CourtListener 10868207

Full text

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

SHAREHOLDER REPRESENTATIVE )
SERVICES, LLC, a Colorado limited )
liability company, )
)
Plaintiff, ) C.A. No. N25C-12-337 MAA CCLD
)
v. )
)
FOLLETT PARENT, LP, )
)
Defendant. )

Submitted: May 14, 2026
Decided: May 29, 2026

Defendant’s Motion to Dismiss:
GRANTED in part; DENIED in part.

MEMORANDUM OPINION

Jaclyn C. Levy, Esquire and Samuel G. Gustafson, Esquire, of POTTER
ANDERSON & CORROON LLP, Wilmington, DE, and Michael P. Conway,
Esquire (Argued), of JONES DAY, Chicago, IL, Attorneys for Plaintiff.

Melissa N. Donimirski, Esquire, of STEVENS & LEE, Wilmington, DE, and Barry
S. Pollack, Esquire and Susan R. Cooke, Esquire (Argued), of POLLACK
SOLOMON DUFFY LLP, Boston, MA, Attorneys for Defendant.

Adams, J.
INTRODUCTION

In December 2021, Follett Parent, LP (“Parent”), through an Agreement and

Plan of Merger (the “Agreement”), acquired all the issued and outstanding capital

stock of Follett Corporation. Under the Agreement, Parent assumed several

obligations to sell Series A and Series B Preferred Stock of Lumen, Inc., which was

formerly owned by Follett Corporation. Now in dispute is whether Parent complied

with these contractual obligations.

Plaintiff Shareholder Representative Services, LLC (“SRS”), the appointed

Shareholder Representative under the Agreement, brings this action on behalf of the

former stockholders of Follett Corporation (“Stockholders”). Pursuant to Superior

Court Civil Rules 12(b)(1), 12(b)(6), and 17, Parent now moves for the Court to

dismiss SRS’s Complaint in its entirety.

Parent’s lead argument is SRS lacks standing to pursue this action because

SRS is not the real party in interest. Parent also presents substantive arguments to

support dismissal of SRS’s contract-based claims, including SRS’s implied covenant

of good faith and fair dealing claim. For the following reasons, the Court finds SRS

has standing to pursue this action and can state a breach-of-contract claim. The

Court finds SRS’s implied covenant claim fails because SRS has not identified any

gap in the Agreement to be filled by implied terms.

1
FACTUAL BACKGROUND

In December 2021, Follett Parent, LP (“Parent” or “Defendant”) acquired all

the issued and outstanding capital stock of Follett Corporation (the “Merger”).1 The

Merger, which closed on February 1, 2022 (the “Closing Date”), was effectuated by

the Agreement.2 Pursuant to the Agreement, Follett Corporation merged with an

existing entity to become a wholly-owned subsidiary of Parent.3

Prior to the Merger, Follett Corporation owned Series A and Series B Preferred

Stock of Lumen, Inc. (the “Lumen Interest”).4 The Agreement contained specific

provisions governing how the Stockholders would be fairly compensated for the

Lumen Interest.5 These provisions contemplated the Stockholders receiving post-

closing consideration through one of two scenarios.6

In the first scenario, Parent would successfully sell the Lumen Interest.7 The

Agreement obligated Parent, for the first three years after the Closing Date, to use

“reasonable best efforts” to consummate the sale of the Lumen Interest.8 Unless a

buyer was closely related to Parent, Parent held “sole discretion with respect to the

1
D.I. 1 [“Compl.”]¶ 2; Compl. Ex. A [“Agreement”] at 1.
2
Compl. ¶¶ 21-22; Agreement.
3
Compl. ¶ 21; Agreement at 1.
4
Compl. ¶ 3; Agreement § 6.10 (“As of the date of this Agreement, the [Follett Corporation]
indirectly owns Series A Preferred Stock and Series B Preferred Stock of Lumen, Inc.”).
5
Agreement § 6.10; Agreement Annex VI.
6
Agreement § 6.10; Agreement Annex VI.
7
Agreement § 6.10.
8
Id.
2
terms and conditions” of a Lumen Interest sale.9 Upon selling the Lumen Interest,

Parent was obligated to deliver 75% of the proceeds, less specified costs, to the

Stockholders as post-closing consideration.10

In the second scenario, Parent, within thirty months after the Closing Date,

would be unsuccessful in selling the Lumen Interest.11 If the Lumen Interest had not

been sold within thirty months, Parent was contractually obligated to procure an

independent, fair market value assessment of the Lumen Interest.12 The Agreement

defined the steps Parent must take to procure the assessment, including the relevant

steps outlined below:

1. Parent, on or before the thirty-month anniversary of the Closing Date,
proposes to SRS a reputable and independent valuation firm (“valuation
firm”) to determine the fair market value of the Lumen Interest.13

9
Id. (“Parent shall have sole discretion with respect to the terms and conditions of the Lumen Sale
unless such sale is to an Affiliate, officer, director, equity or debt holder, manager or family
member of Parent, the Company or any of their respective Affiliates (in which case, the terms and
conditions of the Lumen Sale shall be subject to the Shareholder Representative’s prior written
consent, which shall not be unreasonably withheld, conditioned or delayed), provided that all
consideration payable for the Lumen Interest must be cash.”).
10
Id. The specified costs that would offset the post-closing consideration were taxes and “costs
(including valuation costs) or expenses actually incurred . . . by Parent or the [Follett
Corporation].”
11
Id.
12
Id. (“If the Lumen Interest is not sold prior to the 30-month anniversary of the Closing Date,
Parent shall comply with the provisions set forth in Annex VI.”) (emphasis added).
13
Agreement Annex VI ¶ 1 (“Parent shall propose in writing to the Shareholder Representative on
or before the 30-month anniversary of the Closing Date, a reputable independent third party
valuation firm to be engaged by Parent or the Company to determine the Fair Market Value (as
defined below) of the Lumen Interest in accordance with the terms of this Annex (such valuation,
the ‘FMV Valuation.’)”).
3
2. Parent retains the proposed valuation firm if SRS does not object to the
proposed valuation firm within fifteen days.14

