MATRIX PARENT, INC.; H.I.G. MOBILE, L.P.; H.I.G. EUROPE MIDDLE MARKET LBO FUND, L.P.; H.I.G. MIDDLE MARKET LBO FUND III, L.P.; H.I.G. TECHNOLOGY PARTNERS A, L.P.; H.I.G. TECHNOLOGY PARTNERS B, L.P.; AND H.I.G. MATRIX COINVESTORS, L.P. v. AUDAX MANAGEMENT COMPANY, LLC; AG MOBILE HOLDINGS, LP; AUDAX PRIVATE EQUITY FUND V-A, L.P.; AUDAX PRIVATE EQUITY FUND V-B, L.P.; AFF CO-INVEST L.P.; AUDAX TRUST CO-INVEST, L.P.; AUDAX PE V CO-INVEST, A SERIES OF AUDAX CO-INVEST SERIES, LLC; IVESHU BHATIA; DANIEL DORAN; and TIMOTHY MACK
C.A. No. N23C-10-212 MAA CCLD
IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
Submitted: March 22, 2024; Decided: June 27, 2024
Adams, J.
Defendants’ Motion to Dismiss: GRANTED in Part, and DENIED in Part.
Kevin R. Shannon, Esquire, of POTTER ANDERSON & CORROON LLP, Wilmington, DE, and Kevin B. Huff, Esquire, of KELLOGG, HANSEN, TODD, FIGEL & FREDERICK, P.L.L.C., Washington, DC, Attorneys for Defendants, and Michael Kendall, Esquire, of WHITE & CASE LLP, Boston, MA, Attorneys for Defendants Iveshu Bhatia, Daniel Doran, and Timothy Mack.
Adams, J.
Plaintiff Matrix Parent, Inc. (“Matrix Parent“), along with Plaintiffs H.I.G. Europe Middle Market LBO Fund, L.P., H.I.G. Middle Market LBO Fund III, L.P., H.I.G. Technology Partners A, L.P., H.I.G. Technology Partners B, L.P., Matrix Co-Investors, L.P., and H.I.G. Mobile, L.P. (together, the “H.I.G. Plaintiffs,” and together with Matrix Parent, “Plaintiffs“), bring this suit to recover hundreds of millions of dollars that Plaintiffs allegedly overpaid for Mobileum, Inc. (“Mobileum“) and connected entities. Plaintiffs allege that Mobileum‘s purchase price was artificially inflated by a fraudulent scheme to overstate the growth of Mobileum‘s new bookings and revenue.
Plaintiffs bring their claims against Defendants Audax Management Company, LLC (“Audax“), AG Mobile Holdings, L.P., Audax Private Equity Fund V-A, L.P., Audax Private Equity Fund V-B, L.P., AFF Co-Invest, L.P., Audax Trust Co-invest, L.P., and Audax PE V Co-invest, a Series of Audax Co-Invest Series, LLC (together with Audax, the “Audax Defendants“), as well as Defendants Iveshu Bhatia, Daniel Doran, and Timothy Mack (together, the “Individual Defendants,” and together with the Audax Defendants, “Defendants“). Plaintiffs allege that Defendants are accountable for the fraud because Defendants controlled Mobileum and the selling entity, Mobile Acquisition Holdings, LP (“Mobile Acquisition Holdings“), while the fraudulent scheme was carried out.
FACTS1
I. THE PARTIES
A. Plaintiffs
Matrix Parent is the designated “Buyer” under the SPA.2 It is a Delaware corporation with its principal place of business in New York.3
The H.I.G. Plaintiffs are a group of investment funds that, together, contributed $285 million towards Matrix Parent‘s purchase of Mobileum.4 H.I.G.
B. Defendants
The Audax Defendants are a group of entities that indirectly owned Mobileum prior to the at-issue sale.11 Audax is a Delaware limited liability company with its principal place of business in Massachusetts.12 AG Mobile Holdings, L.P. is a Delaware limited partnership with its principal place of business in Massachusetts.13 Audax Private Equity Fund V-A, LP is a Delaware limited partnership with its
The Individual Defendants—Bhatia, Doran, and Mack—are natural persons affiliated with the Audax Defendants and employed by Audax.19 Each of the Individual Defendants is a Massachusetts resident.20
C. Relevant Non-Parties
Mobile Acquisition Holdings is the designated “Seller” under the SPA.21 Mobile Acquisition Holdings directly owned Mobile Acquisition Corp.22 Mobile Acquisition Corp. directly owned Mobileum.23 Mobile Acquisition Corp. is the designated “Company” under the SPA, but Mobileum was the principal operating
Andrew Warner was Mobileum‘s Chief Financial Officer and a member of Mobileum‘s Board at all relevant times.26 Plaintiffs allege that Warner was also Audax‘s employee and the Audax Defendants’ agent for purposes of managing Mobileum.27
Orathi “Bobby” Srinivasan co-founded Mobileum.28 Srinivasan was Mobileum‘s Chief Executive Officer and a member of Mobileum‘s Board at all relevant times.29
II. THE SALE OF MOBILEUM
Mobileum provides a suite of services to mobile-network providers and other telecommunications companies.30 Audax is a private equity firm that acquires, grows, and then resells portfolio companies.31 In November 2016, Audax acquired Mobileum.32 Audax kept Srinivasan in place as Mobileum‘s CEO, but installed
From 2017 to 2020, Mobileum—under Audax‘s control—acquired six new companies.35 Then, in late 2020, Audax put the augmented Mobileum up for sale.36 Mobileum retained Jefferies LLC (“Jeffries“) to serve as a financial advisor and to market Mobileum.37 In September 2021, Jeffries contacted H.I.G.38 and provided a Confidential Information Memorandum (“CIM“) detailing Mobileum‘s financial position and projections.39
The CIM indicated Mobileum was financially sound and steadily growing.40 Most pertinent to this case, the CIM projected that Mobileum‘s 2021 EBITDA would reach $84 million, its revenue would grow at a rate of 15%, and its bookings would grow at a rate of 18%.41 Those estimates and other promising figures prompted H.I.G. to begin due diligence in late September 2021.42 In November
The parties then engaged in “Phase 2” of due diligence.44 During this phase, the Audax Defendants and Mobileum shared more detailed information about Mobileum with H.I.G.45 H.I.G. retained the services of PricewaterhouseCoopers to help analyze Mobileum‘s financials.46 Sold on Mobileum‘s potential, on December 9, 2021, H.I.G. submitted a binding offer that placed Mobileum‘s Enterprise Value at $890 million.47
Following additional diligence and negotiation, H.I.G. agreed to purchase a majority stake in Mobileum based on a “headline” Enterprise Value of $915 million.48 Accordingly, on December 25, 2021, the parties gifted each other executed copies of the SPA.49 The transaction closed on March 1, 2022.50
As for the mechanics of the transaction, H.I.G. formed Matrix Parent to be the buyer.51 Matrix Parent then bought Mobile Acquisition Holdings’ shares in Mobile
III. THE ALLEGED FRAUD
The crux of this case is Plaintiffs’ allegation that Mobileum‘s attractive EBITDA, revenue growth, and bookings numbers were based on fraud and not actual business performance. According to Plaintiffs, Mobileum‘s revenue was actually in decline during the relevant period and Mobileum‘s 2021 EBITDA was at least $20 million less than advertised.55 Plaintiffs highlight three “pillars” of fraud to describe the recipe Mobileum allegedly used to cook its books.
