     IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PAUL ELTON, LLC, a Delaware               )
limited liability company,                )
                                          )
           Plaintiff,                     )
                                          )
      v.                                  )   C.A. No. 2019-0750-KSJM
                                          )
ROMMEL DELAWARE, LLC, a                   )
Delaware limited liability company,       )
ROMMEL MOTORSPORTS                        )
DELAWARE, INC., a Delaware                )
corporation, and DAVID ROMMEL,            )
                                          )
           Defendants.                    )

                          MEMORANDUM OPINION
                         Date Submitted: February 4, 2020
                           Date Decided: May 7, 2020

Richard L. Abbott, ABBOTT LAW FIRM, Hockessin, Delaware; Counsel for
Plaintiff Paul Elton, LLC.
“J” Jackson Shrum, JACK SHRUM, P.A., Wilmington, Delaware; Counsel for
Defendants Rommel Delaware, LLC, Rommel Motorsports Delaware, Inc., and
David Rommel.



McCORMICK, V.C.
      In 2008, the plaintiff leased property holding a Harley-Davidson dealership to

defendant Rommel Motorsports Delaware, Inc. (“Motorsports”).              The lease

agreement gave Motorsports an option to purchase the parcel of land on which the

dealership and other buildings were located.        Upon exercise of the option,

Motorsports would pay a fixed price up-front and half of any proceeds later derived

from the lease or sale of the additional space holding the other buildings. The lease

provided that Motorsports could be held liable for any assignee’s failure to fulfill

Motorsports’ obligations. Defendant David Rommel signed the lease agreement on

behalf of Motorsports and as a guarantor.

      In 2010, Motorsports assigned its option to defendant Rommel Delaware,

LLC (“Rommel Shell”), which then exercised the option and purchased the property.

The purchase agreement preserved the plaintiff’s right to the proceeds from the sale

of the additional space. Nothing in the agreement released Motorsports, as assignor,

or Rommel, as guarantor, from liability for Rommel Shell’s failure to honor the

plaintiff’s proceeds right.

      In 2017, Rommel Shell agreed to sell the property, including the additional

space, to a third party. By April 2018, Rommel Shell had received all of the

governmental approvals necessary to ensure final approval of the redevelopment

project. The sale closed on April 17, 2018. Rommel Shell ultimately distributed the

proceeds of the sale to Rommel and Motorsports, leaving itself insolvent.
         The plaintiff learned of these events in October 2018 and demanded payment

of the proceeds from the sale. Rommel refused. The plaintiff brought this action

claiming that the defendants breached the lease and purchase agreements, defrauded

the plaintiff, and unjustly enriched themselves. The plaintiff requests declaratory

judgments, specific performance of the agreements, a constructive trust, piercing

Rommel Shell’s veil, and damages. The defendants moved to dismiss the complaint

in its entirety for failure to state a claim upon which relief may be granted. This

decision grants and denies the motion in part.          With the exception of one

permutation, the complaint states multiple claims for breach of contract, and the

plaintiff may seek declaratory relief, specific performance, and damages on those

claims. The complaint fails to state a claim for fraud, unjust enrichment, or veil

piercing.

I.       FACTUAL BACKGROUND
         The facts are drawn from the Verified Complaint (the “Complaint”) 1 and

documents it incorporates by reference.

         A.    The Lease Agreement
         In May 2008, Motorsports, a Delaware corporation owned and controlled by

Rommel, purchased a Harley-Davidson dealership in New Castle, Delaware. The

dealership was located on a portion of a 5.75 acre plot (the “Property”) that also held


1
    C.A. No. 2019-0750-KSJM, Docket (“Dkt.”) 1, Verified Complaint (“Compl.”).

                                           2
a vacant restaurant, two vacant hotels, a vacant check-in facility, and a vacant

auxiliary building formerly used for the hotels’ operations (collectively, the

“Additional Space”). 2

          On May 29, 2008, Paul Elton, LLC (“Plaintiff”), a Delaware limited liability

company, and Motorsports executed a lease agreement comprising a “Lease

Summary Page,” a “Lease,” and three exhibits. 3 Each document was binding on the

parties and incorporated the other documents by reference, and this decision refers

to the collection of documents as the “Lease Agreement.” 4

          Motorsports committed to lease the portion of the Property holding the

dealership for an initial term of fifteen years. 5 During the lease term, Motorsports

would hold an option to purchase the Property (the “Option”),6 the terms of which

were set forth in Section K of the Lease Agreement. The Option provision set an

initial purchase price of $8.5 million plus adjustments for other factors.7 As further




2
    Id. ¶ 11.
3
    See Compl. Ex A.
4
  The Lease Summary Page is subdivided alphabetically. The Lease is subdivided
numerically. Because these different subdivisions are easily distinguishable, this decision
cites generally to the Lease Agreement and then the specific section in either the Lease
Summary Page of the Lease.
5
    Lease Agreement § E.
6
    See id. §§ K, 41.
7
    Id. § K.

                                            3
consideration, the Option provision gave Plaintiff the following proceeds right (the

“Proceeds Right”):

                If [Motorsports] exercises its Option to Purchase before
                any leases for Additional Space are executed, and if,
                within ninety-nine years after the date of settlement
                whereby [Motorsports] becomes the owner of the
                Property, [Motorsports] shall pursue, with due diligence,
                commercially reasonable efforts to lease Additional
                Space, [Motorsports] executes a lease or leases for
                Additional Space or sells Additional Space, then
                [Plaintiff] shall be entitled to receive 50% the value of the
                lease(s) or sales for Additional Space.8

Under the Option provision, the parties have fifteen days from the date of the sale or

lease to agree on the value Plaintiff should receive under the Proceeds Right. If the

parties are unable to agree, the provision describes an alternative dispute resolution

process involving competing real estate appraisals and the possibility of a neutral

third appraisal.

          The Lease Agreement also contains an anti-assignment clause, which includes

the following agreed-upon term:

                Unless released in writing by [Plaintiff], [Motorsports]
                shall remain primarily liable for all liabilities, obligations,
                covenants, representations and warranties under this
                Lease, provided, however, [Motorsports’] obligations may
                not be enlarged or extended by any agreement of any
                assignee or subtenant with [Plaintiff]. Subtenants or
                assignees shall become liable to [Plaintiff] for all
                liabilities, obligations, convents [sic], representations and


8
    Id.

                                              4
                 warranties of [Motorsports] hereunder, without relieving
                 [Motorsports’] liability hereunder . . . . 9

Thus, under this term, Motorsports would continue to be liable for any breach of the

Lease Agreement by an assignee.

