COURT OF CHANCERY
OF THE
STATE OF DELAWARE
417 S. State Street
JOSEPH R. SLIGHTS III Dover, Delaware 19901
VICE CHANCELLOR Telephone: (302) 739-4397
Facsimile: (302) 739-6179
Date Submitted: October 4, 2021
Date Decided: January 19, 2022
Joseph C. Schoell, Esquire James M. Yoch, Jr., Esquire
Faegre Drinker Biddle & Reath LLP Kevin P. Rickert, Esquire
222 Delaware Avenue, Suite 1410 Young Conaway Stargatt & Taylor, LLP
Wilmington, DE 19801 1000 North King Street
Wilmington, DE 19801
Corinne Elise Amato, Esquire
Eric J. Juray, Esquire Michael W. McDermott, Esquire
Jason W. Rigby, Esquire Peter C. McGivney, Esquire
Prickett, Jones & Elliott, P.A. Berger Harris LLP
1310 King Street 1105 North Market Street, 11th Floor
Wilmington, DE 19801 Wilmington, DE 19801
Re: Agspring Holdco, LLC, et al. v. NGP X US Holdings, L.P., et al.
C.A. No. 2019-0567-JRS
Dear Counsel:
This Letter Opinion addresses three motions: (1) Plaintiff, Agspring Holdco,
LLC’s (“Holdco”) Motion for Preliminary Injunction; (2) Holdco’s Motion to File
a Verified Second Amended and Supplemental Complaint; and (3) Defendants’
Motion to Stay. In a separate Letter Opinion issued today, I have addressed motions
pending in related litigation involving Defendant, NGP X US Holdings, L.P.’s
Agspring Holdco, LLC, et al. v. NGP X US Holdings, L.P., et al.
C.A. No. 2019-0567-JRS
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Page 2
(“NGP”) right to advancement of litigation expenses (the “Advancement
Opinion”).1 For the reasons stated below, the Motion for Preliminary Injunction is
denied; the Motion to Amend is granted in part and denied in part; and the Motion
to Stay is granted.
I. BACKGROUND
The background of the parties’ relationship and disputes is stated more fully
in the Advancement Opinion. Relevant here, in 2012, Defendants NGP, Randal
Linville and Bradley Clark formed Agspring, LLC (“Agspring”).2 Two agreements,
the Limited Liability Company Agreement of Agspring, LLC
(the “LLC Agreement”) and the Advisory Services, Reimbursement and
Indemnification Agreement (the “Services Agreement”) (together, the
1
Agspring, LLC v. NGP X US Hldgs., L.P., C.A. No. 2019-1021-JRS (Del. Ch. Jan. 19,
2022) (D.I. 95).
2
Verified Am. Compl. (“Compl.”) (D.I. 28) ¶ 27.
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C.A. No. 2019-0567-JRS
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“2012 Agreements”) governed the relationship between NGP and Agspring and
contained advancement, arbitration and indemnification rights.3
In December of 2015, NGP sold its interest in Agspring to American
Infrastructure MLP Funds (“AIM”) as memorialized in a Membership Interest
Purchase and Contribution Agreement (the “MIPCA”).4 To consummate the deal,
AIM created Agspring, LP, which was later converted into Plaintiff Agspring
Holdco, LLC (“Holdco”).5 Other Plaintiffs in this action—LVS II SPE XVIII LLC,
HVS V LLC, and TOBI XXI, LLC (the “Investor LLCs”)—provided financing for
the transaction.6
In this case, Plaintiffs, led by Holdco, allege, among other things, that
Defendants made fraudulent representations in the MIPCA.7 A month after
3
Am. Verified Compl. (“Inj. Action Compl.”) (C.A. 2019-1021-JRS) (D.I. 61) Ex. B-1,
at 34–35, 47–49; Inj. Action Compl. Ex. B-2, at 2–6.
4
Compl. ¶¶ 2, 4; Compl. Ex. 1 (the “MIPCA”).
5
Id.
6
Compl. ¶ 3.
7
Compl. ¶¶ 4–10.
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C.A. No. 2019-0567-JRS
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Plaintiffs filed their complaint, NGP wrote to Agspring and demanded that
Agspring advance NGP’s legal fees and expenses in defending this and other
litigation under the terms of the Services Agreement.8 On December 12, 2019, NGP
filed a demand for arbitration with JAMS to prosecute its advancement claim,
among others.9 In response, Agspring moved in this Court to enjoin the arbitration,
arguing that the MIPCA superseded the Services Agreement and placed NGP’s
claims within the exclusive jurisdiction of Delaware courts.10 Following argument,
this Court held that because the arbitration clause in the Services Agreement
delegated the question of arbitrability to the arbitrator, the arbitrator must determine
the ongoing validity and reach of the 2012 Agreements.11
In the arbitration that followed, the panel held that the advancement claim
was arbitrable, the 2012 Agreements survived the MIPCA and governed NGP’s
8
Inj. Action Compl. ¶ 1.