Each pillar is described more fully below but to summarize, Plaintiffs allege that, under Defendants’ guidance, Mobileum: (1) improperly accelerated its revenue recognition by acting as if it had performed more work than it had; (2) covered up its improper revenue acceleration by creating, but not sending, invoices for work that
A. Revenue Acceleration
Mobileum used the “percentage of completion” (“POC“) method to account for its revenue under long-term contracts.56 The intuitively named POC method allows a company to recognize the amount of contracted revenue that corresponds with the percentage of the contracted work that has been performed.57 That method can be abused in two ways: overstating how much work has been done on the contract or understating how much work the contract requires. According to Plaintiffs, Mobileum did both.
Plaintiffs recite one example from the fourth quarter of 2021 in which Mobileum employees applied non-billable hours from the customer satisfaction team to billable projects, making those projects seem more complete than they truly were.58 In another example, purchase orders dated December 22, 2021 called for 400 hours of work to be done over six months; but, less than two weeks later, 240 hours were supposedly completed—including 160 hours by an employee that Plaintiffs allege never worked on the project.59 Emails between Mobileum
Plaintiffs also allege Mobileum—led by Warner—further exploited the POC method by improperly reducing the denominator of the determinative calculation.62 In October 2021, Warner allegedly instructed Mobileum‘s revenue team to reduce the numbers of hours required to be worked under a particular contract with no justification other than accelerating revenue recognition.63 In the third quarter of 2021, Mobileum allegedly reduced the estimated time to complete one project from 490 person-days to 81 person-days, which allowed Mobileum to record 100% completion of the project by the end of September.64 Despite that supposed completion, Mobileum later recorded 3,800 non-billable hours on the same project.65 This tactic allowed Mobileum to claim a greater percentage of completion than was accurate, which led to recognizing more revenue than was appropriate.
B. “Dummy” Invoices
An impediment to the alleged revenue acceleration scheme is the fact that customers would not welcome invoices for work that had not be performed. That
Mobileum needed to issue invoices for the “accelerated” revenue; but it could not send customers invoices for work that had not been done. To resolve that dilemma, Warner and other Mobileum employees allegedly created “dummy” invoices, which were recorded for accounting purposes but not sent to customers.69 Mobileum employees were told to use “a generic description like ‘interim milestone‘” when there was no applicable contractual milestone to invoice.70 In early December 2021, Warner and other Mobileum executives described the creation of fictitious invoices as “an immediate priority” and a “top priority.”71
C. Illegitimate Bookings
The final pillar of the alleged fraud relates to Mobileum‘s efforts to show that it was growing its customer base through new bookings. Mobileum allegedly did so in at least two fraudulent ways. The first method was converting “whitespace” to actual bookings.76 In other words, Mobileum employees recorded customer leads as if the potential customer had already committed to making a purchase.77 Plaintiffs allege that Warner encouraged this activity and told Mobileum employees, “[t]he reality is we have a target number from Bobby [Srinivasan], then build the support that makes the number seem reasonable, but we can not [sic] say that!!”78
Prior to December 2021, however, Kibott was not a registered limited liability company.85 Nor did Kibott have significant assets, customers, a business plan, or even a website.86 Kibott ultimately paid Mobileum less than 60,000 euros.87 When Mobileum demanded more after H.I.G. took over, Kibott entered bankruptcy
Nevertheless, Kibott was a valuable partner for Mobileum while Mobileum was on the auction block. Warner told Mobileum employees to “think of [Kibott] as a blank canvas.”90 Accordingly, when Mobileum had problems with its revenue numbers, it repeatedly used Kibott as the solution.91 In one example that took place less than two weeks before the parties executed the SPA, Warner asked his Kibott go-between92 for “another favor on the [Kibott] agreement.”93 That “favor” was amending the relevant contract to allow Mobileum to issue invoices for 1.8 million euros, which would help Mobileum reduce its unbilled revenue balance.94 In response, Warner was told, “[m]issed your email last night but basically yes, go for it.”95 Plaintiffs allege that Kibott was so accommodating because Kibott‘s executives received reassurances that they would not have to pay as promised.96
The SPA is at the epicenter of this dispute. The SPA‘s terms serve as the basis for both Plaintiffs’ primary claims and several of Defendants’ defenses. The provisions most relevant to this Motion, in somewhat abridged form, are as follows.
A. The Contested Representations97
Article IV of the SPA comprises Mobile Acquisition Corp.‘s representations and warranties to Matrix Parent.98 Plaintiffs allege that at least seven of the representations therein were false—Sections 4.05(a), 4.05(b), 4.06, 4.09(a), 4.12, 4.15(a), and 4.22(a) (together, the “Contested Representations“).99 SPA Section 4.05(a) represented in pertinent part:
[T]he Financial Statements reflect the information set forth in the Acquired Companies’ books and records and present fairly, in all material respects, the financial position, results of operations and cash flows of the Acquired Companies (taken as a whole) as of the times and for the periods referred to therein in accordance with GAAP, consistently applied throughout the periods covered thereby . . . . The Company maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are recorded in a timely manner and as necessary to permit preparation of the Financial Statements in accordance with GAAP.
