      IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE


PROJECT BOAT HOLDINGS, LLC,                 :
                                            :
                          Plaintiff,        :
                                            :
                v.                          :     C.A. No. 12606-VCS
                                            :
BASS PRO GROUP, LLC,                        :
                                            :
                          Defendant.        :




                            MEMORANDUM OPINION

                          Date Submitted: February 1, 2019
                            Date Decided: May 29, 2019


John A. Sensing, Esquire of Potter Anderson & Corroon LLP, Wilmington, Delaware and
Mark S. Baldwin, Esquire, Dylan P. Kletter, Esquire and Anthony J. Boccamazzo, Esquire
of Brown Rudnick LLP, Hartford, Connecticut, Attorneys for Plaintiff Project Boat
Holdings, LLC.

S. Mark Hurd, Esquire and Richard Li, Esquire of Morris, Nichols, Arsht & Tunnell LLP,
Wilmington, Delaware and Mike Stenglein, Esquire and Tracey M. Robertson, Esquire of
King & Spalding LLP, Houston, Texas, Attorneys for Defendant Bass Pro Group, LLC.




SLIGHTS, Vice Chancellor
      On February 10, 2015, Project Boat Holdings LLC (“Project Boat”),

a manufacturer of recreational boats, sold three brands of its bass fishing boats to

Bass Pro Group LLC (“Bass Pro”), a national outdoor recreational equipment

retailer, for $260,000,000.    After the sale, Bass Pro discovered that several

purchasers of a particular line of boats included in the sale, the 2014 Triton 21 TrX

(the “TrX”), had presented warranty claims to Project Boat after noticing that the

hulls of the boats had cracked or delaminated.1 Project Boat did not disclose the

warranty claims or increase its warranty reserve in the financial statements provided

to Bass Pro in connection with the Membership Interest Purchase Agreement (the

“Agreement”) that governs the transaction.

      Bass Pro determined the cracks and delamination in the hulls resulted from

Project Boat having manufactured the TrX hull with fewer layers of laminate than

was called for in the boat’s design. Bass Pro also concluded that this production

flaw affected an entire production run of 2014 TrX boats and, therefore, case-by-

case repairs would be inadequate to solve the problem. Instead, following the adage,

“should you find yourself in a chronically leaking boat, energy devoted to changing




1
  As discussed below, “delamination” is a process by which the fiberglass laminate
comprising the boat’s hull decompensates. Delamination can occur in varying degrees.

                                         1
vessels is likely to be more productive than energy devoted to patching leaks,”2 Bass

Pro elected to replace the hulls of every 2014 TrX produced with the allegedly

defective hull.   This decision prompted Bass Pro to initiate a “Replacement

Program” whereby it recalled and replaced the hulls of every affected boat at an

estimated total cost of $5 million.

      A month before commencing its Replacement Program, Bass Pro notified

Project Boat of a claim for indemnification under the Agreement, asserting that

Project Boat’s failure to disclose the manufacturing defect and account for it in its

financial statements breached certain of the Agreement’s representations and

warranties. Bass Pro stated that its expected damages caused by the breach, not

coincidentally, were $5 million. In response, Project Boat notified Bass Pro that its

indemnification claim was factually deficient and failed to comply with the

Agreement’s notice requirements. Accordingly, it demanded that Bass Pro execute

joint instructions for the release of the $2.6 million set aside in escrow under the

Agreement to address post-closing indemnification claims.

      When Bass Pro denied Project Boat’s demand, Project Boat filed this action

seeking a declaration that Bass Pro was in breach of the Agreement and an order

compelling Bass Pro to release the escrow funds. Bass Pro counterclaimed for


2
 WARREN BUFFETT, THE ESSAYS OF WARREN BUFFETT: LESSONS FOR CORPORATE
AMERICA (1st ed. 1998).

                                         2
breaches of representations and warranties, including those that represented Project

Boat had supplied accurate financial statements prepared in accordance with

generally accepted accounting principles (“GAAP”), had set aside an adequate

warranty reserve, had disclosed all warranty claims outside the ordinary course of

business and had not encountered a change or event that had a Material Adverse

Effect on the business. Bass Pro also alleged fraudulent inducement and related tort

claims.