9
Inj. Action Compl. ¶¶ 3, 31.
10
Pl. Agspring, LLC’s Opening Br. in Supp. of its Mot. for Prelim. Inj. (C.A. 2019-1021-
JRS) (D.I. 3) at 1–2.
11
Inj. Action Compl. ¶ 35.
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advancement rights, and that Agspring owed advancement to NGP.12 Agspring
continues to challenge the arbitration panel’s award, and that dispute has been
addressed in the Advancement Opinion.
Agspring has refused to pay advancement costs, stating that “Agspring does
not have sufficient liquidity to pay the advancement demanded by NGP and
continue to operate.”13 According to Agspring, if NGP enforces its advancement
demand by reducing it to a judgment, that act alone will trigger defaults with
Agspring’s creditors and allow them to foreclose on all of Agspring’s assets.14
Holdco is not a party to the Services Agreement, the companion case in this
court or any arbitration proceeding with NGP. Nevertheless, Holdco brings the
Motion for Preliminary Injunction, asking this Court to prohibit NGP from further
pursuing claims for advancement against Agspring as barred by contract and by the
12
Inj. Action Compl. ¶¶ 36–37, 40.
13
Agspring Holdco, LLC’s Opening Br. in Supp. of its Mot. for Prelim. Inj. (“Holdco
PI Br.”) (D.I. 164) at 9; Aff. of Bruce Chapin in Supp. of Agspring Holdco, LLC’s Br. in
Supp. of Prelim. Inj. (“Chapin Aff.”) (D.I. 164) ¶ 5.
14
Holdco PI Br. at 9; Chapin Aff. ¶ 6.
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C.A. No. 2019-0567-JRS
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doctrines of equitable and quasi-estoppel. Holdco concurrently brings the Motion
to Amend, seeking “to include new evidence of NGP’s fraud related to the same
transaction, conduct, and occurrence set forth in the initial Complaint—the sale of
Agspring.”15 In response, NGP filed the Motion to Stay, arguing that this Court
should stay this action until Agspring complies with its advancement obligations.
II. ANALYSIS
As noted, Plaintiffs move for a preliminary injunction and to amend the
complaint. Defendant NGP moves to stay this action until Agspring pays the
advancement award. Each motion will be addressed in turn below.
A. The Motion for Preliminary Injunction
Holdco moves for a preliminary injunction to prevent NGP “from taking
further actions contrary to its promises and representations” in the MIPCA.16
Holdco argues that the MIPCA contains promises that preclude NGP from
enforcing any advancement right against Agspring to harm Holdco. These include
15
Pl. Agspring Holdco, LLC’s Mot. for Leave to File a Verified Second Am. & Suppl.
Compl. (“Agspring Am. Mot.”) (D.I. 163) at ¶ 19.
16
Holdco PI Br. at 1.
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C.A. No. 2019-0567-JRS
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representations or promises that: Agspring had no undisclosed indemnification
obligations amounting to more than $200,000; NGP had no undisclosed rights
against and no undisclosed material contracts with Agspring; and NGP was
delivering its interests in Agspring to Holdco free of any claims.17
As noted, Holdco argues that a preliminary injunction is necessary because
Agspring does not have sufficient liquidity to pay the advancement demanded by
NGP and continue to operate. Moreover, if NGP enforces its advancement demand
by reducing it to judgment, that would trigger defaults with Agspring’s and its
subsidiaries’ senior creditors, giving those creditors the right to foreclose on
Agspring and its subsidiaries and seize all assets.18 “Unless enjoined, NGP’s
actions to enforce its purported temporary right to advancement are likely to destroy
17
Id. at 2; see MIPCA §§ 3.2(b), 4.5(a)(xvi), 4.23, 5.1.
18
Holdco PI Br. at 9.
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Agspring permanently.”19 This allegedly threatens irreparable harm to Holdco
because Agspring is “Holdco’s sole asset.”20
The preliminary injunction standard is well-established. A plaintiff must
show: (1) a reasonable probability of success on the merits, (2) irreparable harm,
and (3) that a balance of equities favor an injunction.21 As discussed below, NGP
argues that Holdco has dressed a request for permanent injunctive relief in
preliminary injunction clothes in hopes of lessening the burden it must carry to
obtain relief. While I agree with that assessment, even if the preliminary injunction
standard provides the correct analytical framework here, as explained below,
Plaintiffs cannot satisfy the first element, so the Motion for Preliminary Injunction
fails.