The Acquired Companies each maintain books and records that accurately and completely reflect in all material respects their respective assets and Liabilities. Except as set forth on Schedule 4.05(b), the Acquired Companies each maintain, adhere to and enforce internal accounting controls that are designed to provide reasonable assurance that: (i) transactions are executed only in accordance with management‘s authorization; (ii) transactions are recorded as necessary to permit preparation of the financial statements of the Acquired Companies in accordance with GAAP; (iii) receipts and expenditures of each Acquired Company are executed only in accordance with such management‘s authorization; and (iv) unauthorized acquisition, disposition or use of assets is prevented or timely detected. To the Company‘s knowledge, there is no weakness in the design or operation of such internal accounting controls that would reasonably be expected to adversely affect the ability of any of the Acquired Companies to initiate, record, process or report financial data.
SPA Section 4.06 represented in pertinent part: “Since the date of the Latest Balance Sheet [September 30, 2021] through the date hereof, each Acquired Company has conducted its business in the Ordinary Course of Business and there has not been any Material Adverse Effect.”
SPA Section 4.09(a) represented in pertinent part: “The Acquired Companies have timely filed (taking into account any applicable extensions) all income Tax Returns and all other material Tax Returns that were required to be filed by them and such Tax Returns are true, correct, and complete in all material respects.”
SPA Section 4.12 represented in pertinent part:
To the Company‘s knowledge, there are no facts or circumstances existing that would reasonably be expected to serve as a basis for any [defined] Claims, actions or Legal Proceedings which, if determined
SPA Section 4.15(a) represented in pertinent part:
[E]ach of the Acquired Companies has at all times since January 1, 2018 been in compliance, and is currently in compliance in all material respects with all Laws and regulations of all Governmental Bodies applicable to such Acquired Company, its business or the ownership or use of its assets and properties.
SPA Section 4.22(a) represented in pertinent part: “The accounts receivable of each of the Acquired Companies arose from bona fide transactions entered into in the Ordinary Course of Business[.]”
B. The Limitations on Liability
Various SPA provisions purport to allocate risk between the SPA‘s parties and balance their respective rights and remedies. In that regard, the SPA states:
The Parties agree that the limits imposed on Buyer‘s, the Company‘s and the other Buyer Related Parties’100 remedies with respect to this Agreement and the transactions contemplated hereby (including this Section 9.01) were specifically bargained for between sophisticated parties and were specifically taken into account in the determination of the amounts to be paid to Seller hereunder.101
To start, the SPA contains provisions in which Plaintiffs broadly disclaimed reliance on any extra-contractual representations, including forecasts, projections, the CIM, and other due diligence materials or discussions.102 Those provisions are buttressed by a similarly broad integration clause.103 Since Plaintiffs have confirmed that they base their fraud claims solely on the falsity of express contractual representations,104 the details of the SPA‘s non-reliance and integration provisions are inessential here.
SPA Section 11.17(b) contains a broad non-recourse provision that provides in pertinent part:
This Agreement may only be enforced against, and any claim or suit or cause of action based upon, arising out of, or related to this Agreement, or the negotiation, execution or performance of this Agreement . . . (including any representation or warranty made in or in connection with this Agreement or . . . as an inducement to enter into this Agreement . . .), whether in contract or in tort, in law or in equity or otherwise, may only be brought against the express named Parties to this Agreement . . . and then only with respect to the specific obligations set forth herein . . . with respect to the named Parties to this Agreement (in all cases, as limited by the provisions of Section 9.01) . . . . No Person who is not an express named Party to this Agreement . . . including any past, present or future director, manager, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney, or representative of the Company, Seller or Buyer or any of their respective Affiliates (the “Non-Recourse Parties“), will have or be subject to any Liability or indemnification obligation (whether in
SPA Section 9.01(b) adds to the non-recourse provision by providing in pertinent part:
Each of Buyer and the Company, on its own behalf and on behalf of the other Buyer Related Parties, acknowledges and agrees that no Buyer Related Parties may avoid any limitation on liability set forth herein (including in this Section 9.01(b)) by . . . seeking damages for breach of contract, tort, or pursuant to any other theory of liability or asserting any claim against any Non-Recourse Party for conspiracy, aiding or abetting or other theory of liability with respect to a claim that may be asserted against a Party to this Agreement, all of which are hereby irrevocably waived[.]
SPA Section 9.01(b) contains an exclusive remedy provision that provides in pertinent part:
[E]xcept . . . (iii) Retained Claims, each of Buyer and the Company hereby irrevocably waives and releases and covenants not to sue, on its own behalf and on behalf of the Buyer Related Parties, to the fullest extent permitted under applicable Law, Seller and the Non-Recourse Parties (including the other Seller Related Parties), whether in any individual, corporate, or any other capacity, from and against any and all other rights, claims, and causes of action it may have against Seller and the Non-Recourse Parties (including the other Seller Related Parties) by virtue of, or based on, the subject matter of this Agreement, the negotiation, execution, or performance of this Agreement, any Exhibit or Disclosure Schedule or other Schedule hereto, or any other document delivered pursuant to this Agreement, . . . or the ownership or operation of the Acquired Companies prior to the Closing, including whether arising under or based upon any Law or otherwise and including any rights of contribution, indemnification, reimbursement, or other similar rights, other than the Retained Claims.
As relevant here, the “Retained Claims” include “claims for Fraud.”106 SPA Section 10.01 defines Fraud to mean:
intentional and knowing common law fraud under Delaware law in the representations and warranties set forth in this Agreement, any Contribution Agreement and the certificates delivered pursuant to Section 2.02(f)(i) and Section 2.03(d)(i). A claim for Fraud may only be made against the Party committing such Fraud. “Fraud” does not
include equitable fraud, constructive fraud, promissory fraud, unfair dealings fraud, unjust enrichment, or any torts (including fraud) or other claim based on negligence or recklessness (including based on constructive knowledge or negligent misrepresentation) or any other equitable claim.
Accordingly, through the SPA, Plaintiffs waived any fraud claims not based on the knowing falsity of a contractual representation.