           Rommel signed the Lease Agreement on behalf of Motorsports. He also

signed the Lease Agreement on behalf of himself as guarantor for any of

Motorsports’ liabilities. Rommel’s guaranty was “continuing and irrevocable.”10

“In the event the Lease [was] assigned in any manner,” Rommel’s guaranty would

“continue in full force and effect unless a mutual release of [the] Guaranty [was]

executed by [Rommel] and [Plaintiff].” 11

           B.    The Purchase Agreement
           In July 2010, Motorsports assigned the Option to Rommel Shell, a single-

member Delaware limited liability company. Rommel Shell then exercised the

Option and entered into a Purchase Agreement with Plaintiff. 12

           The Purchase Agreement contains four recitals which are “incorporated by

reference and made a part of [the Purchase] Agreement” 13:

                 A.    WHEREAS,       [Plaintiff] and    [Motorsports]
                       previously entered into a lease agreement (the

9
    Id.§ 18.
10
     Id. § 43.
11
     Id.
12
     See Compl. Ex. B (the “Purchase Agreement”).
13
     Id. § 1.

                                            5
                      “Lease Agreement”) with respect to the property
                      described below; and

                B.    WHEREAS, the Lease Agreement contained an
                      option to purchase; and

                C.    WHEREAS, [Motorsports] has assigned it’s [sic]
                      rights to the Option to Purchase to [Rommel Shell];
                      and
                D.    WHEREAS, the parties have renegotiated the
                      Purchase Price and Terms of the Option to
                      Purchase. 14

         Following the recitals, the Purchase Agreement states that Rommel Shell will

pay Plaintiff $8 million. The Purchase Agreement then restates the Proceeds Right

and other obligations taken from the Option provision in a section titled “Additional

Consideration”:

                After the date of Settlement [Rommel Shell] shall pursue,
                with due diligence, commercially reasonable efforts to
                lease or sell [the Additional Space]. It is specifically
                understood [Rommel Shell’s] right to maximize the use of
                the Property for its motorcycle business operations is
                paramount and that [Rommel Shell’s] commercially
                reasonable efforts shall be interpreted in that context.

                If [Rommel Shell] executes a lease or leases for Additional
                Space or sells Additional Space then [Plaintiff] shall be
                entitled to receive 50% the value [sic] of the lease(s) or
                sales for Additional Space. . . .

                In the event of a sale of the Property by [Rommel Shell],
                this provision shall become null and void with respect to a
                subsequent purchaser of the Property unless the
                subsequent purchaser is an entity in which [Rommel Shell]

14
     Id. Recitals A–D (emphasis omitted).

                                            6
                 or its principals retain an interest or the sale is not an arms
                 length [sic] transaction.

                 In connection with [Rommel Shell’s] pursuit of utilizing
                 Additional Space on the Property, [Rommel Shell] shall
                 be entitled to consider the quality of the proposed Tenant
                 for the Additional Space, the nature of the business
                 operation and compatibility with the primary use on the
                 site. Under no circumstances shall [Rommel Shell] be
                 obligated to proceed with any additional use on the
                 Property that is not presently permitted, where required
                 governmental approval would materially and adversely
                 affect [Rommel Shell’s] ability to utilize the balance of the
                 Property.
                 This provision shall be applicable for a period of ninety-
                 nine (99) years from the date of Settlement. 15

The Additional Consideration provision also describes the same dispute resolution

process set out in the Option provision to govern disputes over the amount owed in

the event of a sale or lease of the Additional Space.

          The Purchase Agreement’s integration clause notes that the Purchase

Agreement and “those provisions of the Lease specifically incorporated by reference

herein” comprise the entire agreement. 16 Rommel signed the agreement as the “sole

member” of Rommel Shell.17 Unlike the Lease Agreement, Rommel did not sign

the Purchase Agreement as guarantor.




15
     Id. § 4 (formatting altered).
16
     Id. § 13.
17
     Id. § 18.

                                               7
      On August 12, 2010, Plaintiff and Rommel Shell closed on the purchase of

the Property.

      C.     The Sale
      In 2017, Rommel Shell entered into an agreement to sell the Property for $7.6

million to third party 2160 New Castle Avenue, LLC. The third party wanted to

redevelop the Additional Space into a gas station and convenience store. Closing

was conditioned on Rommel Shell’s ability to obtain all governmental approvals

necessary to ensure final approval of the redevelopment (the “Discretionary

Approvals”).    Neither Rommel Shell, Motorsports, nor Rommel (collectively,

“Defendants”) ever notified Plaintiff of the agreement to sell the Property. Rommel

Shell obtained the Discretionary Approvals in April 2018, and Rommel Shell and

the third party closed on the sale of the Property on April 17, 2018 (the “Sale”).

      In connection with the Sale, Rommel Shell entered into a multi-year lease of

the portion of the Property holding the dealership to continue running the Harley-

Davidson business.      But immediately after the redevelopment was formally

approved in June 2018, Rommel Shell terminated its lease and closed the Harley-

Davidson business. According to the Complaint, Rommel Shell then distributed the

proceeds of the Sale to Rommel or Motorsports, making Rommel Shell insolvent.

      In October 2018, Plaintiff learned of the Sale and demanded its share of the

proceeds under the Proceeds Right. Defendants responded by claiming “that there


                                          8
was nothing to pay” because “no adjacent property was involved and the Property

sold at a significant loss.”18 Plaintiff disagreed and retained a certified appraiser in

an attempt to engage Defendants in the dispute resolution process. The appraiser

valued the Additional Space at $5 million.

          D.     This Litigation
          Plaintiff filed this action on September 18, 2019. The Complaint asserts six

Counts:

          •      Count I seeks specific performance of the alternative dispute resolution
                 process described in the Option provision of the Lease Agreement and
                 the Additional Consideration provision of the Purchase Agreement.

          •      Count II asserts that Defendants committed common law and equitable
                 fraud by failing to disclose the redevelopment of the Additional Space
                 and “then representing that no sale of the Additional Space took
                 place.”19

          •      Count III seeks a declaratory judgment that the Sale triggered the
                 Proceeds Right.

          •      Count IV asserts that Defendants were unjustly enriched by the Sale
                 and seeks a constructive trust or equitable lien.

          •      Count V seeks to pierce Rommel Shell’s veil and hold Rommel and
                 Motorsports liable for Rommel Shell’s failure to pay Plaintiff under the
                 Proceeds Right.

          •      Count VI asserts that Defendants breached the Option provision of the
                 Lease Agreement and the Additional Consideration provision of the
                 Purchase Agreement.


18
     Compl. ¶ 41.
19
     Id. ¶ 61.

                                             9
          Defendants moved to dismiss the Complaint on October 18, 2019. 20 The

parties fully briefed the motion by December 31, 2019,21 and the Court heard oral

arguments on February 4, 2020. 22

II.       LEGAL ANALYSIS
          Defendants have moved to dismiss the Complaint pursuant to Court of

Chancery Rule 12(b)(6). Under Rule 12(b)(6), the Court may grant a motion to

dismiss if the Complaint “fail[s] to state a claim upon which relief can be granted.”23

“[T]he governing pleading standard in Delaware to survive a motion to dismiss is

reasonable ‘conceivability.’” 24 When considering such a motion, the Court must

“accept all well-pleaded factual allegations in the [c]omplaint as true . . . , draw all

reasonable inferences in favor of the plaintiff, and deny the motion unless the

plaintiff could not recover under any reasonably conceivable set of circumstances

susceptible of proof.” 25        The Court, however, need not “accept conclusory




20
  Dkt. 14, Motorsports’ Mot. to Dismiss the Compl.; see Dkt. 20, Rommel Shell and
Rommel’s Mot. to Dismiss the Compl.
21
   Dkt. 24, Defs.’ Opening Br. in Supp. of Mots. to Dismiss (“Defs.’ Op. Br.”); Dkt. 27,
Pl.’s Answering Br. in Opp’n to Defs.’ Mots. to Dismiss (“Pl.’s Ans. Br.”); Dkt. 28, Defs.’
Reply Br. in Supp. of Their Mots. to Dismiss (“Defs.’ Reply Br.”).
22
     Dkt. 31, Oral Arg. on Defs.’ Mot. to Dismiss (“Oral Arg. Tr.”).
23
     Ct. Ch. R. 12(b)(6).
24
  Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 537 (Del.
2011).
25
     Id. at 536.