Holdco argues that this Court should enjoin the arbitration award because the
panel did not consider its rights under the MIPCA, but the panel expressly reviewed
19
Id.
20
Id. at 21.
21
Revlon, Inc. v. MacAndrews & Forbes Hldgs., Inc., 506 A.2d 173, 179 (Del. 1986).
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the MIPCA in determining that (1) the 2012 Agreements survive and govern NPG’s
advancement rights; and (2) the Services Agreement requires advancement.22
As noted, the arbitration panel found that the MIPCA did not supersede the Services
Agreement, nor were NGP’s rights under the Services Agreement waived by its
failure to disclose the agreement in the MIPCA. Thus, the arbitration panel
determined that the arbitration provision in the Services Agreement remained valid
despite the MIPCA. Once the issue of arbitrability was settled, the arbitration panel
then issued an order directing that Agspring must advance legal fees to NGP. That
order has been confirmed in the Advancement Decision.
Holdco’s Motion for Preliminary Injunction must be denied, then, because
“[t]he claims underlying Holdco’s request for injunctive relief raise issues Agspring
previously litigated in the Arbitration and lost.”23 This Court will not enjoin the
effect of a now-confirmed arbitration order as somehow inconsistent with the
22
This analysis is discussed thoroughly in the Advancement Opinion.
23
Def. NGP X US Hldgs., L.P.’s Corrected Omnibus Br. Regarding Arbitration Award
and Other Matters (“NGP Omnibus Br.”) (D.I. 200) at 53.
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MIPCA when the panel expressly considered the MIPCA provisions at issue in
reaching its award.
Of course, Holdco was not a party to the arbitration; Agspring was. NGP
argues that issue preclusion applies here because of privity, barring reconsideration
of these issues. I agree. Issue preclusion under the doctrine of collateral estoppel
applies when:
(1) The issue previously decided is identical with the one presented in
the action in question, (2) the prior action has been finally adjudicated
on the merits, (3) the party against whom the doctrine is invoked was
a party or in privity with a party to the prior adjudication, and (4) the
party against whom the doctrine is raised had a full and fair
opportunity to litigate the issue in a prior action.24
Those factors are each satisfied here. For the reasons stated above and in the
Advancement Opinion, Holdco brings the same arguments rejected by the
arbitration panel in reaching its award, and arbitration awards are final
adjudications.25 Moreover, Agspring and Holdco are in privity. “For purposes of
24
Betts v. Townsends, Inc., 765 A.2d 531, 535 (Del. 2000) (citing State v. Machin,
642 A.2d 1235, 1239 (Del. Super. Ct. 1993)).
25
E.g., Global Link Logistics, Inc. v. Olympus Growth Fund III, L.P., 2010 WL 338214,
at *4 n.30 (Del. Ch. Jan. 29, 2010) (“Delaware courts give valid and final arbitration
awards ‘the same effect as a court’s judgment under the doctrine of res judicata.’”) (citing
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res judicata [or collateral estoppel], two parties are in privity where the ‘relationship
between two or more persons is such that a judgment involving one of them may
justly be conclusive on the others, although those others were not party to the
lawsuit.”26 In this regard, “[a] critical factor for the privity analysis is whether the
interests of a party to the first suit and the party in question in the second suit are
aligned.”27
Holdco argues that it is not in privity with Agspring because “Holdco is not
a party to the Services Agreement” and “is not bound by the decisions of an
Mehiel v. Solo Cup Co., 2007 WL 901637, at *5 (Del. Super. Ct. Mar. 26, 2007));
Cooper v. Celente, 1992 WL 240419, at *5–6 (Del. Super. Ct. Sept. 3, 1992) (“This Court
decides that an arbitration award such as the one issued in this dispute has res judicata
effect on subsequent litigation efforts in the courts. This holding is in accordance with
Delaware’s strong public policy in favor of arbitration . . . .”).
26
Washington House Condominium Assoc. of Unit Owners v. Daystar Sills, Inc.,
2015 WL 6750046, at *7 (Del. Super. Ct. Oct. 28, 2015) (citing Grunstein v. Silva, 2011
WL 378782, at *8 (Del. Ch. Jan. 31, 2011)).
27
Id.; see also Levinhar v. MDG Med., Inc., 2009 WL 4263211, at *8 (Del. Ch. Nov. 24,
2009) (“This court has noted that a substantial identity of parties’ interests has been held
to place two superficially separate parties in privity and that, at bottom, the test of privity
is whether there is a close or significant relationship between successive defendants.”)
(internal quotation marks and footnotes omitted).