3. Parent uses reasonable best efforts to provide requested information to the
valuation firm.15

4. Within five business days of receiving the valuation firm’s assessment of
the Lumen Interest’s fair market value, Parent provides 75% of the
assessment, less specified costs, to the Stockholders. If a sale of the Lumen
Interest is consummated before the fair market value assessment is
received, 75% of the sale proceeds, less specified costs, must be delivered
to Stockholders.16

Following the Merger, Parent assumed control over the Lumen Interest.17

After almost thirty months had passed since the Closing Date, SRS requested Parent

provide a description of efforts Parent had taken to sell the Lumen Interest.18 Parent

14
Id. ¶ 2 (“If the Shareholder Representative does not object in writing to the valuation firm
proposed by Parent within 15 days after receipt of such notice, Parent or the Company shall retain
such valuation firm for the FMV Valuation. If the Shareholder Representative timely objects in
writing to the valuation firm proposed by Parent, Parent and the Shareholder Representative shall
mutually agree on a valuation firm for the FMV as promptly as practicable thereafter. The valuation
firm retained by Parent or the Company for the FMV Valuation in accordance with this Annex, the
‘Valuation Firm.’)”).
15
Id. ¶ 3 (“Parent shall use reasonable best efforts to provide, or to cause Lumen, Inc. to provide,
such information as may be requested by the Valuation Firm in connection with the FMV
Valuation.”).
16
Id. ¶ 7 (“Within five Business Days after the Valuation Firm delivers the FMV Value to Parent
and the Shareholder Representative, unless a Lumen Sale has been consummated prior to the date
thereof (in which case Parent shall pay 75% of the net consideration therefrom to the Paying Agent
as contemplated by Section 6.10 of the Agreement, Parent shall pay or cause to be paid to the
Paying Agent, cash (the “Lumen Cash Out Amount”) equal to 75% of the FMV Value less the sum
of (a) 75% of the fees and expenses actually paid by Parent or the Company to the Valuation Firm
in connection with the FMV Valuation and (b) an amount equal to 75% of any taxes that would be
payable by the Parent or the Company if the Lumen Interest had been sold by the Parent or the
Company for the FMV Value.”).
17
Compl. ¶ 23.
18
The thirty-month anniversary of the Closing Date was August 1, 2024. Id. ¶ 28. On July 19,
2024, SRS wrote Parent asking about the status of the Lumen Sale. Id. ¶ 27. When SRS received
4
never provided the description, and thirty months passed post-closing without Parent

selling the Lumen Interest.19

Parent subsequently proposed Ankura as the valuation firm that would

conduct the fair market value assessment of the Lumen Interest.20 SRS conducted

due diligence and agreed to the selection on August 19, 2024.21 Ankura circulated a

draft engagement letter shortly after, which SRS approved if one change was made.22

Parent never approved the change or the engagement letter.23

By October 1, 2024, Parent had not retained Ankura despite indications

Ankura was ready to begin the valuation process.24 When Ankura again inquired

about starting the valuation process, Parent responded: “the parties . . . are

considering their approaches.”25 SRS, however, had repeatedly asked Parent to

retain Ankura by this point.26

On October 30, 2024, Parent reversed course and expressed Parent’s belief

evaluation expenses would “burden a sale process prematurely.”27 SRS, in response,

no response, SRS sent a follow-up email on July 23, 2024, which requested the description of the
efforts Parent has taken to sell the Lumen Interest to that point. Id.
19
Id. ¶¶ 27, 29.
20
Id. ¶ 30.
21
Id.
22
Id. ¶ 32. SRS sought for the letter to incorporate Agreement Annex VI and for the engagement
to allow work product sharing between SRS and SRS’s counsel.
23
Id. ¶ 33.
24
Id. ¶¶ 33-34.
25
Id. ¶ 34.
26
Id.
27
Id. ¶ 35.
5
reminded Parent of its obligation to proceed with the valuation process.28 Despite

this reminder, however, Parent had still not retained Ankura or any other valuation

firm by the start of December 2024.29 When asked whether Parent would maintain

its refusal to continue the valuation process, Parent responded it hoped “to have a

response in the next day or so.”30 Parent would later inform SRS it was not pursuing

the valuation process.31

On December 13, 2024, Parent notified SRS that Parent had received an offer

to buy the Lumen Interest for $600,000.32 Just over a month later, Parent reported it

received another offer to purchase the Lumen Interest for $2,500,000.33 SRS quickly

objected to the new offer, viewing the proposed deal as a “fire sale” resulting from

months of inaction by Parent.34 Parent, despite SRS’s objections, completed the sale

nine days after SRS was notified of the offer.35

On February 20, 2025, Parent informed SRS it considered costs of

“responding to various questions from [SRS], including explanations of the sale

28
Id.
29
Id. ¶ 36.
30
Id.
31
Id. ¶ 38.
32
Id. ¶ 37. According to SRS, this offered purchase price was “a tiny fraction of any reasonable
[fair market value] estimation of the Lumen Interest.” Id.
33
Id. ¶ 41. According to SRS, this offered purchase price “was still at least four to five times less
than the fair market value of the Lumen Interest.” Id. The offer was obtained from the Lumen
CEO. Id. ¶ 12.
34
Id. ¶¶ 43, 46.
35
Id. ¶ 46. The sale followed months of unfulfilled requests to provide evidence of reasonable
best efforts taken to sell the Lumen Interest. Id. ¶¶ 27, 42.
6
process[,]” as an offsetting sales expense.36 Parent also requested SRS send a