                                              10
allegations unsupported by specific facts or . . . draw unreasonable inferences in

favor of the non-moving party.” 26

         Defendants seek to dismiss each of Plaintiff’s six counts. This decision first

addresses Plaintiff’s claims for breach of contract, which supply the foundation for

the other claims, and then addresses Plaintiff’s claims for specific performance,

declaratory judgment, fraud, unjust enrichment, and veil-piercing.

         A.    Breach of Contract
         Plaintiff contends that Defendants breached the Option provision of the Lease

Agreement and the Additional Consideration provision of the Purchase Agreement

by failing to pay Plaintiff under the Proceeds Right, failing to participate in the

alternative dispute resolution process, and “failing to timely and diligently

pursue . . . a subsequent lease or sale” of the Additional Space. 27

         “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, whether

express or implied; second, the breach of an obligation imposed by that contract; and

third, the resultant damage to the plaintiff.” 28 Delaware courts follow the objective




26
  Price v. E.I. DuPont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011), overruled on
other grounds by Ramsey v. Ga. S. Univ. Advanced Dev. Ctr., 189 A.3d 1255 (Del. 2018).
27
     Compl. ¶ 81 (Count VI).
28
     VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).

                                             11
theory of contracts, giving words “their plain meaning unless it appears that the

parties intended a special meaning.” 29

           At the motion to dismiss stage, “the trial court cannot choose between two

differing reasonable interpretations of ambiguous provisions.” 30          Dismissal is

appropriate on a Rule 12(b)(6) motion “only if the defendants’ interpretation is the

only reasonable construction as a matter of law.” 31

                 1.    The Complaint States a Claim for Breach of the Proceeds
                       Right Against Rommel Shell.
           Rommel Shell was a party to the Purchase Agreement. The Additional

Consideration provision of the Purchase Agreement provides that if Rommel Shell

“sells Additional Space then [Plaintiff] shall be entitled to receive 50% the value

[sic] of . . . sales for Additional Space.”32 Rommel Shell sold the Property, which

included the Additional Space. Therefore, under the plain language of the Purchase

Agreement, the Sale triggered the Proceeds Right and Plaintiff has the right to 50%

of the proceeds of the Sale that derived from the value of the Additional Space.




29
  Allen v. Encore Energy P’rs, L.P., 72 A.3d 93, 104 (Del. 2013); see Estate of Osborn ex
rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (“[A] contract’s construction should
be that which would be understood by an objective, reasonable third party.” (internal
quotation marks omitted)).
30
     VLIW Tech., 840 A.2d at 615.
31
     Id.
32
     Purchase Agreement § 4.

                                           12
         Defendants contend that the Sale did not trigger the Proceeds Right because

the Lease Agreement and the Purchase Agreement describe a sale of the Additional

Space, not a sale of the Property.        In other words, they read the Additional

Consideration provision as triggering the Proceeds Right only upon a sale of only

the Additional Space. But the plain language of the agreement does not use the

modifier “only.” And reading the agreement to impose the modifier “only” would

allow a party to easily evade its terms. For example, if a sale of only the Additional

Space triggered the Proceeds Right, then a party could arguably avoid triggering the

Proceeds Right by including in a sale of the Additional Space any additional assets.

Such an outcome would make little sense.33

         Alternatively, Defendants argue that instead of triggering the Proceeds Right,

the Sale made the right null and void. In support of this argument, Defendants cite

a clause in the Additional Consideration provision that states, “[i]n the event of a

sale of the Property by [Rommel Shell], this provision shall become null and void

with respect to a subsequent purchaser of the Property unless the subsequent

purchaser is an entity in which [Rommel Shell] or its principals retain an interest or

the sale is not an arms length [sic] transaction.”34 That clause is irrelevant to this




33
   Estate of Osborn, 991 A.2d at 1160 (describing the absurdity canon of contract
interpretation).
34
     Purchase Agreement § 4.

                                           13
case. The clause precludes Plaintiff from seeking the proceeds of a sale when the

Additional Space has already been sold to a third party and the third party is

subsequently selling the Additional Space. Here, Plaintiff is seeking proceeds from

Rommel Shell in the first sale of the Additional Space following exercise of the

Option, which is the express situation that triggers the Proceeds Right. Interpreting

the clause as Defendants do would eliminate the Proceeds Right entirely.

      Plaintiff alleges that Rommel Shell failed to pay Plaintiff any proceeds from

the Sale. Defendants fail to supply the only reasonable interpretation of the Purchase

Agreement. The Complaint thus states a claim against Rommel Shell for breach of

the Proceeds Right.

             2.    The Complaint States a Claim for Breach of the Proceeds
                   Right Against Motorsports and Rommel.
      Defendants argue that Motorsports and Rommel cannot be held in breach of

the Proceeds Right on the theories that neither Motorsports nor Rommel are parties

to the Purchase Agreement and that the Purchase Agreement superseded the Lease

Agreement.

      Although it is true that Motorsports and Rommel are not parties to the

Purchase Agreement, it is false that the Purchase Agreement superseded the Lease

Agreement. Defendants do not support this argument with a single provision in the

Purchase Agreement. The Purchase Agreement’s integration clause does not include

the typical boilerplate language stating that the agreement supersedes all earlier or

                                         14
contemporaneous agreements. 35         Instead, the plain language of the Purchase

Agreement indicates that the Purchase Agreement intended to preserve the rights

and obligations stated under the Lease Agreement by incorporating those provisions

by reference. As assignor and guarantor of the rights and obligations that arose under

the Lease Agreement, Motorsports and Rommel remain liable for breach.

       It is reasonably conceivable that Motorsports breached its obligations under

the Lease Agreement.         Motorsports assigned the Option to Rommel Shell.