PROCEDURAL HISTORY
Plaintiffs filed their Complaint on October 24, 2023.107 Plaintiffs’ Complaint contains four causes of action108: common-law fraud (Counts I and II);109 aiding and abetting fraud (Counts III and IV);110 civil conspiracy (Counts V and VI);111 and unjust enrichment (Counts VII and VIII).112 One week later, AG Mobile Holdings, L.P. filed a competing suit in the Court of Chancery, which blames H.I.G.‘s mismanagement for Mobileum‘s post-closing decline and claims that the investigation that led to this case was a predetermined farce.113
Returning to this action, Defendants moved to dismiss the Complaint on December 8, 2023.114 The parties completed briefing on the motion to dismiss on
STANDARDS OF REVIEW
I. RULE 12(b)(2)
In the context of
II. RULE 12(b)(6)
Under well-settled principles, the pivotal question under
ANALYSIS
I. THE COURT LACKS A STATUTORY BASIS FOR PERSONAL JURISDICTION OVER THE INDIVIDUAL DEFENDANTS.
Delaware courts employ a “two-step analysis” to determine whether the exercise of personal jurisdiction is proper.124 The first step is determining whether a statute provides a basis for jurisdiction over the nonresident defendant.125 The Court then evaluates whether exercising jurisdiction comports with the Due Process Clause of the Fourteenth Amendment.126
Here, for the reasons expressed below, the Court finds that Plaintiffs have not made a prima facie showing of a statutory basis for jurisdiction over the Individual Defendants. A separate due process analysis is, therefore, unnecessary in this instance.127
Plaintiffs argue that
In this context, “manager” can refer to either a formal manager “as defined in § 18-101”130 or an acting manager who “participates materially in the management of the limited liability company.”131 To qualify as an acting manager under Section 18-109(a)(ii), the individual must have “a significant role in managing an LLC or . . . play[] a significant part in an activity or event that constitutes part of the management of the LLC.”132
An action involves or relates to the business of an LLC within the meaning of § 18-109(a) if: (1) the allegations against the manager focus centrally on his rights, duties and obligations as a manager of a Delaware LLC; (2) the resolution of the matter is inextricably bound up in Delaware law; and (3) Delaware has a strong interest in providing a forum for disputes relating to the ability of managers of an LLC formed under its law to properly discharge their respective managerial functions.133
Here, Plaintiffs argue that the Individual Defendants’ roles at Audax and non-party Mobile GP Holdings LLC (“Mobile GP“) suffice to provide a basis for jurisdiction under Section 18-109.134 The Court disagrees.
1. Plaintiffs Have Not Adequately Shown that the Individual Defendants are “Managers” of Audax.
Plaintiffs contend the Individual Defendants were acting managers of Audax under Section 18-109(a)(ii).135 Thus, Plaintiffs must show that the Individual Defendants had a significant role in the management of Audax.136 To do so, Plaintiffs begin by listing the Individual Defendants’ titles at Audax—Bhatia is a “managing director,” Mack is a “partner,” and Doran is a “principal.”137 But the
With respect to the Individual Defendants’ activities at Audax, Plaintiffs adduce no support for the conclusion that the Individual Defendants controlled or managed Audax itself. Instead, Plaintiffs only discuss the control the Individual Defendants had over Mobileum in their roles with Audax.140 That, however, is beside the point. As Plaintiffs recognize, Mobileum was but one of Audax‘s portfolio companies.141 Managing a discrete task or project on behalf of an LLC is distinct from managing the LLC itself.142 Were it otherwise, Section 18-109(a)(ii) could broadly apply to LLC employees who have little role in the LLC‘s internal governance but participate in the LLC‘s operations. Delaware courts have not
Because Plaintiffs have alleged no facts that suggest the Individual Defendants managed Audax in any material way, Plaintiffs have not made a prima facie showing that the Individual Defendants were “managers” of Audax for purposes of Section 18-109.
2. Plaintiffs’ Claims Do Not Involve or Relate to Mobile GP.
Plaintiffs also suggest the Individual Defendants’ roles at Mobile GP provide a basis for jurisdiction under Section 18-109.145 Mobile GP was the general partner of Mobile Acquisition Holdings.146 Mobile GP‘s Amended and Restated Limited Liability Company Agreement explicitly designated Bhatia and Mack as managers.147 Accordingly, the critical inquiry with respect to personal jurisdiction
Notably, Mobile GP went wholly unmentioned by Plaintiffs until Plaintiffs sought a basis for personal jurisdiction over the Individual Defendants. The Complaint contains counts for aiding and abetting, civil conspiracy, and unjust enrichment against an array of Audax-affiliated entities, but nowhere mentions Mobile GP. While the Court is mindful that Plaintiffs are entitled to have reasonable inferences drawn in their favor at this stage, the proposition that Plaintiffs simply overlooked Mobile GP‘s supposed role in this case when preparing their Complaint does not strike the Court as a reasonable inference.148 Plaintiffs’ opposition brief further reflects Mobile GP‘s tenuous connection to Plaintiffs’ claims.
In the relevant subsection of Plaintiffs’ opposition brief—labeled, “b. Involving or relating to the [entity‘s] business”149—Mobile GP is once again unmentioned. Instead, that subsection concludes, “the Complaint alleges that the Individual Defendants ‘used their capacity as managers of [Audax Management LLC] to commit the well-pled wrongs when negotiating contracts involving the
To reiterate, Plaintiffs bear the burden to make a prima facie showing of personal jurisdiction.151 Mentioning Mobile GP in a single sentence across both the Complaint and the opposition brief does little to carry that burden.152
More substantively, as already noted, Delaware courts interpret Section 18-109 “to narrowly refer to corporate governance and the internal affairs of an LLC.”153 Fraud allegedly committed by Defendants through the actions of Mobileum employees, without more, does not raise any issues related to the governance or internal affairs of Mobile GP. Nor do the allegations against the Individual Defendants “focus centrally on [the Individual Defendants‘] rights, duties and obligations as [managers] of [Mobile GP].”154 Rather, Plaintiffs’ allegations against the Individual Defendants explicitly focus on the Individual Defendants’
