Light Years Ahead, Inc. v. Valve Acquisition, LLC
N20C-12-181 DJB
| Del. Super. Ct. | Dec 22, 2021Background:
- In May 2018 Kevin Murphy sold Advanced Valve Technologies (AVT) to Valve Acquisition; post-sale AVT became Light Years Ahead. Murphy remained as an at‑will strategy advisor and there was a Commission Agreement providing Light Years 8% on specified UK sales (the Cadent opportunity).
- Murphy was fired in October 2018 and executed a Separation Agreement that released employment‑related claims; he nonetheless continued to pursue the Cadent opportunity in the UK.
- Valve Acquisition managed the Cadent relationship after Murphy’s termination; Plaintiffs allege Valve delayed trials and refused resources, causing the project to lose funding and Light Years to receive far less commission than expected.
- Separately, lease disputes between Asylum Holdings (Murphy’s company/landlord) and Valve Acquisition led Valve to sue in Illinois in October 2019; that Illinois action alleged harassment, lease breaches, and related acts and was settled and dismissed by a November 6, 2020 Settlement Agreement containing broad, but partially carved‑out, releases.
- Plaintiffs filed this Delaware suit in December 2020 asserting six counts (breach of the APA re: tax indemnity; breach of Commission Agreement — later dismissed by stipulation; breach of Leases; breach of implied covenant of good faith and fair dealing; declaratory judgment re: warranty disclaimer; and intentional infliction of emotional distress). Valve moved to dismiss; the Court granted dismissal of Counts I, III, V, and VI and denied dismissal as to Count IV.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of APA (Section 6.8(g) — tax indemnity) | Murphy/Light Years: Valve sent an indemnity demand without allowing Murphy to control defense as Section 6.8(g) requires; incurred legal/accounting fees. | Valve: Section 6.8(g) rights apply only to a Tax Matter before a Governmental Authority; Valve didn’t set off commissions and Section 10.1 allocates costs to each party. | Court: Valve’s interpretation is the only reasonable reading; rights not triggered; even if breach, Plaintiff didn’t plead recoverable damages (Section 10.1); Count I dismissed. |
| Breach of Lease (Asylum) | Asylum: Valve made unauthorized renovations to leased property, breaching the leases. | Valve: Illinois Settlement released claims arising out of events/transactions alleged in the Illinois Action, which included the renovations. | Court: The lease claim arises from events alleged in the Illinois Action and is barred by the Settlement Agreement; Count III dismissed. |
| Implied covenant re: Commission Agreement (Cadent deal) | Light Years: Valve willfully or negligently mismanaged the UK business (fired Murphy, delayed trials) and intentionally frustrated the expected benefit; implied covenant should preclude bad‑faith conduct. | Valve: The contract disclaims warranties and addresses commercial risk; implied covenant cannot be used to rewrite agreement or guarantee success. | Court: Plaintiff plausibly alleged conduct beyond ordinary market risk that could frustrate the bargain; implied covenant claim survives at this pleading stage; Count IV survives. |
| Declaratory judgment re Section 1.7 (no warranty of success) | Light Years: Section 1.7 is vague/illusory and should be declared unenforceable or severed. | Valve: No actual controversy justifying declaratory relief; issue is intertwined with implied covenant claim. | Court: No ripe "actual controversy" for DJA now; declaratory relief denied and Count V dismissed. |
| IIED (Murphy) | Murphy: Valve engaged in extreme/outrageous conduct — firing family members, false police report, baseless litigation, harassment — causing severe emotional harm. | Valve: Claims are barred by the Separation and Settlement Agreements and, in any event, facts insufficient to show extreme/outrageous conduct or the required presence/harms. | Court: Allegations are either contractually barred, insufficiently pleaded, or not extreme as a matter of law; Count VI dismissed. |
Key Cases Cited
- Exelon Generation Acquisitions, LLC v. Deere & Co., 176 A.3d 1262 (Del. 2017) (contract construction is a question of law; interpret contract with focus on parties’ intent).
- Paul v. Deloitte & Touche, LLP, 974 A.2d 140 (Del. 2009) (courts construe contract language within its four corners to ascertain intent).
- VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606 (Del. 2003) (on a motion to dismiss a court cannot choose between two reasonable interpretations of ambiguous contract language).
- Dieckman v. Regency GP LP, 155 A.3d 358 (Del. 2017) (principles governing the implied covenant of good faith and fair dealing and its limited scope).
- Nemec v. Shrader, 991 A.2d 1120 (Del. 2010) (the implied covenant is not an equitable tool to rebalance economic allocations anticipated by the contract).
- Chakov v. Outboard Marine Corp., 429 A.2d 984 (Del. 1981) (general releases are valid and must be construed to effectuate parties’ intent).
- Rollins Intern., Inc. v. International Hydraulics, Corp., 303 A.2d 660 (Del. 1973) (standards and purpose for declaratory relief; courts should avoid advisory opinions).
- Spence v. Cherian, 135 A.3d 1282 (Del. Super. Ct. 2016) (elements and standards for intentional infliction of emotional distress under Restatement).