According to the anti-assignment clause of the Lease Agreement, the assignment did


35
   Compare id. § 13 (“[Rommel Shell] and [Plaintiff] agree that they have read and fully
understand this Agreement, including those provisions of the Lease specifically
incorporated by reference herein and that it contains the entire agreement between them
with respect to the matters contained therein.”), with, e.g., Cabela’s LLC v. Wellman, 2018
WL 5309954, at *2, *6 (Del. Ch. Oct. 26, 2018) (“This Agreement is a complete agreement
between the parties and supersedes all prior discussion, negotiations, and agreements with
regard to the subject matter herein, whether oral or written.” (internal quotation marks and
emphasis omitted)), and BioVeris Corp. v. Meso Scale Diagnostics, LLC, 2017 WL
5035530, at *3 (Del. Ch. Nov. 2, 2017) (“This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof, and supersedes all prior or
contemporaneous oral or written agreements, understandings or representations.” (internal
quotation marks omitted)), aff’d, 202 A.3d 509 (Del. 2019) (TABLE), and TrueBlue, Inc.
v. Leeds Equity P’rs IV, LP, 2015 WL 5968726, at *8 (Del. Super. Sept. 25, 2015) (“This
Agreement . . . constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the Parties with respect to the subject matter
hereof and thereof.” (internal quotation marks omitted)), and Simplexity, LLC v. Zeinfeld,
2013 WL 5702374, at *3 (Del. Ch. Oct. 17, 2013) (“This Agreement supersedes all
previous letters, offers, quotations, negotiations and agreements in respect of its subject
matter including, by way of example and not limitation, the Memorandum of understanding
entered into by the Parties . . . .” (internal quotation marks omitted)), and Vornado PS,
L.L.C. v. Primestone Inv. P’rs, L.P., 821 A.2d 296, 320–21 (Del. Ch. 2002) (explaining
that the integration clause “provided that the Agreement ‘supersede[s] all prior agreements
and understanding both written and oral, among the parties . . .’”), aff’d, 822 A.2d 397
(Del. 2003) (TABLE).

                                            15
not release Motorsports from liability for Rommel Shell’s failure to honor the

obligations arising under the Option:

               Unless released in writing by [Plaintiff], [Motorsports]
               shall remain primarily liable for all liabilities, obligations,
               covenants, representations and warranties under this
               Lease, provided, however, [Motorsports’] obligations may
               not be enlarged or extended by any agreement of any
               assignee or subtenant with [Plaintiff]. Subtenants or
               assignees shall become liable to Landlord for all liabilities,
               obligations, convents [sic], representations and warranties
               of [Motorsports] hereunder, without relieving
               [Motorsports’] liability hereunder . . . . 36

         When Motorsports assigned the Option to Rommel Shell, Plaintiff did not

release Motorsports from liability for Rommel Shell’s failure to fulfill any

obligations that arose with exercising the Option. One of those obligations was

honoring the Proceeds Right. The Purchase Agreement did not enlarge or extend

the Proceeds Right; the right remained exactly the same. As the assignor of that

obligation, Motorsports remains liable for Rommel Shell’s failure to honor it.

Therefore, the Complaint pleads that Motorsports breached the Lease Agreement as

assignor by failing to ensure Plaintiff received its share of the proceeds from the

Sale.

         It is also reasonably conceivable that Rommel breached his obligations under

the Lease Agreement. Under the Lease Agreement, Rommel agreed to “guarantee



36
     Lease Agreement § 18.

                                             16
all of the obligations of [Motorsports] under the Lease including, but not limited to,

the payment of rent and of all other payments, covenants and other obligations of

[Motorsports] under or pursuant to the Lease.” 37 The Lease Agreement explains that

“[t]his is a continuing and irrevocable Guaranty and the rights of [Plaintiff]

hereunder may be exercised as often as necessary, as well as after the expiration of

the original term of the Lease and/or during any extension or renewal of the Lease.”38

The Lease Agreement further provides that “[i]n the event the Lease is assigned in

any manner, this Guaranty shall continue in full force and effect unless a mutual

release of this Guaranty is executed by [Rommel] and [Plaintiff] or [Plaintiff’s]

successors and/or assigns.” 39

           As guarantor, Rommel guaranteed the obligations of Motorsports under the

Lease Agreement. The assignment of Motorsports’ obligations had no effect on

Rommel’s guaranty.         Plaintiff never released Rommel from his obligations.

Therefore, the Complaint pleads that Rommel breached the Lease Agreement as

guarantor by failing to ensure Plaintiff received its share of the proceeds from the

Sale.




37
     Id. § 43.
38
     Id.
39
     Id.

                                          17
         The Complaint thus states a claim against Motorsports and Rommel for breach

of the Proceeds Right.

               3.    The Complaint States a Claim for Failure to Comply with
                     the Alternative Dispute Resolution Clause.
         Defendants rely on the same arguments to support dismissal of Plaintiff’s

claim for breach of the alternative dispute resolution clause. 40 This decision has

already addressed these arguments, holding that it is reasonably conceivable that the

Sale triggered the Proceeds Right and that Rommel and Motorsports are liable for

Rommel Shell’s breach of its obligations under the Additional Consideration

provision so long as they did not enlarge or extend those in the Option provision.

         Under the Purchase Agreement, the alternative dispute resolution clause

applies when “the parties cannot reach an agreement on value [of proceeds owed to

Plaintiff] within fifteen (15) days following the date of a transaction leasing or

selling Additional Space.”41       In that situation, the Additional Consideration

provision states that

               each party shall, within five (5) days, select an appraiser
               to complete an appraisal of the value of the lease for the
               Additional Space. The appraisals shall be completed
               within sixty (60) days of the time of [sic] the appraisers
               selected. In the event that the difference of the two
               appraisals is five percent (5%) or less, then the average of
               the two appraisals shall be the price. If the difference is
40
  See Defs.’ Op. Br. at 19; Defs.’ Reply Br. at 14–15; see also Oral Arg. Tr. at 9–10, 18–
20, 43–46.
41
     Purchase Agreement § 4.

                                           18
               more than five percent (5%), then the two appraisers shall,
               within ten (10) days, select a third appraiser and the
               average of the two closest appraisals shall be the [value of
               the Additional Space]. All appraisers selected shall be
               licensed commercial real estate appraisers in the State of
               Delaware having at least ten (10) years experience. The
               costs of the three appraisals shall be shared equally
               between [Rommel Shell] and [Plaintiff]. 42

         The Complaint alleges that Defendants refused to pay Plaintiff any proceeds

from the Sale because they did not believe the Proceeds Right had been triggered

“and the Property sold at a significant loss . . . [leaving] nothing to pay [Plaintiff].”43

Plaintiff responded by attempting to engage in the alternative dispute resolution

process. Defendants refused to engage, which violates the alternative dispute

resolution clause because the parties were in dispute over the value of the Additional

Space.

         The alternative dispute resolution process described in the Purchase

Agreement is identical to the process described in the Lease Agreement. 44 The


42
   Purchase Agreement § 4. Instead of using the term “value of the Additional Space,”
Section 4 of the Purchase Agreement uses the term “Option Price.” The Purchase
Agreement never uses that term again. Use of the term “Option Price” makes it reasonable
to infer that the parties just copied and pasted the alternative dispute resolution clause from
the Lease Agreement and attempted to adapt it to the Purchase Agreement. The Lease
Agreement had used the term Option Price because its alternative dispute resolution clause
was drafted to resolve disputes over the price at which Motorsports could exercise its
option, and then incorporated by reference to apply to disputes over the value of the
Additional Space in the event the Proceeds Right was triggered. See Lease Agreement § K.
43
     Compl. ¶ 41.
44
  Lease Agreement § K (“If the parties cannot reach an agreement as to [the value of the
lease(s) or sales for the Additional Space] within 15 days [of the transaction], then each
                                              19
Purchase Agreement neither enlarged nor extended Motorsports’ or Rommel’s

obligations under the Lease Agreement, meaning that they remain liable as assignor

and guarantor. The Complaint thus states a claim against Defendants for failure to

comply with the alternative dispute resolution clause.