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arbitration in which it had no obligation to participate.”28 But Holdco’s own
authority recognizes that privity can arise from the nature of the parties’ relationship
and need not be derived from contract.29 In this case, Holdco’s and Agspring’s
interests are directly aligned; indeed, they have litigated in lockstep, they are both
plaintiffs in this case and they both share the same counsel.30
Given that the elements for collateral estoppel have been satisfied, the
resolution of factual and legal issues by the arbitration panel is justly conclusive on
both Agspring and Holdco. Thus, Holdco cannot demonstrate a reasonable
probability of success on the merits because the advancement award bars it, as a
matter of privity, from litigating anew the issues Agspring already lost at arbitration.
28
Combined Reply Br. in Supp. of Agspring Holdco, LLC’s Mots. to Am. the Compl. and
for Prelim. Inj. and Agspring, LLC’s Mot. for Declaratory J. and to Vacate the Arbitration
Award (D.I. 206) at 6.
29
See Hartford Acc. & Indem. v. Columbia Cas. Co., 98 F. Supp. 251, 256–57 (D. Conn.
2000).
30
See NGP Omnibus Br. at 54–56; see also Vasquez v. Bridgestone/Firestone, Inc.,
325 F.3d 665, 677 (5th Cir. 2003) (finding privity between the parties in part because they
were “represented by the same counsel”); Levinhar v. MDG Med., Inc.,
2009 WL 4263211, at *8 (Del. Ch. Nov. 24, 2009) (same).
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Moreover, Holdco purports to seek a “preliminary injunction,” but as NGP
points out, “deciding the merits while denying advancement to NGP is tantamount
to a permanent injunction, because it will prevent NGP from ever vindicating its
right to advancement.”31 Thus, NGP argues “the Court should apply the standard
for a permanent injunction.”32 Here again, I agree. “This Court has utilized the
higher mandatory injunction standard where, instead of seeking ‘to preserve the
status quo as interim relief, Petitioners, as a practical matter, seek the very relief
that they would hope to receive in a final decision on the merits.’”33 Delaying
adjudicated advancement rights until the conclusion of underlying litigation is
tantamount to denying them. Indeed, “[t]his Court has long recognized that a delay
in recognizing advancement rights may ultimately render those rights illusory.”34
31
Id. at 52.
32
Id.
33
Alpha Builders, Inc. v. Sullivan, 2004 WL 2694917, at *3 (Del. Ch. Nov. 5, 2004)
(quoting Joyland Daycare Ctr. v. Dep’t of Servs. for Children, Youth & Their Families,
1996 WL 74713, at *2 (Del. Ch. Jan. 22, 1996)).
34
Perryman v. Stimwave Techs. Inc., 2020 WL 2465720, at *4 (Del. Ch. May 13, 2020).
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A permanent injunction is an “extraordinary remedy”35 and, as such, the party
seeking such relief is required “to demonstrate that: (1) it has proven actual success
on the merits of the claims; (2) irreparable harm will be suffered if injunctive relief
is not granted; and (3) the harm that will result if an injunction is not entered
outweighs the harm that would befall the defendant if an injunction is granted.”36
Holdco has not even demonstrated the “reasonable probability of success”
necessary for a preliminary injunction, so it follows that it has not demonstrated
actual success on the merits either.
For the reasons just stated, the Motion for Preliminary Injunction must be
denied.37
35
N. River Ins. Co. v. Mine Safety Appliances Co., 105 A.3d 369, 385 (Del. 2014).
36
Korn v. New Castle Cty., 2005 WL 2266590, at *14 (Del. Ch. Sept. 13, 2005).
37
I note that the Motion for Preliminary Injunction arguably seeks both prohibitive and
mandatory relief. The Motion seeks an order that would direct NGP to act in a manner
that it is not otherwise inclined to act. See Holdco PI Br. at 3 (“Holdco therefore requests
that this Court require NGP to act consistent with its representations to Holdco in the
MIPCA and to refrain from taking any further enforcement steps against Agspring.”).
This appears to be, at least partially, mandatory injunctive relief. See C&J Energy Servs.,
Inc. v. City of Miami Gen. Emps.’ & Sanitation Emps.’ Ret. Tr., 107 A.3d 1049, 1071
(Del. 2014) (noting a mandatory injunction “requir[es] a party to take affirmative action”);
Tebo v. Hazel, 74 A. 841, 846 (Del. Ch. 1909) (defining a mandatory injunction as “one
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B. The Motion to Amend
Holdco moves to amend its complaint in three respects: (1) to remove claims
dismissed by this Court’s July 30, 2020 Memorandum Opinion, (2) to add facts
regarding NGP’s fraud, and (3) to add counts for equitable estoppel and quasi
estoppel based on the fact that NGP has asserted claims for indemnification and
advancement from Agspring under the Services Agreement despite NGP’s
representations and warranties to Holdco in the MIPCA that no such claims exist.