B. The Long-Arm Statute Does Not Provide Jurisdiction.
Plaintiffs’ only other proposed basis for statutory jurisdiction is
Plaintiffs only point to the SPA-related creation of four Delaware entities (the “Matrix Entities“)159 as the transaction that triggers Section 3104(c)(1).160 “Delaware courts have held consistently that forming a Delaware entity constitutes the transaction of business within Delaware that is sufficient to establish specific personal jurisdiction under Section 3104(c)(1).”161 The Matrix Entities, however,
“As a defendant‘s involvement in the underlying transaction and the formation of the Delaware entity becomes more attenuated, it becomes more difficult to hold that the defendant transacted business in the state.”163 For example, in EBG Holdings LLC v. Vredezicht‘s Gravenhage 109 B.V., 2008 WL 4057745 (Del. Ch. Sept. 2, 2008), the Court of Chancery held that the Dutch parent of an entity that participated in the formation of a Delaware LLC was “simply too attenuated” from the formation of the LLC to be subject to Delaware‘s jurisdiction on that basis.165 The court noted that the Dutch defendant‘s subsidiary held only a small interest in the new LLC, and that neither the defendant nor the subsidiary controlled the LLC after it was created.166
The Court of Chancery followed EBG Holdings’ reasoning in In re Swervepay Acquisition, LLC, 2022 WL 3701723, at *15 (Del. Ch. Aug. 26, 2022). There, the plaintiffs alleged that a defendant “took specific fraudulent actions, which [were] the subject of [that] lawsuit, in order to effectuate
In Mobile Diagnostic Group Holdings, LLC v. Suer, 972 A.2d 799 (Del. Ch. 2009) a plaintiff attempted to use the formation of a Delaware entity as part of a larger transaction as a jurisdictional hook over an individual who helped negotiate the transaction.173 The Court of Chancery rejected that attempt, saying, “[t]hat plaintiffs (or the Sponsors) chose to consummate the transaction using Delaware entities does not constitute an act in Delaware by [the defendant] that would subject him to personal jurisdiction under the long-arm statute.”174 Notably, though, the defendant‘s participation in the negotiations was limited to provisions that affected him, not the overall structure of the transaction.175
Guided by these principles, the Court finds that the Individual Defendants were too attenuated from the formation of the Matrix Entities to predicate jurisdiction on that transaction. There are no allegations that the Individual Defendants proposed forming the Matrix Entities in Delaware, received any personal benefit from the formation of the Matrix Entities, or took any affirmative act specific to forming the Matrix Entities. In fact, Plaintiffs’ allegations say little about what role the Individual Defendants played in negotiating the SPA; Plaintiffs instead focus on the Individual Defendants’ roles in preparing Mobileum for sale and the due diligence process.179 Plaintiffs’ allegations only support an inference that the
The citations Plaintiffs offer do not compel a different result. In the seminal case, Papendick v. Bosch, 410 A.2d 148 (Del. 1979), the nonresident defendant directly formed the new Delaware entity, which readily distinguishes Papendick from this case.182 The same is true of In re P3 Health Group Holdings, LLC, 2022 WL 8011513 (Del. Ch. Oct. 14, 2022) and Cairns v. Gelmon, 1998 WL 276226 (Del. Ch. May 21, 1998).
Plaintiffs also cite the Court of Chancery‘s opinion in In re General Motors (Hughes) Shareholders Litigation, 2005 WL 1089021, at *22 (Del. Ch. May 4, 2005), aff‘d, 897 A.2d 162 (Del. 2006). There, a nonresident corporate defendant, “News,” was subjected to specific jurisdiction in Delaware based on its negotiation of a merger transaction even though News did not directly engage in any acts within Delaware.191 News did, however, have a major role in orchestrating the merger, and the merger required the filing of a Certificate of Merger in Delaware.192 The court thus concluded:
By negotiating and engaging in a transaction between itself, an indirect Delaware subsidiary . . . , and another Delaware corporation . . . , in which Delaware law was to be applied, and necessary acts by the parties in furtherance of that transaction would be taken in Delaware, News has “purposefully availed” itself of the laws of Delaware and should
have reasonably anticipated being haled into a Delaware court for a cause of action related to that transaction.193
The General Motors court emphasized the importance of Delaware providing a forum in which to vindicate violations of Delaware-imposed fiduciary duties, including claims for aiding and abetting such violations.194
Suer‘s thoughtful distinction of General Motors resonates here.195 Like the defendant in Suer, the Individual Defendants were involved in negotiating the at-issue transaction but are not alleged to have been the driving force behind the SPA like News was for the merger at issue in General Motors. The Suer court also explained that the “most important[]” distinction with General Motors is the delta between Delaware‘s “obligation” to provide a forum in which to remedy breaches of fiduciary duties owed to Delaware corporations and Delaware‘s lesser interest in hearing more ordinary civil disputes involving out-of-state parties.196 Where, like Suer and here, the aforementioned “obligation” is not present, the plaintiff‘s burden under Section 3104(c)(1) is heavier than that imposed in General Motors.197
II. PLAINTIFFS HAVE PLED REASONABLY CONCEIVABLE FRAUD CLAIMS.
Plaintiffs’ principal claims against Defendants allege common-law fraud. The elements of common-law fraud are:
(1) a false representation made by the defendant; (2) the defendant knew or believed the representation was false or was recklessly indifferent to its truth; (3) the defendant intended to induce the plaintiff
to act or refrain from acting; (4) the plaintiff acted or refrained from acting in justifiable reliance on the representation; and (5) damage resulted from such reliance.199
“When a party sues based on a written representation in a contract . . . it is relatively easy to plead a particularized claim of fraud” because the surrounding circumstances are largely evidenced by the contract itself.203 Therefore, once a plaintiff identifies purportedly false contractual representations, “the plaintiff need only allege facts sufficient to support a reasonable inference that the representations were knowingly false.”204
In this Motion, Defendants primarily challenge the adequacy of Plaintiffs’ pleading with regard to the knowledge element.205 Defendants also argue that
Plaintiffs have not satisfied Rule 9(b) with regard to the falsity element.206 The Court reviews those arguments in turn.
A. Plaintiffs Have Raised a Fair Inference that Defendants Knew of the Fraud.
The parties are in accord that the SPA forecloses claims of reckless fraud and only permits claims of knowing fraud.207 This limitation is permitted under Delaware law.208 Where the parties diverge is whether Plaintiffs have adequately pled knowing—as opposed to reckless—fraud by Defendants. The parties have effectively centered their dispute on what is required to plead knowing fraud when a contract expressly prohibits claims of reckless fraud.209 Thus, the Court will pay particular attention to the applicable standard before applying that standard to Plaintiffs’ Complaint.