              4.     The Complaint Partially States a Claim for Failure to
                     Pursue a Lease or Sale of the Additional Space.
       Again, Defendants rely on the same arguments to support dismissal of

Plaintiff’s claim for breach of the obligation under the Purchase Agreement to

“pursue, with due diligence, commercially reasonable efforts to lease or sell [the

Additional Space].” 45 This decision has already addressed these arguments, holding

that it is reasonably conceivable that the Sale triggered the Proceeds Right and that

Rommel and Motorsports are liable for Rommel Shell’s breach of the obligations

under the Additional Consideration provision so long as they did not enlarge or



party shall, within 5 days, select an appraiser to complete an appraisal of the value of the
lease [or sale] for only the Additional Space . . . . The appraisals shall be completed within
sixty (60) days of the time the appraisers are selected. In the event that the difference of
the appraisals is five percent (5%) or less, then the average of the two appraisals shall be
the [value of the Additional Space]. If the difference is more than 5%, then the two
appraisers shall, within 10 days, select a third appraiser and the average of the two closest
appraisals shall be the [value of the Additional Space]. All appraisers selected shall be
licensed commercial real estate appraisers in the State of Delaware having at least ten years
experience. The costs of the three appraisals shall be shared equally between [Plaintiff]
and [Motorsports].”)
45
  Purchase Agreement § 4; see Defs’ Op. Br. at 19; Defs’ Reply Br. at 14–15 (repeating
arguments in reply brief); see also Oral Arg. Tr. at 9–10, 18–20, 43–46. For example,
Defendants did not argue that Plaintiff failed to allege facts that amounted to a breach of
the commercially reasonable efforts clause.

                                             20
extend those in the Option provision. The Complaint thus states a claim against

Rommel Shell for failure to pursue a lease or sale of the Additional Space.

         The analysis for Motorsports and Rommel is less straightforward because the

Purchase Agreement extended and reframed the obligations owed under the Lease

Agreement. The Lease Agreement required Motorsports to “pursue, with due

diligence, commercially reasonable efforts to lease Additional Space.” 46 In contrast,

the Purchase Agreement required Rommel Shell to “pursue, with due diligence,

commercially reasonable efforts to lease or sell [the Additional Space].” 47 The

requirement to pursue a sale of the Additional Space is an expansion of the

obligations originally placed upon Motorsports.

         The Lease Agreement does not address, nor did the parties brief, whether the

scope of obligations imposed by the Purchase Agreement affects the claims against

Motorsports. This decision interprets the provision in Plaintiff’s favor as exposing

Motorsports to potential liability for the original obligations.          Under this

interpretation of the Lease Agreement, the Complaint states a claim against

Motorsports for failing to pursue commercially reasonable efforts to lease the

Additional Space. The Complaint fails to state a claim against Motorsports for

failing to pursue commercially reasonable efforts to sell the Additional Space.


46
     Lease Agreement § K.
47
     Purchase Agreement § 4 (emphasis added).

                                           21
         The analysis for Rommel is the same. Rommel is liable as guarantor only for

Motorsports’ failure to satisfy its obligations. The Complaint thus states a claim

against Rommel for failing to pursue commercially reasonable efforts to lease the

Additional Space. However, the Complaint fails to state a claim against Rommel

for failing to pursue commercially reasonable efforts to sell the Additional Space.

         B.     Specific Performance
         Plaintiff seeks an order requiring Defendants to specifically perform in

accordance with the Purchase Agreement’s alternative dispute resolution clause.48

Specific performance requires “a valid contract,” a plaintiff that is “ready, willing,

and able to perform,” and a “balance of the equities” that tips in the plaintiff’s

favor. 49

         This decision has already held that it is reasonably conceivable that the Sale

triggered the Proceeds Right and that Plaintiff stated a claim against Defendants for

failure to comply with the alternative dispute resolution clause. Plaintiff’s appraisal

of the Additional Space indicates its willingness to perform. Plaintiff should be able

to obtain the benefit of the parties’ agreed-upon, cost-effective dispute resolution

process, and Defendants have pointed to no reason that specific performance




48
     Compl. ¶¶ 57–58 (Count I).
49
     Estate of Osborn, 991 A.2d at 1158.

                                           22
“would . . . cause even greater harm than it would prevent.”50 The Complaint thus

states a claim for specific performance.

         C.     Declaratory Judgment
         Plaintiff seeks a declaratory judgment that the Sale triggered the obligations

in the Option provision and the Additional Consideration provision. 51 Defendants’

only argument for dismissal of this claim is based on the premise that there was no

breach of contract.52 This decision has already addressed that issue, holding the

Complaint pleads claims for breach.             The Complaint thus states a claim for

declaratory judgment.

         D.     Fraud
         Plaintiff contends that Defendants committed both common law and equitable

fraud by “failing to disclose” the redevelopment of the Additional Space “and then

representing that no sale of Additional Space took place.” 53 This decision first




50
     Id. at 1161 (internal quotation marks omitted).
51
     Compl. ¶ 67 (Count III).
52
   See 10 Del. C. § 6501; Rollins Int’l, Inc. v. Int’l Hydronics Corp., 303 A.2d 660, 662–
63 (Del. 1973) (explaining that a declaratory judgment requires an “actual controversy”
with the following “prerequisites”: “(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; (4) the issue involved in the controversy must be ripe for judicial
determination.”).
53
     Compl. ¶ 61 (Count II).

                                              23
addresses the claims under the framework of common law fraud and then turns to

equitable fraud.

                1.     The Complaint Fails to State a Claim for Common Law
                       Fraud.
         To state a claim for common law fraud, a complaint must plead the following

elements:

                1) a false representation, usually one of fact, made by the
                   defendant;

                2) the defendant’s knowledge or belief that the
                   representation was false, or was made with reckless
                   indifference to the truth;
                3) an intent to induce the plaintiff to act or to refrain from
                   acting;

                4) the plaintiff’s action or inaction taken in justifiable
                   reliance upon the representation; and
                5) damage to the plaintiff as a result of such reliance. 54

The first element can also be satisfied if a defendant deliberately conceals a material

fact or remains silent about a material fact in the face of a duty to speak.55

         Under Court of Chancery Rule 9(b), “[i]n all averments of fraud or mistake,

the circumstances constituting fraud or mistake shall be stated with particularity.

Malice, intent, knowledge and other condition of mind of a person may be averred




54
     Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983).
55
     Id.; accord Nicolet, Inc. v. Nutt, 525 A.2d 146, 149 (Del. 1987).