      In this post-trial memorandum opinion, I conclude that the cracks and

delamination in the TrX hulls were unusual and the warranty claims for the damaged

hulls were outside the ordinary course of business. Nevertheless, Project Boat did

not breach the Agreement by failing to disclose the warranty claims relating to the

damaged hulls because Bass Pro did not prove that total replacement, rather than

case-by-case repairs, of the hulls was the only means by which to address the

warranty claims. Nor did Bass Pro prove that Project Boat’s warranty reserve was

insufficient to address the warranty claims, assuming those claims were addressed

by case-by-case repairs or replacement as appropriate. I am also satisfied there was

no Material Adverse Effect that would trigger disclosure obligations under the

Agreement. Finally, whether measured by a preponderance of evidence or a clear

and convincing evidence standard of proof, Bass Pro did not prove that Project Boat

fraudulently induced Bass Pro to enter into the Agreement.

                                         3
         Judgment will be entered in favor of Project Boat and against Bass Pro. The

parties shall issue joint instructions to the escrow agent to release the escrow funds

to Project Boat. There will be no award of attorneys’ fees.

                                   I. BACKGROUND

         The Court held a four-day trial during which it heard live testimony from eight

witnesses and received over 400 trial exhibits along with the lodged deposition

testimony of each trial witness and two additional fact witnesses. I have drawn the

facts from the stipulations of fact entered in advance of trial, the testimony and

exhibits presented during trial and from reasonable inferences that flow from that

evidence.3 The following facts were proven by a preponderance of the evidence.

     A. The Parties and Relevant Non-Parties

         Plaintiff/Counterclaim Defendant, Project Boat, is a Delaware limited liability

company with its principal place of business in Beverly Hills, California.4 At the

time of the transaction at issue, Project Boat was a portfolio company of Platinum

Equity, LLC and Platinum Equity Advisors, LLC (together “Platinum Equity”).5


3
  Citations will appear as follows: “PTO ¶ __” shall refer to stipulated facts in the pre-trial
order; “Tr. __ ([Name])” shall refer to witness testimony from the trial transcript; “JX__”
shall refer to trial exhibits using the JX-based page numbers generated for trial; “JX__
([Name] Dep.) __” shall refer to witness testimony from a deposition transcript lodged with
the Court for trial.
4
    PTO ¶ 9.
5
    JX 192 §§ 4.27, 12.2(b); JX 312 (Wolf Dep.) 12–13, 180.

                                              4
Project Boat, in turn, owned PBH Marine Holdings, LLC (“PBH Marine” or the

“Company”).6 Through its 100% ownership of PBH Marine Group, LLC, which in

turn owns 100% of Fishing Holdings, LLC (“Fishing Holdings”), PBH Marine

owned fishing boat manufacturers Ranger Boats, Triton Boats and Stratos Boats.7

The following chart depicts the assets Project Boat sold to Bass Pro along with the

key personnel associated with each asset8:



                       Remainder of page intentionally left blank




6
    PTO ¶ 11.
7
    Id.
8
 In the briefs and during trial, the parties at various times referred to the entities within the
Project Boat family interchangeably. Because my understanding is that Fishing Holdings
sat directly above the three boat lines—Ranger, Triton and Stratos—I will refer to Fishing
Holdings when describing the operational issues that led to the warranty claims at issue
here.

