Phunware, Inc. v. Excelmind Group Ltd.
117 F. Supp. 3d 613
D. Del.2015Background
- Phunware and Rain (Delaware) contracted with Excelmind and ECL (BVI) under a Share Purchase Agreement (SPA) dated Oct. 7, 2014 for Phunware to buy Excelmind; Seawood (Philippines) was not a signatory.
- The SPA contained a 30-day "drop dead" closing deadline (Nov. 6, 2014), a Delaware choice-of-law/forum clause, a nonwaiver clause, and conditions requiring audited financials before closing.
- Plaintiffs failed to deliver audited financial statements by the drop-dead date but provided interim revenue estimates; negotiations and communications continued after Nov. 6, 2014.
- On Dec. 5, 2014, ECL delivered a written Notice of Termination under SPA § 9.01(b); plaintiffs had earlier filed (and later voluntarily dismissed) a Delaware Chancery action seeking specific performance.
- Plaintiffs then filed this federal suit seeking damages for breach of contract and related claims; defendants moved to dismiss (ECL for failure to state a claim; Seawood for lack of personal jurisdiction).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ECL validly terminated the SPA after the drop-dead date | SPA parties implicitly agreed audited financials could be delivered after the drop-dead date; ECL waived termination by continuing negotiations and communications | SPA explicitly allowed termination after the 30-day window; nonwaiver and written-waiver clauses mean post-deadline negotiations did not waive termination | ECL’s termination under §9.01(b) was valid; no waiver shown; breach claim for termination fails |
| Whether ECL breached SPA duties (§6.07 best efforts / §6.09 anti-solicitation) | ECL negotiated with competitor (Xurpas) after the drop-dead date, violating best-efforts and no-compete/anti-solicitation covenants, causing damages | Any alleged conduct occurred after the drop-dead date and could not have caused the failure to close; termination right supersedes best-efforts; plaintiffs do not tie the alleged breach to damages | Breach claim under §6.07 and §6.09 dismissed: §6.09 allegations insufficiently tied to recoverable damages given termination right |
| Whether plaintiffs can state a claim for breach of implied covenant of good faith and fair dealing | Parties implicitly agreed to allow delivery of audited financials post-deadline; enforcing literal SPA would be inequitable | Contract expressly addresses the timing/termination issue; implied covenant cannot override explicit contract terms | Claim for breach of implied covenant dismissed: contract addresses the conduct, so implied covenant inapplicable |
| Whether this court has personal jurisdiction over non-signatory Seawood | Seawood was closely related to SPA (major holder, negotiator actions, use of Seawood email), so forum-selection/consent clause or Delaware long-arm apply; jurisdictional discovery should be allowed | Seawood was not a signatory, received no direct benefit, had no sufficient Delaware contacts; LOI was superseded by SPA; jurisdictional discovery would be a fishing expedition | Personal jurisdiction over Seawood denied. Plaintiffs fail the Hadley/closely-related test and do not show sufficient Delaware contacts; jurisdictional discovery denied |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard requires facts plausibly suggesting entitlement to relief)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (two-step Iqbal/Twombly pleading framework)
- Int'l Shoe Co. v. Washington, 326 U.S. 310 (1945) (minimum contacts due process standard for personal jurisdiction)
- World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980) (purposeful availment and reasonable foreseeability for jurisdiction)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) (specific jurisdiction requires claim to arise from forum contacts)
- Walden v. Fiore, 134 S. Ct. 1115 (2014) (focus on defendant’s contacts with the forum state itself for jurisdiction)
- VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606 (Del. 2003) (elements of breach of contract under Delaware law)
- National Data Payment Sys., Inc. v. Meridian Bank, 212 F.3d 849 (3d Cir. 2000) (drop-dead date termination can supersede best-efforts obligations)
- Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434 (Del. 2005) (limitations on implying contractual terms via covenant of good faith)