                                               24
generally.” 56 Delaware law recognizes that “[t]he test of whether an attempted

pleading of fraud states sufficient ‘circumstances’ to satisfy Rule 9 is not

scientific.”57

                 Generally, it may be said that an allegation of fraud is
                 legally sufficient under Rule 9(b) if it informs defendants
                 of the precise transactions at issue, and the fraud alleged
                 to have occurred in those transactions, so as to place
                 defendants on notice of the precise misconduct with which
                 they are charged.58

A plaintiff can satisfy this principle by alleging “(1) the time, place, and contents of

the false representation; (2) the identity of the person making the representation; and

(3) what the person intended to gain by making the representations.” 59

         Plaintiff first alleges that Defendants represented that “no sale of Additional

Space took place.”60 The Complaint does not allege this fact with any particularity.

For example, the Complaint does not allege when this representation was made or



56
     Ct. Ch. R. 9(b).
57
   Kahn Bros. & Co., Inc. Profit Sharing Plan & Tr. v. Fischbach Corp., 1989 WL 109406,
at *4 (Del. Ch. Sept. 19, 1989).
58
   Id. (internal quotation marks, alterations, and citations omitted); accord ABRY P’rs V,
L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1050 (Del. Ch. 2006) (“Essentially, the plaintiff
is required to allege the circumstances of the fraud with detail sufficient to apprise the
defendant of the basis for the claim.”); H-M Wexford LLC v. Encorp., 832 A.2d 129, 145
(Del. Ch. 2003); see Cont’l Ill. Nat’l Bank & Tr. Co. of Chi. v. Hunt Int’l Res. Corp., 1987
WL 55826, at *6 (Del. Ch. Feb. 27, 1987) (“[A] plaintiff need not allege evidentiary
details.”).
59
     ABRY, 891 A.2d at 1050.
60
     Compl. ¶ 61.

                                             25
by whom. Besides this particularity defect, the Complaint never alleges that Plaintiff

relied on Defendants’ representation. Plaintiff did the exact opposite: it hired an

appraiser, valued the Additional Space, and brought this action.

           Plaintiff next alleges that Defendants committed common law fraud by failing

to disclose the redevelopment of the Additional Space.61 “Generally, there is no

duty to disclose a material fact or opinion, unless the defendant had a duty to

speak.”62 “An affirmative obligation to speak only arises where there is ‘a fiduciary

or other similar relation of trust and confidence’ between the parties.” 63 “In other

words, there is no duty to speak absent special circumstances.” 64

           Plaintiff argues that Defendants had a duty to speak because the Purchase

Agreement states that “[t]ime is of the essence with regard to all provisions of this




61
     Id.
62
  Nicolet, 525 A.2d at 149; see Prairie Capital III, L.P. v. Double E Hldg. Corp., 132 A.3d
35, 52 (Del. Ch. 2015) (“In an arms’ length contractual setting . . . , a party has no
affirmative duty to speak.”); Restatement (Second) of Torts § 551(1) (Am. L. Inst. 1977)
(“One who fails to disclose to another a fact that he knows may justifiably induce the other
to act or refrain from acting in a business transaction is subject to the same liability to the
other as though he had represented the nonexistence of the matter that he has failed to
disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose
the matter in question.”).
63
  Prairie Capital, 132 A.3d at 52 (quoting 37 C.J.S. Fraud § 33, Westlaw (database
updated 2015)).
64
  Corp. Prop. Assocs. 14 Inc. v. CHR Hldg. Corp., 2008 WL 963048, at *6 (Del. Ch.
Apr. 10, 2008).

                                               26
Agreement”65 and describes a procedure for providing notices.66 Yet neither of these

provisions impose a duty on Defendants to notify Plaintiff about the development or

sale of the Additional Space. Instead, they set guidelines for providing notice when

required to do so. Plaintiff did not raise any other argument for inferring that

Defendants were under a duty to speak.

          In briefing, Plaintiff argues that its fraud claims should survive because of

alleged “badges of fraud,” 67 a phrase that generally refers to circumstances that

would allow a court to find (or, at the pleading stage, infer) the intent required to

support a claim of fraud. 68 Recasting Plaintiff’s claims in this manner does not


65
     Purchase Agreement § 11.
66
     Id. § 14.
67
   Pl.’s Ans. Br. at 24 (identifying the following alleged “badges of fraud”: “1) the
structuring and timing of the [Sale] and [government approvals] in an attempt to hide the
sale of Additional Space; 2) rendering [Rommel Shell] insolvent to avoid paying the
[Proceeds Right]; 3) failing to timely notify [Plaintiff] of the [Sale] so as to further the
fraudulent scheme; 4) lack of timely disclosure to [Plaintiff] of the pursuit of the Additional
Development; 5) preventing [Plaintiff] from taking action to prevent the fraudulent scheme
from being carried out; 6) the inability of [Plaintiff] to . . . seek equitable relief in Court;
or 7) selling the Additional Space without retaining adequate reserves to pay [Plaintiff] the
[Proceeds Right]”).
68
   See Badge of Fraud, Black’s Law Dictionary (11th ed. 2019) (defining “badge of fraud”
as “[a] circumstance generally considered by courts as an indicator that a party to a
transaction intended to hinder or defraud the other party, such as a transfer in anticipation
of litigation, a transaction outside the usual course of business, or a false statement,” and
alternatively defining “badge of fraud” as “an indication of fraudulent intent”); see also,
e.g., JPMorgan Chase Bank, N.A. v. Ballard, 213 A.3d 1211, 1245 (Del. Ch. 2019)
(inferring at pleading stage that defendants had intent to defraud based on “badges of
fraud,” including allegations that the “challenged payments largely were made to insiders”
and that other suspicious circumstances surrounded the transactions), appeal refused, 214
A.3d 448 (Del. 2019) (TABLE); Cooch v. Grier, 59 A.2d 282, 287 (Del. Ch. 1948)
                                              27
improve their viability, as the alleged “badges of fraud” do not support the elements

of a claim for fraud for the reasons discussed above.

         The Complaint thus fails to state a claim for common law fraud.

                2.     The Complaint Fails to State a Claim for Equitable Fraud.
         The parties did not separately address the equitable fraud claims. Yet,

“[e]quitable fraud is separate from, and broader, than common law fraud.”69

“Whatever amounts to fraud, according to the legal conception, is also fraud in

equitable conception; but the converse of this statement is not true.”70

                It is utterly impossible to formulate any single statement
                which shall accurately define the equitable conception of
                fraud, and which shall contain all of the elements which
                enter into that conception; these elements are so various,
                so different under the different circumstances of equitable
                cognizance, so destitute of any common bond of unity, that
                they cannot be brought within any general formula. To


(identifying knowledge of the timing of a fraudulent conveyance as a “badge of fraud”
permitting inference of intent to defraud); Kirkley v. Lacey, 30 A. 994, 995–96 (Del. Super.
1885) (instructing jury that if business was held in wife’s name but funded by husband
where husband sought to avoid business’s liabilities, that would constitute a “badge of
fraud” that would support proof of fraud); see also United States v. Fernon, 640 F.2d 609,
613 (5th Cir. 1981) (“[I]ntention [to defraud] can be found by the existence of certain
indicia or badges of fraud. . . . ‘[W]hile a badge of fraud standing alone may amount to
little more than a suspicious circumstance, insufficient in itself to constitute fraud per se,
several of them when considered together may afford a basis from which its existence is
properly inferable.’” (quoting Banner Constr. Corp. v. Arnold, 128 So. 2d 893, 896 (Fla.
Dist. Ct. App. 1961))); cf. Richards v. Jones, 142 A. 832, 835 (Del. Ch. 1928) (describing
a transfer from a son to his mother for nominal consideration as a badge of fraud permitting
increased scrutiny of fairness of transaction because of higher possibility of fraud).
69
     Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 143 (Del. Ch. 2009).
70
     3 John Norton Pomeroy, A Treatise on Equity Jurisprudence § 872, at 420 (5th ed. 1941).