“binding writing” indicating SRS “will not bring litigation in relation to the Lumen

Sale.”37 Parent expressed without such a writing, Parent would send net proceeds to

SRS incrementally and deduct “from those proceeds its future litigation expenses

from defending its breaches of the Agreement.”38

On February 28, 2025, SRS again requested documentation of Parent’s efforts

to sell the Lumen Interest.39 SRS requested Parent present several forms of

documentation, which Parent expressly refused to provide.40 According to SRS,

Parent’s alleged breaches of the Agreement were willful, malicious, and done with

intent to cause injury to SRS.41

On December 17, 2025, SRS filed this action against Parent, seeking four

counts.42 Count I is a breach-of-contract claim alleging Parent breached Section 6.10

of the Agreement.43 Count II is a breach-of-contract claim alleging Parent breached

Section 6.10 and Annex VI of the Agreement.44 Count III is a declaratory judgment

36
Id. ¶ 48. In other words, Parent intended to deduct these expenses from the sale proceeds owed
to Stockholders.
37
Id. ¶ 49.
38
Id.
39
Id. ¶ 50.
40
Id. ¶¶ 50-51.
41
Id. ¶ 52. Relevant to one of Parent’s main arguments in favor of dismissal, SRS says it, not the
Stockholders, was harmed in Paragraph 52. Id. Given the proceeding paragraphs, however, it is
reasonable to infer SRS meant the Stockholders SRS represents.
42
Compl.
43
Id. ¶¶ 53-60.
44
Id. ¶¶ 61-68.
7
claim seeking determination of whether attorneys’ fees are costs and expenses

deductible from Lumen Interest proceeds.45 Count IV is an implied covenant of

good faith and fair dealing claim alleging Parent breached an implied covenant to

fulfill Agreement obligations in good faith.46

On January 27, 2026, Parent filed a motion to dismiss the Complaint in its

entirety.47 On March 4, 2026, SRS filed an Answering Brief in opposition to Parent’s

motion to dismiss.48 On March 25, 2026, Parent filed a Reply Brief.49

STANDARD OF REVIEW

When a party brings a motion to dismiss for lack of standing pursuant to Rules

12(b)(1) and 12(b)(6), the Court’s determination of which rule applies is determined

by examining whether “the issue of standing is related to the merits.”50 When the

defendant argues relief cannot be granted because the plaintiff “has not pleaded an

essential element of the claim, the motion is properly decided under Rule

12(b)(6).”51 When the defendant argues the court “would not have the authority to

45
Id. ¶¶ 69-77.
46
Id. ¶¶ 78-86.
47
D.I. 7 [“Parent OB”].
48
D.I. 10 [“SRS Ans. Br.”].
49
D.I. 12 [“Parent Reply Br.”].
50
In re COVID-Related Restrictions on Religious Servs., 302 A.3d 464, 478 (Del. Super. 2023),
aff’d, 326 A.3d 626 (Del. 2024) (citations omitted).
51
Id. (citing Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275, 1285 (Del. 2007)).
8
grant relief requested to any plaintiff,” the motion is properly decided under Rule

12(b)(1).52

The “standards governing a motion to dismiss for failure to state a claim are

well settled: (i) all well-pleaded factual allegations are accepted as true; (ii) even

vague allegations are “well-pleaded” if they give the opposing party notice of

the claim; (iii) the Court must draw all reasonable inferences in favor of the non-

moving party; and (iv) dismissal is inappropriate unless the “plaintiff would not be

entitled to recover under any reasonably conceivable set of circumstances

susceptible of proof.”53

Superior Court Civil Rule 17 requires “every action . . . be prosecuted in the

name of the real party in interest.”54 “[A] party with whom or in whose name a

contract has been made for the benefit of another . . . may sue in that person’s own

name without joining the party for whose benefit the action is brought.”55 “The

contractual appointment of a shareholder representative to bring certain actions

makes that representative the real party in interest in those actions.”56

52
Id.
53
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-897 (Del. 2002) (citation omitted).
54
Super. Ct. Civ. R. 17.
55
Id.
56
Fortis Advisors LLC v. Allergan W.C. Hldg. Inc., 2020 WL 2498068, at *3 (Del. Ch. May 14,
2020) (citing Coughlan v. NXP B.V., 2010 WL 1531596, at *2-3 (Del. Ch. Apr. 15, 2010)).
9
LEGAL ANALYSIS

A. SRS IS THE REAL PARTY IN INTEREST AND HAS STANDING TO PURSUE THE
CLAIMS BROUGHT IN THE COMPLAINT.

The Court first addresses Parent’s lead argument that SRS, based on the

pleadings, lacks standing to pursue the claims in this action. Parent specifically

alleges SRS has not established SRS is the real party in interest.57 Parent presents a

two-pronged argument: (1) the Complaint is devoid of facts sufficient to establish

SRS as the real party in interest; 58 and (2) SRS lacks authority to bring claims in its

own name.59 For the following reasons, the Court finds SRS, as appointed

Shareholder Representative for former Follett Corporation Stockholders, is the real

party in interest with standing to pursue this action.