For the reasons stated below, Holdco’s Motion to Amend is denied as to the addition
of counts for equitable estoppel and quasi estoppel but granted as to the removal of
claims and addition of facts regarding NGP’s alleged fraud.
“Motions to amend a pleading are committed to the sound discretion of the
judge.”38 Court of Chancery Rule 15(a) states that “leave shall be freely given when
which commands the defendant to do some positive act”). Because “[m]andatory
injunctions should only issue with the confidence of findings made after a trial or on
undisputed facts,” mandatory injunctive relief is inappropriate on this ground as well since
this case, for practical purposes, has not even left the starting gate. C&J Energy Servs.,
Inc., 107 A.3d at 1053–54.
38
In re Estate of Childres, 2020 WL 1659351, at *1 (Del. Ch. Mar. 25, 2020).
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justice so requires,”39 and our “[c]ourts have interpreted [Rule 15] to allow for
liberal amendment in the interest of resolving cases on the merits.”40 “But ‘leave
to amend should not be granted where there is evidence of bad faith, undue delay,
dilatory motive, undue prejudice or futility of amendment.’”41 Where, as here, the
Court is asked to evaluate futility, the Court is “required to take well-plead facts as
true and draw all reasonable inferences in [the plaintiff’s] favor.”42 A motion to
amend should be denied on the basis of futility only if “the legal insufficiency of
the amendment is obvious on its face.”43
NGP opposes Holdco’s motion to amend, arguing that the amendments are
futile because “Holdco is precluded from relitigating issues of advancement and
39
Ct. Ch. R. 15(a).
40
Gould v. Gould, 2011 WL 141168, at *7 (Del. Ch. Jan. 7, 2011).
41
Apogee Invs., Inc. v. Summit Equities LLC, 2017 WL 4269013, at *2 (Del. Ch. Sept. 22,
2017) (alteration omitted) (quoting N.S.N. Int’l Indus., N.V. v. E.I. DuPont de Nemours &
Co., 1994 WL 148271, at *8 (Del. Ch. Mar. 31, 1994)).
42
Id.
43
NACCO Indus., Inc. v. Applica, Inc., 2008 WL 2082145, at *1 (Del. Ch. May 7, 2008).
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arbitrability that have already been decided by the Panel.”44 The arbitration panel
determined in Interim-Award 1 that “[t]he arbitration clauses in the 2012 Services
Agreement and the 2012 LLC Agreement survive and govern.”45 Because the
clauses survive and govern, “they require[d] arbitration.”46 The arbitration panel
then determined that “[t]he clear and unambiguous terms of the Services Agreement
entitle NGP to advancement from Agspring.”47
In its proposed amended complaint, Agspring pleads that “NGP should be
enjoined and estopped from enforcing the terms of the 2012 Services Agreement to
obtain advancement or indemnity.”48 But, as discussed above, I refuse to enjoin
enforcement of the arbitration panel’s advancement award because to issue the
requested injunction would be to nullify the panel’s award, and I have now
44
NGP Omnibus Br. at 76–77.
45
NGP Omnibus Br. Ex. 28 at 1.
46
NGP Omnibus Br. Ex. 30 at 3.
47
NGP Omnibus Br. Ex. 33 at 4.
48
Agspring Am. Mot. Ex. B at 87–88.
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confirmed that award in the Advancement Opinion. Thus, amending the complaint
to add a request for an injunction-based estoppel would be futile.
I cannot say the same, however, with regard to the other two amendments
proffered by Holdco. Removing the claims dismissed by the Memorandum Opinion
makes perfect sense as a matter of good pleading hygiene. And I am not inclined
to prevent Holdco from adding facts about the non-disclosure of the
2012 Agreements to its fraud claims. The arbitration panel held that the
2012 Agreements survive and govern, but it made no determination regarding
NGP’s alleged fraud. The fraud claims may or may not survive a pleading stage
challenge down the road, but the challenge has yet to be mounted and the proffered
amendments to the claims, at this stage, are not “insufficien[t] . . . on [their] face.”49
NGP also opposes amendment by arguing that Holdco unduly delayed in
bringing its motion to amend. Specifically, it argues that Holdco was aware of the
so-called “additional facts” it wants to add as early as May 2019, but Holdco waited
49
NACCO Indus., Inc., 2008 WL 2082145, at *1.
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nearly two years to add the allegations.50 In my view, there is no undue delay for
two reasons. First, Holdco proposes to add new allegations in support of an already
existing claim and well before discovery or trial. As such, there is no prejudice.51
And second, Holdco did not know with certainty whether it would be threatened
with alleged harm to its sole asset, Agspring, until the advancement award was in
place. Given this dynamic, Agspring did not unduly delay in seeking leave to file
the proposed amendment.