                                               5
                        PBH                                         BASS PRO



                                  PBH MARINE HOLDINGS
                                  Operating Committee included:

                                            Randy Hopper

                                            Mendel Hughes




                                    PBH MARINE GROUP



                                     FISHING HOLDINGS
                                        CEO – Randy Hopper

                                       CFO – Mendel Hughes

                                      VP/Sales – Keith Daffron

                                     Warranty Mgr. – Tim Houk



                  RANGER BOATS                                   TRITON BOATS
                  CEO – Randy Hopper                        CEO – Earl Bentz (disputed)
                  CFO – Mendel Hughes                  VP/Sales & Marketing – Adam Adkisson
                 VP/Sales – Keith Daffron           Head of New Product Dev. – Gary Zittrower
                                                                                                9



         Defendant/Counterclaim Plaintiff, Bass Pro, is a Delaware limited liability

company with its principal place of business in Springfield, Missouri.10 It operates




9
    Stratos Boats not shown.
10
     PTO ¶ 10.

                                                   6
a national network of sporting goods retail stores and owns approximately 100 boat

dealerships nationwide.11

      B. The Membership Interest Purchase Agreement

         On November 14, 2014, Project Boat and Bass Pro executed the Agreement

under which Project Boat sold to Bass Pro all issued and outstanding interests of

PBH Marine for $260,000,000.12 The Agreement contains representations and

warranties from the seller13 and buyer.14 Bass Pro alleges Project Boat breached four

representations and warranties set forth in Sections 4.8, 4.9, 4.23 and 4.26.

         Under Section 4.8, Project Boat warranted that the Company’s unaudited

financial statements for the period between January 1, 2014 and July 27, 2014,

presented fairly the Company’s financial condition in accordance with GAAP. More

specifically, the provision states:

         Financial Statements. Attached as Schedule 4.8 are (a) the audited
         combined balance sheets and statements of income, cash flow and
         members’ equity of Fishing Holdings, its Subsidiaries and 96 Ranger
         Road, LLC as of and for the twelve-month periods ended December 31,
         2013 and December 31, 2012 (the “Audited Financial Statements”) and
         (b) an unaudited combined balance sheet and statements of income and
         cash flow of Fishing Holdings, its Subsidiaries and 96 Ranger Road,


11
     JX 309 (Maliszewski Dep.) 16–17.
12
     PTO ¶ 11; JX 192 at 6, § 2.2.
13
     JX 192 Article IV.
14
     Id. Article V.

                                          7
          LLC as of July 27, 2014, and for period commenced January 1, 2014
          and ended July 27, 2014 (the “Interim Financial Statements” and,
          together with Audited Financial Statements, the “Financial
          Statements”). Except as set forth on Schedule 4.8, the Financial
          Statements present fairly, in all material respects, the consolidated
          financial position and results of operations of the Company and its
          Subsidiaries as of the dates and for the periods indicated in such
          Financial Statements in conformity with GAAP consistently applied
          (except in the case of the Interim Financial Statements for the absence
          of footnotes and other presentation items and for normal year-end
          adjustments).15

          Under Section 4.9, Project Boat represented that, as of November 14, 2015,

the date of the Agreement’s execution, and February 10, 2015, the date of the

closing, there were no undisclosed liabilities of a type required to be reflected or

reserved for under GAAP16:

          Undisclosed Liabilities. Except as set forth on Schedule 4.9, there is no
          liability, debt or obligation of or claim against the Company or any of
          its Subsidiaries of a type required to be reflected or reserved for on a
          balance sheet prepared in accordance with GAAP, except for liabilities
          or obligations (a) reflected or reserved for on the Financial Statements
          or disclosed in the notes thereto, (b) that have arisen since the date of
          the most recent balance sheet included in the Financial Statements in
          the ordinary course of the operation of the business of the Company and
          its Subsidiaries consistent with past practice, (c) incurred in connection
          with the transactions contemplated by this Agreement, or (d) which do
          not exceed $250,000 in the aggregate.17

15
     Id. § 4.8.
16
  Tr. 186 (Hopper); JX 192 at 1. As part of the closing, Project Boat certified that its
representations remained materially accurate. Id. § 9.2(a), (d).
17
     Id. § 4.9.