1. The “Position to Know” Standard Applies for Pleading Purposes.
Plaintiffs argue they adequately pled Defendants’ knowledge of the fraud because Plaintiffs’ Complaint raises a reasonable inference that the falsity of the Contested Representations was knowable and Defendants were in a position to know it.210 Defendants retort that using a “position to know” standard would be
As the Supreme Court of Delaware recited in one of its most recent descriptions of the pleading requirements for a fraud claim, “where pleading a claim of fraud has at its core the charge that the defendant knew something, there must, at least, be sufficient well-pled facts from which it can reasonably be inferred that this ‘something’ was knowable and that the defendant was in a position to know it.”213 This Court and the Court of Chancery—which, of course, defer to the Supreme Court—have used the same language to describe pleading knowing fraud.214
This standard is not a particularly recent development. The above phrasing of the position-to-know test was introduced to Delaware‘s jurisprudence more than two decades ago in Iotex Communications, Inc. v. Defries.215 Defendants cannot
Defendants are, in a sense, correct that this standard draws a “distinction between the scienter element [Plaintiffs] must prove at trial (intentional fraud) and what [Plaintiffs must] allege at the motion-to-dismiss stage (mere ‘position to know‘).”217 Defendants are incorrect, however, that there is no justification for such a distinction. The justification lies in Delaware‘s “minimal” and “plaintiff friendly” pleading standard, which denies dismissal if there is even “a possibility of recovery.”218 And while
Defendants also argue the myriad cases that apply the position-to-know test to fraud claims are inapposite because none of them dealt with contractual language expressly disclaiming reckless fraud.220 The Court does not see that as a controlling distinction. As explained above, the position-to-know test applies to pleading knowledge, not recklessness. As such, even though alleging knowledge is contractually required in this matter, the actual element that Plaintiffs must plead is no different than in the cases that apply the position-to-know test. Accordingly, to adequately plead knowledge in this case, Plaintiffs must raise a reasonable inference that the fraud was knowable and Defendants were in a position to know about it.221
Although the position-to-know test is a lower standard than particularity, the Court stresses that it is not a perfunctory analysis. To the contrary, the position-to-know test serves as a check on the broad language of “pled generally.”222 Even still, Defendants’ staunch resistance to application of the position-to-know test presages their inability to dispel the inference that Defendants were in a position to know about knowable fraud. The bulk of Defendants’ response to Plaintiffs’ invocation of the position-to-know test is dedicated solely to the supposed inapplicability of that standard.223 Having decided against Defendants on that threshold question, the ensuing analysis is relatively straightforward on these facts.
The Complaint alleges in detail that the Individual Defendants—who are not subject to this Court‘s jurisdiction but whose knowledge can nevertheless be imputed to their employers224—worked closely with Mobileum employees to
were deeply imbedded in Mobileum‘s day-to-day management and operation (for which they collected hefty management fees); set Mobileum‘s overall business and growth strategy; sourced and led diligence of Mobileum‘s acquisition targets; set the compensation of Mobileum‘s senior management; received monthly, weekly, and at times daily updates from Mobileum‘s senior management on their revenue recognition and acceleration schemes; set what they knew to be unrealistic revenue, earnings, and booking targets; had full access to Mobileum‘s internal revenue database and its customer lists; were alerted to reporting, compliance, and substantive issues with Mobileum‘s financial data; and led the overall sale process, including crafting narratives around Mobileum‘s revenue and earnings growth. Bhatia, Doran, and Mack in turn acted as directors and officers of Mobile Acquisition Holdings, LP and the Audax Defendants, who thus gained knowledge of fraudulent schemes and the falsity of the False Representatives and Warranties.225
This involvement was not limited to the big-picture development of Mobileum.
Plaintiffs allege, for example, that Bhatia conferred with Warner via email regarding specific cash flow estimates.226 That conversation included Bhatia asking whether the figures were kept internal and telling Warner, “I assume [the potential buyer] will see something better.”227 The Complaint also alleges that in December 2021, Bhatia instructed Mobileum not to answer certain questions from H.I.G. about Mobileum‘s audited financials and gave instructions about “how to position certain
As a whole, the Complaint alleges that the Audax Defendants—through Bhatia, Doran, and others—were closely involved with the preparation of Mobileum‘s allegedly fraudulent financials and the presentation of the same to H.I.G.232 Audax even allegedly came to Mobileum‘s aid when an accounting firm representing another potential buyer uncovered “material” problems with Mobileum‘s accounting practices, which led that buyer to terminate negotiations.233 According to Plaintiffs, Audax pressured the accounting firm to not share the firm‘s discovery with others and had Bhatia work with Srinivasan to “conceal the reason” that buyer walked away.234
This is not a case where the plaintiffs allege that a seller should be liable for not catching the omission of “a few miscellaneous line items . . . that should have been included.”236 Defendants seek to portray the falsified timesheets, invoices, and bookings as “administrative minutiae.”237 But while such documents might be relatively insignificant when kept accurately, the decision to falsify them is hardly routine. In fact, senior Mobileum executives—including Warner—allegedly described the creation of dummy invoices as an “immediate priority” and a “top priority.”238 The priorities of senior executives cannot fairly be called “administrative minutiae.”
B. Plaintiffs Have Raised a Fair Inference that the SPA Contained False Representations.
Defendants next argue that Plaintiffs’ Complaint fails to put Defendants on notice of how the Contested Representations were false.240 Defendants do not argue, however, that the Contested Representation could be accurate if Plaintiffs’ allegations are true, which the Court must assume at this stage. This portion of Defendants’ Motion does not require extensive discussion.
The Court first notes that the Court‘s role at this stage is not to distill the representations that can support a viable fraud claim from those that cannot; instead, the Court‘s task is to assess whether each aggregated claim of fraud adequately
Defendants’ position that Plaintiffs’ allegations of falsity are impermissibly vague is belied by the Complaint. Paragraph 107 of the Complaint contains a chart comparing side-by-side the SPA‘s representations and Plaintiffs’ rendition of “The Truth.”243 Reproducing the full details of that chart is unnecessary in this instance because, if Plaintiffs’ allegations are true, the resulting falsity of several Contested Representations would be apparent. In brief, the Contested Representations form three basic categories: (1) the material accuracy of Mobileum‘s financial statements, bookkeeping, and tax returns;244 (2) Mobileum operating in the “Ordinary Course of Business” and not suffering any “Material Adverse Effects;”245 and (3) Mobileum
If Plaintiffs’ allegations are true, Mobileum‘s financial misfeasance would have necessarily involved illegitimate bookkeeping, misleading financial statements, and, likely, inaccurate tax filings. Similarly, the three pillars of alleged fraud are not indicative of the ordinary course of business, and Delaware courts have found an inference of a material adverse effect in comparable instances of internal financial manipulation.247 Last, the falsification of financial documents—including producing backdated invoices for work that had not been performed—is inconsistent with several laws248 and put Mobileum at risk of litigation.
In sum, Plaintiffs’ allegations raise a reasonable inference that the Contested Representations were false. The Court emphasizes that Plaintiffs have yet to prove these claims, and Defendants may be able to demonstrate the truth of the Contested Representations once the pleading stage‘s imbalanced standards are set aside. For now, though, Plaintiffs’ fraud claims survive dismissal as to the Audax Defendants.