For these reasons, the Motion to Amend is denied in part and granted in part.
C. The Motion to Stay is Granted
“The decision to grant or to deny a stay is one that lies within the discretion
of the trial court.”52 A stay is appropriate “where the granting of a stay would not
50
NGP Omnibus Br. at 79.
51
See Annone v. Kawasaki Motor Corp., 316 A.2d 209, 211 (Del. 1974) (explaining that
prejudice must exist for the court to deny a motion to amend on grounds of delay).
52
LightLab Imaging, Inc. v. Axsun Techs., Inc., 2012 WL 1764225, at *1 (Del. Ch.
May 10, 2012) (citing Phillips Petroleum Co. v. Arco Alaska, Inc., 1983 WL 20283, at *4
(Del. Ch. Aug. 3, 1983)).
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prejudice the non-moving party and where it would spare the moving party
‘unnecessary expense or burden.’”53
NGP argues that “[i]t is inequitable and prejudicial to NGP to allow Plaintiffs
to continue to prosecute their claims against NGP in the Sale Action while Agspring
flouts its obligation to advance NGP’s legal fees arising from this very lawsuit.”54
It points out that this Court has granted stays to prevent a party from “get[ting] to
play offense when it wants to play offense, while gaining the advantage of not
having to play defense.”55 It also argues that Agspring will not experience prejudice
because this is a case for money damages, not time-sensitive injunctive relief.56
53
Id. (citing Weiss v. LeeWards Creative Crafts, 1992 WL 65410, at *1 (Del. Ch. Mar. 1,
1992)).
54
Def. NGP X US Hldgs., L.P.’s Mot. to Stay (D.I. 181) at 9.
55
LightLab Imaging, Inc., 2012 WL 1764225, at *2.
56
See Walker Digital, LLC v. Canon U.S.A. Inc., 2013 WL 12221415, at *1 n.1 (D. Del.
Jan. 28, 2013) (“Where money damages will suffice to address a plaintiff’s injury, the
delay occasioned by a stay is less likely to result in undue prejudice.”). Holdco argues
that “Holdco will be prejudiced by a stay because it is seeking time-sensitive injunctive
relief” in the form of its Motion for Preliminary Injunction. Agspring Holdco, HVS, LVS,
and TOBI’s Resp. to NGP’s Mot. to Stay (“Holdco Stay Resp.”) (D.I. 189) at 10. But, for
reasons explained above, that motion has now been denied.
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Holdco and Agspring both oppose NGP’s Motion to Stay. Agspring argues
that staying the claims against NGP worth hundreds of millions of dollars until
Agspring “pays NGP’s extraordinary legal bills will preclude Agspring’s claim
from being considered on the merits” because it is insolvent.57 And in such
circumstances, Delaware courts “balance the existence of advancement rights
against the realities of insolvent entities.”58
For its part, Holdco argues that there is no basis to stay the claims brought by
Plaintiffs in this case because “Holdco and the Investor LLCs are not subject to any
arbitration award and are not parties to any contract that would require those entities
to advance fees to NGP.”59 They say that “NGP also cites no case in which a
57
Pl. Agspring, LLC’s Opp’n to NGP X Hldgs. L.P.’s Mot. to Stay (“Agspring Opp’n to
Mot. to Stay”) (D.I. 188) at 4. NGP disputes that Agspring is insolvent. See Tr. of Oral
Argument (D.I. 221) 73:13–74:18; NGP Omnibus Br. at 70.
58
Agspring Opp’n to Mot. to Stay at 4 (citing Andrikopoulos v. Silicon Valley Innovation
Co., 120 A.3d 19, 20 (Del. Ch. 2015)). NGP distinguishes Andrikopoulos in its reply brief
because the company at issue there was in receivership, which Agspring is not. See Def.
NGP X US Hldgs. L.P.’s Reply in Supp. of Mot. to Stay (“NGP Mot. to Stay Reply”)
(D.I. 208) at 8–9.
59
Holdco Stay Resp. at 3.
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Delaware court effectively dismisses, or even stays, claims by parties with no
advancement obligations based on defendants’ inability to obtain advancement
from a different party.”60 According to Holdco, “[a] stay until Agspring pays NGP
advancement will cause Holdco and the Investor LLCs the ultimate prejudice:
dismissal of their claims without consideration on the merits.”61
As to Agspring, the Motion to Stay must be granted. “[S]evere financial
hardship . . . is not a legally cognizable defense to advancement.”62 Agspring’s
arguments are all premised on the fact that it cannot pay the advancement fees it
has now been ordered to pay in a final, binding judgment.63 On this record, at least,
60
Id. at 9.