Before addressing the merits of Parent’s arguments, the Court must determine

which rule, 12(b)(1) or 12(b)(6), applies to Parent’s challenge to SRS’s standing.

During oral argument, Parent admitted it was not challenging whether a

contractually appointed stockholder representative is the real party in interest when

bringing authorized claims on behalf of stockholders. Nor would Parent be

successful in making such an argument.60

57
Parent OB at 13-16; Parent Reply Br. at 2-7.
58
Parent OB at 13-15; Parent Reply Br. at 2-4.
59
Parent OB at 15-16; Parent Reply Br. at 4-7.
60
Delaware courts have repeatedly held contractually appointed stockholder representatives are
the real parties in interest when pursuing authorized claims on behalf of stockholders. See Fortis,
2020 WL 2498068, at *3 (“The contractual appointment of a shareholder representative to bring
certain actions makes that representative the real party in interest in those actions.”); Coughlan,
10
Parent’s challenge is instead based upon alleged deficiencies in SRS’s own

pleadings and contractual interpretations of the Agreement. In other words, Parent’s

challenge is “related to the merits,” not on the Court’s “authority to grant [the] relief

requested to any plaintiff.”61 The Court therefore finds Rule 12(b)(6) applies to

Parent’s standing arguments.

The Court now proceeds to the merits of Parent’s standing arguments. For

SRS to be the real party in interest for this litigation, the Court must answer two

questions in the affirmative. The first question is whether the Agreement authorizes

SRS to bring the claims in this action. The second question is whether SRS has

sufficiently pled that SRS is the contractually appointed Shareholder Representative

authorized to bring, on behalf of the Stockholders, the claims in this action.

The Court first examines whether the Agreement authorizes SRS to bring the

claims in this action. This is a two-part inquiry. The Court must first find the

Agreement provided a mechanism for Stockholders to delegate SRS authority to act

on their behalf. The Court must then find the Agreement authorizes SRS to bring

2010 WL 1531596, at *2-3 (“Coughlan, as Stockholders’ Representative, is a party in whose name
a contract has been made for the benefit of the GloNav Stockholders, who are admittedly the real
parties in interest.”). In fact, this structure of representation is often encouraged, as it promotes
judicial efficiency by streamlining the adjudication of disputes. Fortis, 2020 WL 2498068, at *3
(“This structure is helpful to both buyers and sellers, as it enables each side to resolve post-closing
disputes efficiently. Buyers also benefit from the fact that the structure makes a judgment against
the representative binding on all stockholders, eliminating the risk of inconsistent judgments.”)
(cleaned up).
61
In re COVID-Related Restrictions, 302 A.3d at 478 (citations omitted).
11
the claims at issue in its capacity as Shareholder Representative. The answer to both

inquiries, and to the larger question of whether the Agreement authorizes SRS to

bring the claims in this action, is yes.

Neither Party disputes the Agreement provided a mechanism for the

Stockholders to delegate SRS authority to act on their behalf.62 Under Section 5.5(a)

of the Agreement, Stockholders are deemed to have appointed SRS as their

Shareholder Representative when Stockholders either vote in favor of the Merger or

receive the benefits of it.63

The Parties do dispute whether the Agreement grants SRS, in its capacity as

Shareholder Representative, authority to pursue the claims brought in this action.64

The Agreement does. Under the Agreement, a Shareholder Representative is

authorized to act as a Stockholder’s “agent, attorney-in-fact[,] and representative.”65

A Shareholder Representative is also authorized to “engag[e] attorneys . . . on behalf

of the [Stockholders] in connection with th[e] Agreement” and “tak[e] all such other

actions . . . which are necessary or appropriate under th[e] Agreement.”66

This language is extremely broad and sweeping. It authorizes SRS, as

Shareholder Representative, to take a variety of actions necessary to enforcing the

62
Parent Reply Br. at 4; SRS Ans. Br. at 4-5.
63
Agreement § 5.5(a).
64
Parent OB at 15-16; Parent Reply Br. at 4; SRS Ans. Br. at 5-6.
65
Agreement § 5.5(a).
66
Id.
12
Agreement or resolving post-closing disputes. The Court finds a plain reading of

Section 5.5(a) makes it at least reasonably conceivable SRS is authorized to pursue

the claims brought in this action.

The Court next examines whether SRS has sufficiently pled that SRS is the

contractually appointed Shareholder Representative authorized to bring, on behalf

of former Follett Corporation Stockholders, the claims in this action. The answer is

yes. Delaware law has long recognized our courts look to substance over form when

evaluating pleadings.67 This practice embraces the principle “mere matters of form

in labelling pleadings are of no importance; the contents of the pleadings are looked

to in seeking that justice is done.”68

Parent presents hyper technical arguments that ask the Court to abandon this

long-standing practice and rule on form over substance. Parent first argues SRS

impermissibly brings claims in its own name.69 Parent then argues, in the alternative,

SRS has failed to sufficiently identify the Stockholders it represents.70 For the

following reasons, the Court is unpersuaded by these arguments.