Plaintiffs also bring claims for aiding and abetting fraud and civil conspiracy (together, the “Secondary Fraud Claims“). To state a claim of aiding and abetting fraud, the plaintiff must allege: “(i) underlying tortious conduct, (ii) knowledge, and (iii) substantial assistance.”249 To state a claim of civil conspiracy, the Plaintiff must allege that: “two or more persons combined or agreed with the intent to do an unlawful act or to do an otherwise lawful act by unlawful means.”250 When fraud is the underlying unlawful act, both torts fall under
In opposition to the Secondary Fraud Claims, Defendants primarily rely on SPA provisions that purport to waive any claims for conspiracy or aiding and abetting.253 Defendants also argue that even if the Secondary Fraud Claims are not
A. The Terms of a Fraudulently Procured Contract Cannot Exempt from Liability Entities that were Knowingly Complicit in the Fraud.
Defendants urge that SPA Section 9.01(b) prohibits Plaintiffs from bringing the Secondary Fraud Claims. The most relevant language reads, “no Buyer Related Parties may avoid any limitation on liability set forth herein . . . by . . . asserting any claim against any Non-Recourse Party for conspiracy, [or] aiding or abetting[.]”255 Plaintiffs argue that such clauses are unenforceable under Delaware law when knowing fraud is the underlying tort.256 Defendants respond that because the SPA prohibits the Secondary Fraud Claims more explicitly than the non-recourse and exclusive remedy provisions in previous cases, the Court should enforce the SPA‘s plain language.257 For the reasons that follow, the Court finds that under Delaware law, the terms of a fraudulently procured contract cannot exempt from liability entities that were knowingly complicit in the fraud, including entities that aided, abetted, or conspired to commit such fraud.
The SPA‘s particularly precise provisions with respect to limiting fraud liability create a scenario for which neither the parties nor the Court located a perfect analogue—i.e., the express disclaimer of aiding and abetting and conspiracy claims in a case alleging knowing fraud. Notwithstanding that fact, the Court is not venturing into uncharted legal territory. To the contrary, the seminal case ABRY Partners has been followed up with nearly two decades’ worth of incremental development of the extent to which contracting parties can limit fraud liability. The Court‘s holding here is a natural corollary of that existing precedent.
Beginning with ABRY Partners, that decision has been summarized and analyzed many times before.258 The Supreme Court, in Express Scripts, explained and reaffirmed ABRY Partners’ holding.259 The central tension that ABRY Partners resolved is Delaware‘s “especially strong” respect for freedom of contract weighed against American courts’ “strong tradition” of prohibiting the contractual waiver of fraud claims.260 To balance those competing policies, then-Vice Chancellor Strine
Importantly, as explained in Prairie Capital, ABRY Partners’ holding does not only apply to the entity that directly made the false contractual representation.263 In Prairie Capital, a fraud claim against a private equity fund and its managers survived a motion to dismiss because the counterclaim-plaintiff adequately alleged that those defendants knew the target company‘s representations were false.264 As the Court of Chancery later recounted, “[t]he court [in Prairie Capital] reasoned that, although under the terms of the stock purchase agreement only the company made the representations, the scope of a claim for contractual fraud sweeps more broadly to cover those who knew that such representations were false.”265
In Online HealthNow, then-Vice Chancellor Slights further elucidated that doctrine.266 As relevant here, Online HealthNow examined the enforceability of a
“no officer, director, partner, manager, equityholder, employee or Affiliate of any Party . . . will have any liability or obligation with respect to [the SPA] or with respect to any claim or cause of action (whether in contract, tort or otherwise)” arising out of or related to the SPA “(including a representation or warranty made in connection with [the SPA] or as an inducement to enter into [the SPA]).”268
Following an “explication de texte” of ABRY Partners and its progeny, the court in Online Healthnow held that “[b]ecause Plaintiff has well pled that [a non-recourse party] did, in fact, know of and facilitate the fraudulent misrepresentations in the SPA . . . [the non-recourse party] cannot invoke the non-recourse provision to avoid liability under ABRY Partners and its progeny.”269
This Court, in AmeriMark, followed Online HealthNow and held: “Public policy against fraud may defeat . . . non-recourse contractual language at the motion to dismiss stage in litigation, if the plaintiff can adequately plead that a non-signatory party was knowingly complicit when a contracting party made fraudulent representations in a contract.”270 The AmeriMark court then analyzed fraud-based
The Court is similarly guided by LVI Group.272 There, the Court of Chancery faced a circumstance analogous to this one. The relevant exclusive remedy provision carved out “claims for fraud against the Person who committed such fraud.”273 The court was then asked to decide whether the plaintiff could nevertheless bring a fraud-based civil conspiracy claim.274 The court spared the conspiracy claim from
The LVI Group court explained that conspiracy law attributes one conspirator‘s acts to each co-conspirator, so “[i]n a sense . . . all members of a conspiracy to commit fraud have ‘committed such fraud,’ as the [relevant
2. Application of the Established Doctrine
Three accepted premises emerge from settled law that, when taken together, compel the Court‘s conclusion: (1) the critical factor under ABRY Partners and its progeny is the defendant‘s illicit mental state; (2) ABRY Partners’ holding that contractual provisions cannot displace liability for knowing fraud does not only apply to the entity that directly made the misrepresentation; and (3) the Secondary Fraud Claims have knowing complicity as an essential element. Together, those established rules reflect that when a plaintiff adequately pleads that a defendant knowingly promoted279 fraud, the defendant cannot shield itself from liability by relying on protections in the fraudulently procured contract.
Delaware law is clear that the Secondary Fraud Claims require an illicit mental state.280 As this Court recently stated, “[a] civil conspiracy claim requires a plaintiff
There is a caveat to the above, however. Like fraud‘s scienter requirement, the relevant knowledge for aiding and abetting can ordinarily be satisfied by “constructive knowledge,” which entails “reckless indifference” to the truth.285 ABRY Partners held that the risk of reckless fraud could fairly be allocated by contracting parties, including by waiving such claims.286 That reasoning neatly ports to claims of reckless aiding and abetting. Accordingly, the remainder of this discussion pertains only to aiding and abetting claims based on actual knowledge, rather than constructive knowledge, of the underlying fraud.