61
Id.
62
Tafeen v. Homestore, Inc., 2004 WL 556733, at *10 (Del. Ch. Mar. 22, 2004), aff’d
Homestore, Inc. v. Tafeen, 886 A.2d 502 (Del. 2005); cf. 1 Donald J. Wolfe, Jr. &
Michael A. Pittenger, Corporate and Commercial Practice in the Delaware Court of
Chancery, § 9.02[j], 9-48 (2d ed. 2020) (noting that this court “has evidenced a reluctance
to entertain a defense based upon the resulting financial hardship” to a corporation in the
context of mandatory advancement for officers, directors or other agents of the
corporation).
63
In light of this reality, Agspring asks this Court to “balance the equities of advancement
rights against the realities of insolvent entities.” See Andrikopoulos, 120 A.3d at 20.
As noted, NGP argues Andrikopoulos is distinguishable because it arises from the
receivership context and does not override the general rule that inability to pay is not a
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that is not enough to justify a ruling that requires NGP to defend itself on claims
asserted by Agspring while Agspring flouts its obligation to advance.64
Whether the stay should apply to Holdco is a thornier question. “[O]ur
corporation law is largely built on the idea that the separate legal existence of
corporate entities should be respected—even when those separate corporate entities
are under common ownership and control.”65 The same is generally true of
justification for avoiding a binding, final advancement obligation. Agspring also argues
that the policy reasons that animate awards of advancement as stated in the authorities
cited by NGP—to encourage capable directors to serve on corporate boards—is
inapplicable here. Agspring Opp’n to Mot. to Stay at 4–5. Even if true, Agspring’s refusal
to honor its advancement obligations frustrates Delaware’s strong commitment to
“enforce the contractual scheme that the parties have arrived at through their own self-
ordering.” Change Cap. P’rs Fund I, LLC v. Volt Elec. Sys., LLC, 2018 WL 1635006,
at *4 (Del. Super. Ct. Apr. 3, 2018).
64
Other courts have held the same. See, e.g., NGP Mot. to Stay Reply at 7–8; Islet Scis.,
Inc. v. Brighthaven Ventures, LLC, 2017 WL 3860500, at *4 (N.C. Super. Ct. Aug. 29,
2017) (“[The party’s] claimed inability to pay does not excuse its failure to provide the
Advancement.”); Orion Ethanol, Inc. v. Evans, 2009 WL 2355274, at *4 (D. Kan. July 29,
2009) (“As [the defendant] correctly points out in its brief, a legal obligation to advance
the funds is not negated by a lack of cash. [The plaintiff] provided no legal support for its
inadequate cash argument.”).
65
Allied Cap. Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1038 (Del. Ch. 2006);
see also Skouras v. Admiralty Enters., Inc., 386 A.2d 674, 681 (Del. Ch. 1978) (“Mere
control and even total ownership of one corporation by another is not sufficient to warrant
the disregard of a separate corporate entity.”).
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alternative entities like limited liability companies.66 This principle, however, is
not absolute.67
With this backdrop in mind, in my view, there are several reasons to grant
the Motion to Stay for now, even as to Holdco and notwithstanding its legal
separateness, pending the outcome of further proceedings. I explain them briefly
below.
First, the Advancement Opinion will result in a final judgment in the
companion litigation. Agspring has expressed its intent to appeal that judgment.68
66
See, e.g., 6 Del. C. §18-303 (“[T]he debts, obligations and liabilities of a limited liability
company . . . shall be solely the debts, obligations and liabilities of the limited liability
company . . . .); Focus Fin. P’rs, LLC v. Holsopple, 241 A.3d 784, 809 (Del. Ch. 2020)
(“A Delaware LLC is a separate legal entity created through Delaware’s sovereign power
as a state.”) (internal quotation marks omitted); Wood v. U.S. Bank Nat’l Ass’n, 246 A.3d
141, 148 (Del. Ch. 2021) (“The Delaware Uniform Limited Liability Act makes clear that
an LLC has a separate juridical existence distinct from its members.”).
67
See, e.g., Manichaean Cap., LLC v. Exela Techs., Inc., 251 A.3d 694, 706 (Del. Ch.
2021) (“[I]n exceptional cases, corporate veil-piercing is necessary and appropriate.”)
(internal quotation marks omitted); Feeley v. NHAOCG, LLC, 62 A.3d 649, 667 (Del. Ch.
2012) (“Numerous legal rules and doctrines circumvent the general principles of corporate
separateness and legal liability.”).