                                              28
                attempt such a definition would therefore be not only
                useless, but actually misleading.71

         “The flexibility of the doctrine of equitable fraud is necessary to allow courts

of equity to address fraud in all of its forms, unhampered by the formalism that

traditionally limited common law courts.”72 One of the ways in which this Court

has loosened the formality of common law fraud has been by waiving the

requirement to show scienter, “reflecting its willingness to provide a remedy for

negligent or innocent misrepresentation.” 73

         Decisions of this Court have held that “an equitable fraud . . . claim lies only

if there is either: (i) a special relationship between the parties over which equity takes

jurisdiction (like a fiduciary relationship) or (ii) justification for a remedy that only

equity can afford.”74 In this case, Plaintiff alleged neither. Plaintiff and Defendants


71
     Id. § 873, at 420–21.
72
     Airborne, 984 A.2d at 144.
73
   Id. (internal quotation marks omitted); see, e.g., Zirn v. VLI Corp., 681 A.2d 1050, 1061
(Del. 1996); Stephenson, 462 A.2d at 1074 (“Equity courts developed their own
requirements for relief from fraud. However, the only departure from the common law
elements was Chancery’s willingness to provide a remedy for negligent or innocent
misrepresentations: the defendant did not have to know or believe that his statement was
false or to have proceeded in reckless disregard of the truth.”); see also Donald J. Wolfe,
Jr. & Michael A. Pittenger, Corporate and Commercial Practice in the Delaware Court of
Chancery § 2.03[b][1][iii], at 2-36 to 2-37 (2d ed. 2019).
74
   Fortis Advisors LLC v. Dialog Semiconductor PLC, 2015 WL 401371, at *9 (Del. Ch.
Jan. 30, 2015) (internal quotation marks omitted) (collecting cases); see Airborne, 984
A.2d at 144 (“Equitable fraud is not available in every case or to every plaintiff. It requires
special equities, typically the existence of some form of fiduciary relationship, such as that
between a director and stockholder or a trustee and cestui que trust, although other
circumstances might be cited.”).

                                              29
were contracting parties who were incentivized to protect and monitor their

individual rights memorialized in their agreements. They were not engaging in a

relationship that imposed trust or confidence in one another. Plaintiff can seek an

adequate remedy at law through its claims for breach of contract and specific

performance.

         The Complaint thus fails to state a claim for equitable fraud.

         E.     Unjust Enrichment, Constructive Trust, and Equitable Lien
         Plaintiff contends that Defendants were unjustly enriched and seeks relief

through a constructive trust or equitable lien.75           If an “express, enforceable

contract . . . controls the parties’ relationship . . . , a claim for unjust enrichment will

be dismissed.” 76 As the Restatement (Third) of Restitution and Unjust Enrichment

explains, “[c]onsiderations of both justice and efficiency require that . . . the parties’

own definition of their respective obligations—assuming the validity of their

agreement by all pertinent tests—take precedence over the obligations that the law

would impose in the absence of agreement.” 77




75
     Compl. ¶¶ 70–73 (Count IV).
76
   Bakerman v. Sidney Frank Importing Co., 2006 WL 3927242, at *18 (Del. Ch.
Oct. 10, 2006, revised Oct. 16, 2006); accord Restatement (Third) of Restitution and
Unjust Enrichment § 2(2) (Am. L. Inst. 2011) (“A valid contract defines the obligations of
the parties as to matters within its scope, displacing to that extent any inquiry into unjust
enrichment.”).
77
     Restatement (Third) of Restitution and Unjust Enrichment § 2 cmt. c.

                                             30
         Plaintiff argues that Defendants were unjustly enriched through a scheme to

deprive Plaintiff of its share of the proceeds from the Sale. The conduct at issue is

governed by the obligations in the Lease Agreement and Purchase Agreement.

Because those agreements take precedence, the Complaint fails to state a claim for

unjust enrichment.

         The only basis Plaintiff offers to support the imposition of a constructive trust

or equitable lien is unjust enrichment.78 Thus, to the extent the Complaint seeks

those forms of relief as a separate cause of action, it fails to state a claim. 79

         F.    Veil Piercing
         Plaintiff claims that the Court should pierce Rommel Shell’s veil to hold

Rommel and Motorsports liable for Rommel Shell’s failure to pay Plaintiff the

proceeds from the Sale. 80



78
   See Hogg v. Walker, 622 A.2d 648, 652 (Del. 1993) (“When one party, by virtue of
fraudulent, unfair, or unconscionable conduct, is enriched at the expense of another to
whom he or she owes some duty, a constructive trust will be imposed.”); Branca v. Branca,
443 A.2d 929, 931 (Del. 1982) (“A principal reason for impressing an equitable lien is to
prevent unjust enrichment, i.e., where it would be contrary to equity and good conscience
for an individual to retain a property interest acquired at the expense of another.”);
Vornado, 821 A.2d at 322 (“For a court to impose a constructive trust, a plaintiff must
demonstrate (1) a confidential or fiduciary relationship, (2) a promise, (3) a transfer in
reliance on such promise, and (4) unjust enrichment.” (internal quotation marks omitted)).
79
  Plaintiff contends that Defendants waived any argument for dismissing the claim for an
equitable lien. Pl.’s Ans. Br. at 28. The request for an equitable lien rested upon Plaintiff’s
claim for unjust enrichment. Because Plaintiff failed to state that claim, the Court sees no
reason to address the waiver argument.
80
     Compl. ¶ 78 (Count V).