The Court starts with the argument SRS impermissibly brings claims in its

own name. To be clear, the caption of the Complaint does reflect claims are brought

67
Johnson v. Hamilton, 185 A.2d 70, 72 (Del. Super. Oct. 18, 1962).
68
Id.
69
Parent OB at 15-16; Parent Reply Br. at 4-7.
70
Parent OB at 13-14; Parent Reply Br. at 2-4.
13
in SRS’s own name.71 But the remainer of the Complaint simply does not reflect

this reality. On the first page of the Complaint, just below the case caption, SRS

clearly identifies itself as “appointed representative of the former shareholders of

the Follett Corporation.”72

The counts in the Complaint reflect this representative nature. SRS does not

allege personal harm. SRS instead pleads three times “Parent’s breach has harmed

the Shareholders, whom SRS represents.”73 SRS also pleads several times “[t]he

Shareholders are entitled to compensatory damages.”74 The substance of these

pleadings reflects, especially collectively, SRS is bringing claims on behalf of

Stockholders, not on its own behalf.

While Parent’s remaining argument is largely mooted by the discussion above,

the Court nonetheless addresses it briefly here. Parent focuses on SRS not providing

a voting record for the Merger and failing to join individual Stockholders to the

action.75 These arguments fair no better than the first argument. Delaware law does

not require a stockholder representative join individual stockholders,76 nor does

71
See generally Compl. (showing that the caption lists as plaintiff “Shareholder Representative
Services LLC, a Colorado limited liability company.”)
72
Compl. (emphasis added).
73
Id. ¶¶ 58, 66, 84.
74
Id. ¶¶ 59, 67, 85.
75
Parent OB at 15-16; Parent Reply Br. at 2.
76
Coughlan, 2010 WL 1531596, at *2-3 (“Coughlan, as Stockholders’ Representative, is a party
in whose name a contract has been made for the benefit of the GloNav Stockholders, who are
admittedly the real parties in interest. Accordingly, she may bring this action without joining
GloNav Stockholders.”) (emphasis added).
14
Parent provide sufficient support for SRS being required to identify all individual

Stockholders—especially at the pleading stage.

SRS pled in the Complaint SRS was appointed Shareholder Representation

for former Follett Corporation Stockholders.77 SRS incorporated by reference the

Agreement, which articulates how SRS became a Shareholder Representative.78

Because one such way was through voting in favor of the Merger,79 and because the

Merger, which was conditioned upon Stockholder approval, was completed, the

Court can make a reasonable inference SRS represents at least some of the former

Follet Corporation Stockholders. These facts are enough to properly establish SRS’s

representative status in this action.

The Court therefore rejects Parent’s hyper technical arguments, which

naturally implicate a form over substance approach to evaluating pleadings. The

substance of the Complaint, when viewed as a whole, reflects SRS is a valid

Shareholder Representative bringing claims on behalf of former Follett Corporation

Stockholders.

The Court finds SRS has sufficiently plead SRS is the contractually appointed

Shareholder Representative for former Follett Corporation Stockholders. The Court

77
Compl. ¶ 2.
78
Agreement § 5.5(a).
79
Id.
15
also finds the Agreement authorizes SRS to bring this action in its capacity as

Shareholder Representative. SRS is thus the real party in interest for this litigation.

B. PARENT’S MOTION TO DISMISS COUNT I IS DENIED.

The Court next discusses Parent’s motion to dismiss Count I of the

Complaint.80 Count I is a breach-of-contract claim concerning Parent’s alleged

failure to use reasonable best efforts to sell the Lumen Interest.81 SRS specifically

alleges Parent breached Section 6.10 of the Agreement.82 Section 6.10 provides, in

relevant part: “[f]ollowing the Closing until the third anniversary of the Closing

Date, Parent shall . . . use reasonable best efforts to consummate the Lumen Sale.”83

“In order to survive a motion to dismiss for failure to state a breach of contract

claim, the plaintiff must demonstrate: first, the existence of the contract . . . second,

the breach of an obligation imposed by that contract; and third, . . . damage to the

plaintiff.”84 The validity of the Agreement and whether damages have been alleged

is not in dispute.85 What is in dispute under Count I is whether Parent breached

Section 6.10 by failing to use reasonable best efforts when Parent was contractually

obligated to do so.

80
Compl. ¶¶ 53-60.
81
Id. ¶ 57.
82
Id. ¶¶ 56-57.
83
Id. ¶ 56; Agreement § 6.10. The term “reasonable best efforts” is not defined under the
Agreement. See generally Agreement (failing to define “reasonable best efforts”).
84
VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003) (citations omitted).
85
See generally Parent OB; SRS Ans. Br.; Parent Reply Br. (showing that neither party challenges
the enforceability of the Agreement or that damages have not been plead).
16
Delaware courts have previously held determining whether a party used

reasonable best efforts “is an inherently factual inquiry that is not readily amenable

to resolution at the pleadings stage.”86 An exception is where a claim for breach of

a reasonable-best-efforts obligation is not found to be reasonably conceivable under

any set of circumstances susceptible of proof.87

The Court finds such an exception does not apply in this case. SRS pleads

multiple facts making it reasonably conceivable Parent did not use reasonable best

efforts to sell the Lumen Interest at all relevant times. For example, SRS pleads

Parent has refused, on multiple occasions, to provide evidence Parent used

reasonable best efforts.88

SRS also pleads Parent received no offers to purchase the Lumen Interest in

the first thirty months after closing, but then received two offers within about a

month starting in late 2024.89 A reasonable inference can be drawn Parent was not