68
Pl.’s Opening Br. in Supp. of its Mot. for Summ. J., Declaratory J., and to Vacate the
Arbitration Award (C.A. 2019-1021) (D.I. 62) at 3 (“The purpose of Agspring’s motion
is to present Agspring’s arguments regarding its rights under the MIPCA in one place,
ideally to obtain relief from this Court, but at a minimum, to resolve this case to final
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Given that NGP’s right to advancement is at the heart of the appeal and the Motion
to Stay, it makes sense as a matter of case management to allow that issue to be
resolved finally before tackling the difficult question of whether Holdco may
litigate its claims against NGP while its wholly-owned subsidiary fails to honor its
obligation to advance the fees and expenses NGP incurs as it defends those claims.69
Second, in my view, the parties have not fully developed the extent to which
the advancement judgment might be binding upon Holdco.70 That issue will need
to be explored further following the resolution of the advancement appeal, but the
judgment such that Agspring can take an appeal.”); id. at 12 (“Since the Court’s ruling
[denying Agspring’s motion for a preliminary injunction enjoining the arbitration],
Agspring has sought to reduce this matter to a final judgment so it can exercise its right to
appeal under the Delaware Constitution.”).
69
See K&K Screw Prods., LLC v. Emerick Cap. Invs., Inc., 2011 WL 3505354, at *11
(Del. Ch. Aug. 9, 2011) (observing that “[t]he Court of Chancery possesses the inherent
power to manage its docket, including the discretion to stay case pending the resolution
of [other litigation] on the basis of comity, efficiency, or common sense”) (citation and
internal quotation marks omitted). Obviously, if Agspring or Holdco elect not to appeal,
then the stay can be revisited.
70
I distinguish this question from the question of whether Holdco may litigate issues
decided in the arbitration anew in this case under the doctrine of collateral estoppel––an
issue already resolved in the discussion above. See Greene v. Conn. Mut. Life Ins. Co.,
1979 WL 174435, at *3 (Del. Ch. Sept. 19, 1979) (noting the “important distinctions”
between collateral estoppel and res judicata).
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issue should be resolved before NGP is required to defend claims that are subject
to an adjudicated right to advancement.71
Third, the parties have not addressed the practical and perhaps substantive
implications of staying the litigation of Agspring’s claims while Holdco’s claims
proceed. Is Agspring a necessary party to Holdco’s claims?72 Relatedly, can
Holdco’s claims proceed to judgment without Agspring? If so, is it efficient to
litigate Holdco’s claims to judgment when there remains a possibility that the stay
71
I note that there is some incongruency in Holdco’s positions as advanced in the various
motions. It seeks to enforce Agspring’s rights in requesting injunctive relief under
contracts to which it is not a party, yet it touts corporate separateness in resisting a stay
based on the advancement judgment. Holdco and Agspring’s counsel addressed this
apparent inconsistency at oral argument by emphasizing that Holdco has separate
contractual rights. Oral Argument Tr. at 30:24–31:16 (“The Court: [I]f I’m going to find
that harm to you flows from harm to Agspring, then why would I not find that connection
meaningful with respect to those rights that have been adjudicated thus far in these
proceedings? It just seems a bit of a you want to be separate when you want to be, but you
don’t when you don’t. [Counsel]: Well, I understand that, but I think the distinction here
is that Holdco has a contract, a separate contract, with NGP . . . . Holdco is not a party
to . . . the services agreement. And so I think it is consistent for Holdco to say, do not
hold us accountable with respect to a contract to which we are not a party. However,
NGP, you are a party to the MIPCA. We get to enforce the MIPCA.”). But, as noted,
strict contractual privity is not required for preclusion purposes.
72
See Ct. Ch. R. 19(b).
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of Agspring’s claims will be vacated down the road? These questions may need to
be addressed following the outcome of the advancement appeal.
Finally, it may be necessary to conduct targeted discovery on the questions
related to corporate separateness before deciding whether the advancement
judgment should affect Holdco’s ability to prosecute its claims while Agspring’s
advancement obligation remains unsatisfied. Again, this issue will need to be
revisited upon the conclusion of the advancement appeal.
Until the advancement appeal is concluded, and as long as the advancement
judgment remains unsatisfied, I am satisfied that a stay of this litigation is
appropriate to prevent NGP from incurring potentially “unnecessary expense or
burden.”73 Of course, any party may seek relief from the stay for good cause shown.
III. CONCLUSION
For the foregoing reasons, the Motion for Preliminary Injunction is DENIED,
the Motion to Amend is GRANTED IN PART and DENIED IN PART and the
Motion to Stay is GRANTED.
73
Weiss, 1992 WL 65410, at *1.
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IT IS SO ORDERED.
Very truly yours,
/s/ Joseph R. Slights III