                                              31
       Delaware public policy disfavors disregarding the separate legal existence of

business entities.81 Although a court considers several factors when determining

whether to pierce the corporate veil, 82 courts have often articulated the elements of

a veil piercing as requiring “an overall element of injustice or unfairness.”83




81
   Doberstein v. G-P Indus., Inc., 2015 WL 6606484, at *4 (Del. Ch. Oct. 30, 2015)
(“Delaware public policy does not lightly disregard the separate legal existence of
corporations . . . .” (internal quotation marks omitted)); Wallace ex rel. Cencom Cable
Income P’rs II, L.P. v. Wood, 752 A.2d 1175, 1183 (Del. Ch. 1999) (“Persuading a
Delaware court to disregard the corporate entity is a difficult task.” (quoting Harco Nat’l
Ins. Co. v. Green Farms, Inc., 1989 WL 110537, at *4 (Del. Ch. Sept. 19, 1989))).
82
   See, e.g., Doberstein, 2015 WL 6606484, at *4 (“Specific facts a court may consider
when being asked to disregard the corporate form include: (1) whether the company was
adequately capitalized for the undertaking; (2) whether the company was solvent; (3)
whether corporate formalities were observed; (4) whether the dominant shareholder
siphoned company funds; and (5) whether, in general, the company simply functioned as a
facade for the dominant shareholder.” (internal quotation marks omitted)).
83
   Doberstein, 2015 WL 6606484, at *4; see Crosse v. BCBSD, Inc., 836 A.2d 492, 497
(Del. 2003) (“To state a ‘veil-piercing claim,’ the plaintiff must plead facts supporting an
inference that the corporation, through its alter-ego, has created a sham entity designed to
defraud investors and creditors.”); Wenske v. Blue Bell Creameries, Inc.,
2018 WL 3337531, at *15 (Del. Ch. July 6, 2018) (dismissing veil-piercing claim that
failed to allege facts supporting inference that corporation “exists solely as a vehicle for
fraud”); Gadsden v. Home Preserv. Co., 2004 WL 485468, at *4 (Del. Ch. Feb. 20, 2004,
revised Mar. 12, 2004) (“A court of equity will disregard the separate legal existence of a
corporation where it is shown that the corporate form has been used to perpetrate a fraud
or similar injustice.”); Wallace, 752 A.2d at 1184 (observing that veil piercing “‘requires
that the corporate structure cause fraud or similar injustice’” and that “[e]ffectively, the
corporation must be a sham and exist for no other purpose than as a vehicle for fraud”
(quoting Outokumpu Eng’g Enters., Inc. v. Kvaerner Enviropower, Inc., 685 A.2d 724, 729
(Del. Super. 1996))); see also United States v. Golden Acres, Inc., 702 F. Supp. 1097, 1104
(D. Del. 1988) (“[N]o single factor could justify a decision to disregard the corporate entity,
but . . . some combination of them [is] required, and . . . an overall element of injustice or
unfairness must always be present . . . .”), aff’d, 879 F.2d 860 (3d Cir. 1989) (TABLE).

                                              32
         In this case, Plaintiff points to Defendants’ alleged fraudulent activity as a

basis for veil piercing. Plaintiff specifically alleges that (1) “[Rommell Shell] had

no assets other than the net proceeds from the sale of the Property,” (2) the

distribution of those assets “was made at a time when [Rommell Shell was] aware

of the financial obligation to pay [pursuant to its contractual obligations],” and

(3) the “transfer of assets . . . was a sham transaction that existed for no purpose

other than to defraud [Plaintiff].” 84       As discussed above, however, Plaintiff’s

allegations of fraud fail to state a claim. Plaintiff’s other allegations amount to

conclusory assertions insufficient to independently support a claim of veil piercing

under the traditional multi-factor analysis. 85




84
     Compl. ¶¶ 76, 77.
85
  See Doberstein, 2015 WL 6606484, at *4 (observing that “a plaintiff must do more than
plead that one corporation is the alter ego of another in conclusory fashion” (internal
quotation marks omitted)); see also Wenske v. Blue Bell Creameries, Inc., 2018 WL
5994971, at *6 (Del. Ch. Nov. 13, 2018) (denying reargument on pleading-stage dismissal
of veil-piercing claim that consisted of “conclusory allegations of ‘domination and
control’”); PR Acqs., LLC v. Midland Funding LLC, 2018 WL 2041521, at *15 (Del. Ch.
Apr. 30, 2018) (dismissing veil-piercing claim where complaint failed to plead facts that
“suggest[ed] in any way that [company] dominates or controls [affiliate] or that [company]
exists as a vehicle for [affiliate’s] purported fraud”); MicroStrategy Inc. v. Acacia Research
Corp., 2010 WL 5550455, at *12 (Del. Ch. Dec. 30, 2010) (dismissing veil-piercing claim
pled “in a conclusory fashion” where the complaint asserted that “the two corporations
took actions that allegedly constitute breaches of contract and fraud without asserting any
facts suggesting that such wrongs arose out of a ‘misuse of the corporate structure’”
(quoting Medi-Tec of Egypt Corp. v. Bausch & Lomb Surgical, 2004 WL 5366102, at *7
(Del. Ch. Mar. 4, 2004))).

                                             33
         Plaintiff further claims as part of its veil-piercing claim that Section 18-607

of the Delaware LLC Act provides an alternative route to recovery from Rommel

and Motorsports. 86 Plaintiff, however, failed to meaningfully develop this argument,

devoting a mere sentence to this issue in briefing,87 and thus the motion to dismiss

this aspect of Plaintiff’s claim is also granted. 88




86
     Compl. ¶¶ 75–76.
87
     Pl.’s Ans. Br. at 30.
88
   In re Mobilactive Media, LLC, 2013 WL 297950, at *12 n.152 (Del. Ch. Jan. 25, 2013)
(“‘[I]ssues adverted to in a perfunctory manner, unaccompanied by some effort at
developed argumentation, are deemed waived . . . . It is not enough merely to mention a
possible argument in the most skeletal way, leaving the court to do counsel’s
work.’” (quoting Roca v. E.I. du Pont de Nemours & Co., 842 A.2d 1238, 1242 n.12 (Del.
2004))). I also question the merits of this argument. By its plain language, Section 18-607
creates a corporate cause of action against LLC members who knowingly receive
distributions that improperly strip an LLC of its assets so as to render the LLC insolvent.
See 6 Del. C. § 18-607; Robert L. Symonds, Jr. & Matthew J. O’Toole, Symonds &
O’Toole on Delaware Limited Liability Companies § 7.05[A], at 7-36 (2d ed. 2019). Under
Delaware law, creditors lack standing to pursue derivative claims in the LLC context. See
CML V, LLC v. Bax, 28 A.3d 1037, 1041 (Del. 2011). And on its face, Section 18-607
does not expose LLC members to claims brought by creditors, although such language
could have been easily drafted. Compare 8 Del. C. § 174(a) (providing that “[i]n case of
any willful or negligent violation of § 160 or § 173 of this title, the directors under whose
administration the same may happen shall be jointly and severally liable . . . to the
corporation and to its creditors in the event of its dissolution or insolvency, to the full
amount of the dividend unlawfully paid, or the full amount unlawfully paid for the purchase
or redemption of the corporation’s stock” (emphasis added)), with 6 Del. C. § 18-607(b)
(providing that “[a] member who receives a distribution in violation of subsection (a) of
this section and who knew at the time of the distribution that the distribution violated
subsection (a) of this section, shall be liable to the limited liability company for the amount
of the distribution” (emphasis added)). Yet given the paucity of briefing on this issue, I
am reluctant to weigh in on the merits of the argument here.

                                              34
III.   CONCLUSION
       Defendants’ motion to dismiss is GRANTED in part and DENIED in part.

Counts II, IV, and V are dismissed in their entirety. Count VI is dismissed as to the

claim against Motorsports and Rommel for failure to ensure that Rommel Shell

pursued commercially reasonable efforts to sell the Additional Space. In all other

respects, the motion to dismiss is denied.




                                         35