86
In re WeWork Litig., 2020 WL 6375438, at *9 (Del. Ch. Oct. 30, 2020) (citing Cooper Tire &
Rubber Co. v. Apollo (Mauritius) Hldgs. Pvt. Ltd., 2013 WL 5787958, at *6 (Del. Ch. Oct. 25,
2013); Crum & Crum Enters., Inc. v. NDC of Cal., LP, 2010 WL 4668456, at *5 (D. Del. Nov. 3,
2020); Brown v. Buschman Co., 2002 WL 389139, at *85 (D. Del. Mar. 12, 2002)).
87
Id.
88
Compl. ¶¶ 27, 42, 50-51. These consistent refusals may alone justify, at this stage, the Court
rejecting Parent’s argument Parent exercised reasonable best efforts in selling the Lumen Interest.
Delaware courts are hesitant to find a party acted with reasonable best efforts when the party is
found to have failed to adequately work with counterparties. See, e.g., Snow Phipps Grp., LLC v.
KCAKE Acq., Inc., 2021 WL 1714202, at *48 (Del. Ch. Apr. 30, 2021) (“Moreover, this court has
been hesitant to find that a party took reasonable best efforts to solve a problem where the party
“did not raise their concerns before filing suit, did not work with their counterparties, and appeared
to have manufactured issues solely for purposes of litigation.”).
89
Id. ¶¶ 28-29, 37, 41.
17
using the same efforts to sell the Lumen Interest in the first thirty months post-

closing as Parent was using when multiple offers were received.

A final example is the two offers Parent received for the Lumen Interest being

far below fair market value.90 Parent is correct an obligation to use “reasonable best

efforts” does not mean it must procure the highest possible offer for a sale.91 When

the only two offers received were allegedly far below fair market value, however, a

reasonable inference can be drawn that Parent did not use reasonable best efforts to

sell the Lumen Interest.

During oral argument, Parent attempted to distinguish the language of Section

6.10 from a typical reasonable best efforts clause. Parent argued Section 6.10 only

imposed an obligation to use reasonable best efforts to consummate a transaction. In

Parent’s view, this language limits the obligation to the sale transaction itself, not to

the actions leading up to the sale transaction. Because Parent did in fact consummate

a sale of the Lumen Interest, Parent therefore contends it cannot be in breach of

Section 6.10.

As SRS points out, however, Parent’s reading of Section 6.10 is extremely

narrow and would represent a substantial deviation from how a typical reasonable

best efforts clause operates. SRS’s reading of Section 6.10, which is broader and

90
Id. ¶¶ 37, 41.
91
Parent Reply Br. at 8.
18
more closely aligns to typical reasonable best efforts clauses, is just as reasonable.

Because the Court is not permitted to choose between two reasonable interpretations

at the pleadings stage,92 resolution of the meaning of Section 6.10 must occur in

further proceedings.

The Court finds, based on the pleadings, it is reasonably conceivable Parent

did not use reasonable best efforts to sell the Lumen Interest when it was

contractually obligated to do so. Because determining whether Parent used

reasonable best efforts is a factual inquiry inappropriate for resolution at the motion-

to-dismiss phase, Parent’s motion to dismiss Count I is DENIED.

C. PARENT’S MOTION TO DISMISS COUNT II IS DENIED.

The Court proceeds to discuss Parent’s motion to dismiss Count II of the

Complaint.93 Count II is a breach-of-contract claim concerning Parent’s alleged

failure to obtain a valuation of and subsequently pay consideration for the Lumen

Interest.94 SRS specifically alleges Parent breached Section 6.10 and Annex VI of

the Agreement.95 The Court has already stated the standard to survive a motion to

dismiss a breach-of-contract claim and will not repeat it here.

92
Vanderbilt Income and Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609,
613 (Del. 1996) (“On a motion to dismiss for failure to state a claim, a trial court cannot choose
between two differing reasonable interpretations of ambiguous documents.”).
93
Compl. ¶¶ 61-68.
94
Id. ¶ 65.
95
Id. ¶¶ 64-65.
19
Count II involves another dispute over whether Parent breached a Section 6.10

obligation. In addition to imposing on Parent the “reasonable best efforts” obligation

discussed for Count I, Section 6.10 also provides the following requirement: “If the

Lumen Interest is not sold prior to the 30-month anniversary of the Closing Date,

Parent shall comply with the provisions set forth in Annex VI.”96 Annex VI governs

the required steps to obtaining a valuation of the Lumen Interest.97

Before the Court discusses the terms of Annex VI, the Court first addresses

the Section 6.10 language just quoted above. The language is clear and

unambiguous; should the Lumen interest not be sold within thirty months of the

Closing Date, Parent shall comply with the terms outlined in Annex VI. The words

“shall comply” are mandatory, not discretionary. Parent was therefore contractually

obligated to comply with Annex VI when the Lumen Interest was not sold within

thirty months of the Closing Date.98

To resolve Parent’s motion to dismiss Count II, the Court must therefore

determine whether it is reasonably conceivable Parent breached the terms of Annex

VI. The Court finds that it is. Once Annex VI applies, it first requires Parent to

propose to SRS, in writing, a “reputable independent third party valuation firm to . .