Morally, abettors and conspirators make the choice to promote tortious conduct that causes harm to third parties. Neither justice nor social norms are served by enabling bad actors to make that choice without fear of legal repercussions. Practically, the scienter element of the Secondary Fraud Claims already protects from liability those who inadvertently assist or act alongside fraudsters.290 Thus, even in the absence of contractual protection, an actor can confidently avoid liability
The Court also finds important Delaware courts’ refusal to narrowly apply ABRY Partners to the party that made the misrepresentation. Instead, “as a matter of public policy, the scope of a claim for contractual fraud swe[eps] more broadly.”292 To that end, anyone who causes another to make a knowingly false representation can also be liable as a principal fraudster.293 Of course, the Secondary Fraud Claims are only necessary to hold liable those who are not principal fraudsters. Still, the Court sees substantial overlap in the wrongfulness of causing another to make a false statement and the wrongfulness of either substantially assisting or agreeing to another making a false statement. In each circumstance, the actor is consciously participating in a course of conduct that leads to someone else defrauding a third party. The shared culpability of secondary tortfeasors is reflected
Finally, although these parties invited a detailed analysis of this issue, the Court reiterates that this is not a new rule. Rather, this conclusion merely follows the holdings in AmeriMark and LVI Group. The only difference here is that the SPA‘s attempt to preclude secondary liability was more explicit than in past cases. But the non-recourse provision in AmeriMark waived as to non-parties, “all claims, obligations, liabilities, or cause[s] of action (whether in Contract or in tort, in law or in equity)” connected to the relevant agreement.295 That “very broad” language putatively barred aiding and abetting and civil conspiracy claims, but such claims were nevertheless permitted.296 Likewise, given LVI Group‘s holding that “all members of a conspiracy to commit fraud have committed that fraud,”297 allowing co-conspirators to contractually avoid fraud liability would conflict with ABRY Partners. Accordingly, this result is not merely aligned with ABRY Partners’ culpability-focused reasoning, it is commanded by more recent developments of that doctrine.
Plaintiffs’ aiding and abetting and civil conspiracy claims are legally distinct, but they are so closely related that the Court analyzes them together.298 Additionally, aside from the SPA‘s exclusive remedy and non-recourse provisions, Defendants rely almost exclusively on the supposed defectiveness of Plaintiffs’ principal fraud claims to defeat the Secondary Fraud Claims. Since the Court has already explained that the SPA does not bar these claims and Plaintiffs’ principal fraud claims are well-pled, there is not much left to discuss. In the interest of completeness, the Court will briefly address the elements.
The first two elements of aiding and abetting—i.e., Defendants’ knowledge of an underlying tort299—have already been addressed at length. For the reasons stated in Section II of this Analysis, Plaintiffs have raised a reasonable inference that Defendants knew certain representations in the SPA were false. The only remaining element is Defendants’ substantial assistance of the fraud.300
Aiding and abetting‘s third element requires the plaintiff to show that “the abettor‘s ‘encouragement or assistance [wa]s a substantial factor in causing the resulting tort.‘”301 As noted above, Plaintiffs allege that the Individual Defendants,
The conspiracy claim is essentially satisfied by the same conduct. As Vice Chancellor Glasscock has explained:
it seems likely . . . that civil conspiracy is, in many cases, to borrow a term, a “lesser-included” claim within an aiding and abetting claim; an “agreement” and act in furtherance does not necessarily rise to the level of “substantial assistance,” while “substantial assistance,” if shown, normally includes an “agreement,” even if implicit, and act in furtherance thereof.305
IV. PLAINTIFFS’ UNJUST ENRICHMENT CLAIMS ARE BARRED BY THE SPA.
Plaintiffs also bring claims for unjust enrichment. “To plead unjust enrichment, a plaintiff must show: ‘(1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and the impoverishment, [and] (4) the absence of justification.‘”309 As with the Secondary Fraud Claims, Defendants argue this cause of action is barred by the SPA and the underlying fraud is not well pled.310 Plaintiffs likewise resume their argument that a well-pled claim of knowing fraud defeats
As relevant here, the exclusive remedy provision in SPA Section 9.01(b) waives all claims except those for “Fraud.”312 The SPA‘s definition of Fraud expressly excludes claims of “unjust enrichment.”313 Defendants also raise language in SPA Sections 9.01(b) and 11.17(b) that purports to preclude liability “based on . . . the ownership or operation of the Acquired Companies prior to the Closing[.]”314 These provisions unambiguously waive claims against Defendants for unjust enrichment, so Plaintiffs’ claims are only viable if public policy renders this aspect of the SPA unenforceable.315
The Court thus returns to the guiding precedent detailed in Section III.A of this Analysis. As previously discussed, Delaware‘s “especially strong” respect for freedom of contract only yields to contractually prohibited fraud claims where the
“As the Delaware Supreme Court has stated, ‘[r]estitution serves to deprive the defendant of benefits that in equity and good conscience he ought not to keep, even though he may have received those benefits honestly in the first instance[.]‘”323 For that reason, “[r]estitution is permitted even when the defendant retaining the benefit is not a wrongdoer.”324 In fact, unjust enrichment has been permitted alongside fraud claims specifically because unjust enrichment can reach defendants who were not implicated in the fraud.325
Because unjust enrichment can force disgorgement from “innocent” parties,326 the public policy concerns addressed by ABRY Partners do not apply to
V. THE COURT WILL PERMIT ADDITIONAL BRIEFING ON DEFENDANTS’ MOTION TO STRIKE.
The Court chooses to permit additional briefing on the issue of Defendants’ Motion to Strike Plaintiffs’ jury demand. Compared to the more pressing issues addressed herein, the effect of the SPA‘s jury waiver provision on this group of parties received sparse attention from the litigants. Of the attention this issue did receive, most of it was spent debating the procedural propriety of raising an argument in a footnote. The Court believes a more substantive discussion of this issue is worthwhile before a decision is rendered. The parties shall therefore propose a briefing schedule and a word limit that is less than that provided by Rule 107(h)(1) to better address the impact of the SPA‘s jury waiver provision on this litigation.
In conclusion, Defendants’ Motion to Dismiss Plaintiffs’ Complaint is GRANTED as to the Individual Defendants and Counts VII and VIII, but DENIED in all other respects. The parties are instructed to submit a proposed briefing schedule for Defendants’ Motion to Strike by July 19, 2024.
IT IS SO ORDERED.
/s/ Meghan A. Adams
Meghan A. Adams, Judge