would be enough.170
Against this result stands Cooper Industries, LLC v. CBS Corp. 171 There, a
declaratory judgment request survived dismissal alongside a breach-of-contract
claim, even though both arguably addressed the same injury. But, despite its similar
facts, Cooper Industries did not consider anti-duplication law, which the decision
could be read to otherwise contradict.
In Cooper Industries, a buyer and a seller executed an asset purchase
167
But see ESG Cap., 2015 WL 9060982, at *15.
168
But see Goldenberg, 2021 WL 1529806, at *20.
169
Trusa, 2017 WL 1379594, at *8 n.71.
170
See, e.g., Great Hill, 2014 WL 6703980, at *29 (“Declaratory judgment . . . is meant to provide
relief where a claim . . . would not support a cause of action . . . . Here, however, Plaintiffs assert
a complete entitlement to a complete set of common-law and equitable remedies, in contract, tort
and equity, including recission of the contract. Because the declaratory judgment count is
completely duplicative of the affirmative counts of the complaint, [it] is dismissed.” (citations
omitted)).
171
2019 WL 245819 (Del. Super. Ct. Jan. 10, 2019). The parties did not cite this decision, but it
reaches the opposite result on seemingly analogous facts. So, the Court addresses it for the sake
of candor and completeness.
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agreement through which the buyer acquired a manufacturing facility from the
seller.172 The manufacturing facility produced hazardous waste. 173 So the buyer
extracted a broad indemnification duty from the seller under which the seller agreed
to indemnify “all” contamination-related losses. 174 The plaintiff, as successor to the
buyer, and the defendant, as successor to the seller, inherited this arrangement. 175
Decades later, regulators discovered contamination at the facility. 176 To avoid
pollution penalties, the plaintiff undertook cleanup efforts at its own expense.177
Seeking reimbursement, the plaintiff noticed the defendant of its duty to indemnify
“all” contamination costs.178 But the defendant refused coverage. Dissatisfied, the
plaintiff sued for breach-of-contract and declaratory judgment. The defendant
moved to dismiss, arguing (i) the statute of limitations barred the plaintiff’s breach-
of-contract count; and (ii) the declaratory count was impermissibly duplicative of
the breach-of-contract count.179
172
Id. at *1.
173
Id. at *1–2.
174
Id. at *1.
175
Id.
176
Id. at *2.
177
Id.
178
Id. at *3.
179
Id.
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Having found the breach claim timely,180 the Cooper Industries court then
spoke to the defendant’s duplication argument. The defendant argued the
declaratory count was “superfluous” and “simply recast[ed]” the plaintiff’s breach
allegations.181 The Court disagreed. In the Court’s view, the two counts were
“entirely different” because they involved separate “interpretation issues.” 182 As
support for that finding, the Court found grounding for its case-specific ruling in the
plaintiff’s counterarguments:
Cooper argues that its declaratory judgment claim “is intended to
resolve a dispute that CBS raised regarding the interpretation of Section
14.5.” Plaintiff believes that its two claims are distinct because the
“breach claim seeks damages for CBS’s violation of its duty to
indemnify Cooper, and the declaratory judgment claim seeks a
determination that CBS had a duty to indemnify and seeks a resolution
of the interpretive dispute CBS has raised regarding the scope of CBS’s
indemnity obligation under Section 14.5.”183
Determining that it did not, at this point, need to resort to any additional authority or
further interpret the parties’ agreement, the Court found that ignoring the counts’
“distinct[ions]” might just “open the door to future endless litigation between the
parties.”184
180
Id. at *4.
181
Id. at *5.
182
Id.
183
Id. (cleaned up).
184
Id.
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Given the specifics thereof—and what was not addressed therein—one need
be wary of relying too heavily on Cooper Industries as some broad pronouncement
that breach-of-contract and duplicative declaratory claims rest easily side-by-side.
The parties there gave little attention to the declaratory judgment count. And
Cooper Industries, at bottom, was a statute of limitations case. So the parties’ light
touch, together with the case’s posture, likely counseled against dismissing the
proposed declaration until the parties developed the issue more helpfully.185
Here, though, there is no reason to defer. The Company doesn’t need the
additional “guardrails” 186 it attempts to erect. And so, Count II is DISMISSED as
MOOT.
IV. CONCLUSION
Count I survives dismissal. Under the Separation Agreement, the Code
Violation is an indemnifiable (Excluded) Liability that has caused the Company to
suffer Losses. Those Losses might be recovered as direct damages and will,
regardless, be quantified eventually. Dow must cover “any and all” of those Losses
unless another Separation Agreement provision relieves it of its coverage duties. At
185
Given the statute of limitations question, the Court’s dismissal ruling required a procedural
approach. See id. at *3 (“The Court would like to note that, as [the parties] conceded in their
respective briefs, Delaware procedural law will be applied.” (citations omitted)). So the Court
deferred substantive questions of “construction, validity and interpretation.” Id. (internal quotation
marks omitted); see also id. at *5 (“The Court also finds at this stage of the litigation that Plaintiffs’
declaratory judgment claim is not duplicative . . . .” (emphasis added)).
186
Hr’g Tr. at 33.
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this stage, however, it is reasonably conceivable that none of the defensive
provisions Dow has identified bars the Code Violation’s coverage. Accordingly,
Dow’s motion against Count I is DENIED.
Count II, however, must be dismissed as moot. Where a claimant seeks both
common law and declaratory relief for the same injury and on the same terms, the
declaratory judgment claim is impermissibly duplicative unless it is pleaded as
distinct from the common-law claim. Here, however, Count II has been pleaded
merely as a declaratory version of Count I. It rests on the same facts, shoulders the
same burden of proof, involves the same elements, and requests the same interpretive
outcome. In short, Count II is unnecessary. Because the Court has found Count I
conceivably provides all the relief the Company seeks, Dow’s motion against Count
II is GRANTED.
IT IS SO ORDERED.
_________________________
Paul R. Wallace, Judge
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