96
Agreement § 6.10.
97
Agreement Annex VI.
98
Compl. ¶¶ 28-29.
20
. determine the [f]air [m]arket [v]alue of the Lumen Interest.”99 SRS has plead

Parent proposed Ankura as the valuation firm.100

Annex VI then provides Parent “shall retain such valuation firm for the [fair

market valuation]” if SRS “does not object in writing to the valuation firm proposed

. . . within 15 days after receipt of such notice.”101 The Court again highlights “shall

retain” is mandatory and not discretionary. SRS has pled it did not object to Ankura

assessing the fair market value on the Lumen Interest.102 SRS has also pled Parent

never retained Ankura and later expressly informed SRS it would not obtain any

valuation firm.103

These pleadings alone establish it is reasonably conceivable Parent breached

Annex VI. Parent argues Annex VI allowed Parent to exercise its “sole discretion”

in selling the Lumen Interest any time before a fair market valuation of the Lumen

Interest was received.104 But Parent fails to address the language in Annex VI

requiring Parent to retain a valuation firm after proposing the firm without objection.

Because it is reasonably conceivable Parent breached the terms of Annex VI,

and thus breached Section 6.10, Parent’s motion to dismiss count II is DENIED.

99
Agreement Annex VI ¶ 1.
100
Compl. ¶ 30.
101
Agreement Annex VI ¶ 2.
102
Compl. ¶ 30.
103
Id. ¶¶ 36, 38.
104
Parent OB at 17.
21
D. PARENT’S MOTION TO DISMISS COUNT III IS DENIED.

The Court turns to discuss Parent’s motion to dismiss Count III of the

Complaint.105 Count III is a declaratory judgment claim concerning whether Section

6.10 authorizes Parent to deduct, from Lumen Interest proceeds, Parent’s attorneys’

fees from defending alleged Agreement breaches.106 SRS seeks declaratory

judgment these fees should not be deducted from the Lumen Interest proceeds owed

to Stockholders.107

“The judiciary’s power to issue a declaratory judgment is limited by the well-

settled principle that a declaratory judgment must ‘address an actual controversy

between parties with affected rights.”108 A case or controversy exists when the

following four requirements are met:

“(1) It must be a controversy involving the rights or other legal relations
of the party seeking declaratory relief; (2) it must be a controversy in
which the claim of right or other legal interest is asserted against one
who has an interest in contesting the claim; (3) the controversy must be
between parties whose interests are real and adverse; [and] (4) the issue
involved in the controversy must be ripe for judicial determination.”109

105
Compl. ¶¶ 69-77.
106
Id. ¶ 77.
107
Id.
108
In re COVID-Related Restrictions, 326 A.3d at 642 (internal quotations omitted) (quoting
Gower v. Trux, Inc., 2022 WL 534204, at *12 (Del. Ch. Feb. 23, 2022)).
109
Id. (citing Rollins Int’l v. Int’l Hydronics Corp., 303 A.2d 660, 662-63 (Del. 1973)).
22
Parent only challenges SRS’s Count III does not meet the ripeness requirement.110

For the following reasons, the Court finds Count III is ripe and a case or controversy

exists for declaratory judgment to be appropriate.

The Parties again ask the Court to examine language found in Section 6.10.

Section 6.10 provides, in relevant part: “[t]he consideration paid in connection with

a sale of the Lumen Interest . . . net of the Taxes, costs (including valuation costs) or

expenses actually incurred . . . by Parent . . . to consummate the Lumen Sale, shall

be allocated 25% to Parent and 75% to the former [Stock]holders.”111 At issue is the

scope of “costs” and “expenses” to consummate the Lumen Sale.

The Court does not find, as Parent suggests, SRS’s declaratory judgment claim

“rises and falls” with SRS’s breach-of-contract-claims in Counts I and II.112 SRS

seeks declaratory judgment, under Section 6.10, that legal fees incurred in

connection with the Lumen Sale are not within the scope of “cost” or “expenses”

Parent is entitled to withhold from proceeds.113

Whether Counts I and II are ultimately successful has no bearing on the

resolution of this declaratory judgment claim. An actual and ripe controversy exists

as to whether, based on Section 6.10, Stockholders are entitled to Lumen Interest

110
Parent OB at 19-20.
111
Agreement § 6.10.
112
Parent OB at 19.
113
Compl. ¶ 77.
23
proceeds now or after the current disputes between the Parties are resolved. The

Court must interpret the language of Section 6.10 to resolve Count III, and the Court

need not wait until Counts I and II are resolved to do so.

The Court now moves to discuss the merits of Count III. It is well-settled the

Court “cannot choose between two differing reasonable interpretations of

ambiguous provisions.”114 Contractual language is “ambiguous if it is susceptible to

more than one reasonable interpretation.”115 An interpretation is unreasonable “if it

produces an absurd result or a result that no reasonable person would have accepted

when entering the contract.”116

The Court finds ambiguous the Section 6.10 language governing the costs and

expenses Parent can withhold from the Lumen Interest proceeds. The Court finds

the phrase “to consummate the Lumen Sale” to be especially ambiguous.117 There

are at least two reasonable interpretations of this phrase.

One reasonable interpretation is legal fees, which result solely from post-

closing disputes of the Lumen Interest Sale, fall outside the costs and expenses

contemplated in Section 6.10. Under this interpretation, the underlying disputes

generating the legal fees at issue do nothing to further or hinder the consummation

114
LGM Hldgs., LLC v. Schurder, 340 A.3d 1134, 1144 (Del. 2025) (internal quotations omitted)
(quoting VLIW Tech., 840 A.2d at 615).
115
Id. (internal quotations omitted) (quoting Terell v. Kiromic Biopharma, Inc., 338 A.3d 1272,
1275-77 (Del. Jan. 21, 2025)).
116
Id. (internal quotations omitted) (quoting Terell, 338 A.3d at 1275-77).
117
Agreement § 6.10.
24
of the Lumen Sale. This reading is narrow and essentially only allows recovery of

costs and expenses resulting from the sale transaction itself.

Another reasonable interpretation is Section 6.10 contemplates Parent

recovering all costs or expenses relating to the sale of the Lumen Interest. Under

this interpretation, Parent would essentially be indemnified for every related cost or

expense incurred because of the Lumen Sale—even those incurred after the sale was

complete. This reading is broad, which matches the broad nature of the terms “costs”

and “expenses.”118

Because the Court finds the relevant language in Section 6.10 ambiguous, and

because the Court is prohibited from choosing one reasonable interpretation over

another at the motion-to-dismiss phase, Parent’s motion to dismiss Count III is

DENIED.

E. PARENT’S MOTION TO DISMISS COUNT IV IS GRANTED.

The Court finally discusses Parent’s motion to dismiss Count IV of the

Complaint.119 Count IV is an implied covenant of good faith and fair dealing claim

concerning Parent’s alleged breach of an implied covenant to perform, in good faith,

Parent’s Agreement obligations.120 SRS specifically alleges Parent breached implied

covenants by “failing to exercise good faith in failing to pursue a bona fide sale

118
Id.
119
Compl. ¶¶ 78-86.
120
Id. ¶ 82.
25
process of the Lumen [I]nterest and selling the Lumen Interest at well below its fair

market value.”121

The implied covenant of good faith and fair dealing (the “Implied Covenant”)

is “the doctrine by which Delaware law cautiously supplies terms to fill gaps in the

express provisions of a specific agreement.”122 The Implied Covenant is inherent in

every contract and cannot be eliminated.123 Despite its widespread presence,

however, the Implied Covenant is “a limited and extraordinary legal remedy.”124

To prevail on an Implied Covenant claim, a plaintiff must prove “a specific

implied contractual obligation, a breach of that obligation by the defendant, and

resulting damage to the plaintiff.”125 These elements parallel a claim for breach of

an express contract provision, except the operative provision is implied.126

When presented with an Implied Covenant claim, Courts must “first [] engage

in the process of contract construction to determine [if] there is a gap to be filled.”127

Courts assess whether contract language “expressly covers a particular issue” or

121
Id. ¶ 83.
122
Allen v. El Paso Pipeline GP Co., L.L.C., 113 A.3d 167, 183 (Del. Ch. 2014).
123
Cygnus Opportunity Fund, LLC v. Washington Prime Grp., LLC, 302 A.3d 430, 458 (Del. Ch.
2023).
124
Oxbow Carbon & Mins. Hldgs., Inc. v. Crestview-Oxbow Acq., LLC, 202 A.3d 482, 507 (Del.
2019) (quoting Nemec v. Shrader, 991 A.2d 1120, 1128 (Del. 2010)).
125
Cygnus, 302 A.3d at 458 (quoting Cantor Fitzgerald, L.P. v. Cantor, 1998 WL 842316, at *1
(Del Ch. Nov. 10, 1998)).
126
Id.
127
Allen, 113 A.3d at 183 (citing Mohsen Manesh, Express Contract Terms and the Implied
Contractual Covenant of Delaware Law, 38 DEL. J. CORP. L. 1, 19 (2013)).
26
whether “the contract is silent on the issue.”128 The Implied Covenant only applies

when the contract is truly silent on the issue at hand, as “[t]he [I]mplied [C]ovenant

will not infer language that contradicts a clear exercise of a contractual right.”129

The Court starts analysis of Count IV with the instructive precedent set in

Fortis Advisors LLC v. Dialog Semiconductor PLC.130 Dialog involved a post-

closing dispute over earnout payments and efforts used to achieve them. 131 The

plaintiff brought a claim for breach of the reasonable best efforts clause, alleging the

defendant had breached the clause by taking or failing to take six actions. 132 The

plaintiff also brought, in the alternative, an Implied Covenant claim.133 Under this

claim, plaintiff alleged the defendant breached the Implied Covenant by taking or

failing to take the same six actions.134

The Court of Chancery dismissed the plaintiff’s Implied Covenant claim

because the plaintiff had failed to identify a gap to be filled in the relevant

agreement.135 Instead, the Court of Chancery found the plaintiff simply mimicked

the language of the breach-of-contract claim.136 The Court of Chancery also held

128
Id.
129
Id. (citing Nemar v. Shrader, 991 A.2d at 1127).
130
2015 WL 401371 (Del. Ch. Jan. 30, 2015).
131
Id. at *1.
132
Id. at *4.
133
Id.
134
Id.
135
Id. at *5.
136
Id.
27
without such a gap identified, it was inappropriate to allow the Implied Covenant

claim to remain as an alternative to the plaintiff’s breach-of-contract claim.137

The Court finds a similar situation occurring with Count IV. The only

difference between Count I and Count IV, which concern the exact same conduct of

Parent, is Count IV alleges the conduct was not done in good faith. The problem

here, as was the case in Dialog, is SRS has not identified a gap to be filled in the

Agreement. SRS rather seeks to either supplant or add to an existing standard for

conduct already expressly addressed in the Agreement.138 This makes Counts I and

IV duplicative.

Because the Court finds the Agreement already expressly provides the

standard Parent must meet to sell the Lumen Interest, and because the standards of

reasonable best efforts and good faith are duplicative, Parent’s motion to dismiss

Count IV is GRANTED.

IT IS SO ORDERED.

137
Id.
138
Agreement § 6.10.
28