                                              8
          Section 4.23 of the Agreement warrants that there has been no change or event

that would result in a Material Adverse Effect on Project Boat. The Agreement

defines Material Adverse Effect, with a number of exceptions that do not apply here,

to mean “a material adverse effect on the business, results of operations, financial

condition or assets of the Company and its Subsidiaries, taken as a whole.”18

Section 4.23 states:

          Absence of Changes.

      a. Except as set forth on Schedule 4.23, from the date of the most recent
         balance sheet included in the Interim Financial Statements to the date
         of this Agreement, there has not been any change, event, development
         or occurrence that, individually or in the aggregate, has had or would,
         individually or in the aggregate, reasonably be expected to have a
         Material Adverse Effect on the Company.

      b. Except as set forth on Schedule 4.23, and except in connection with the
         transactions contemplated by this Agreement, from the date of the most
         recent balance sheet included in the Interim Financial Statements to the
         date of this Agreement, the Company and its Subsidiaries have, in all
         material respects, conducted their business and operated their
         properties in the ordinary course of business consistent with past
         practice.19

          Finally, in Section 4.26, Project Boat warranted:

          Product and Service Warranties. There is no pending or, to the
          knowledge of Seller, threatened (in writing) claim alleging any breach
          of any warranty or guaranty as to goods sold by the Company or its

18
     Id. at 12.
19
     Id. § 4.23.

                                             9
          Subsidiaries, other than as reserved for on the Reference Balance Sheet
          or for claims made in the ordinary course of business consistent with
          past practice, individually, which do not exceed $100,000.20

          In the event of a breach of the representations and warranties, or a covenant

or agreement contained within the Agreement, the affected party may seek

indemnification by providing proper notice to the indemnitor21:

          If any Indemnified Party becomes aware of any circumstances that may
          give rise to an Indemnification Claim for any matter not involving an
          Action, then such Indemnified Party shall promptly (i) notify the
          Indemnitor and (ii) deliver to the Indemnitor a written notice
          (A) describing in reasonable detail the nature of the circumstances
          giving rise to the Indemnification Claim, (B) including the Indemnified
          Party’s good faith estimate (based on the facts then known) of the
          amount of Damages that may arise from such circumstances, and
          (C) describing in reasonable detail the basis for the Indemnified Party's
          request for indemnification under this Agreement. Failure to notify the
          Indemnitor in accordance with this Section 11.3(c) will not relieve the
          Indemnitor of any liability that it may have to the Indemnified Party,
          except to the extent (1) the defense of such Indemnification Claim is
          actually materially prejudiced by the Indemnified Party’s failure to give
          such notice or (2) the Indemnified Party fails to notify the Indemnitor
          of such Indemnification Claim in accordance with this Section 11.3(c)
          prior to the Survival Expiration Date; provided that an immaterial
          deficiency in a timely notice required by this Section 11.3(c) will not




20
     Id. § 4.26.
21
     Id. Article XI, §§ 11.2(a), (b).

                                             10
          relieve the Indemnitor of any liability that it may have to the
          Indemnified Party.22

          At Section 11.2(a), Project Boat agreed that it would indemnify Bass Pro “for

any and all damages to the extent arising from [] any breach of any representation

and warranty in Article IV.”23 Section 11.4(a) sets an “indemnification cap” and

Section 11.4(b) creates an indemnification “claims basket.”24 For Bass Pro, the

indemnification cap for claims of breach of the representations and warranties at

issue here (non-“Fundamental Representations”) was the amount in the

“Indemnification Escrow Fund.”25            The “claims basket” limits recovery for

indemnification to circumstances where each individual claim exceeds $75,000,

excluding costs and expenses, and the aggregate damages from all claims exceeds

$350,000.26

          Along with the Agreement, the parties executed an escrow agreement under

which Bass Pro deposited $2,600,000 as the “Indemnification Escrow Amount” (the



22
   Id. § 11.3(c). See also id. § 11.1 (explaining that any claim for indemnification must be
asserted “on or before the Survival Expiration Date [February 10, 2016] . . . by proper
written notice in accordance with this Article XI, specifying, in reasonable detail, the basis
of the claim . . . .”).
23
     Id. § 11.2(a).
24
     Id. §§ 11.4(a), (b).
25
     Id. at 10, § 11.4(a)(i), (ii).
26
     Id. § 11.4(b).

                                             11
“Escrow Agreement”).27 In Section 4(g) of the Escrow Agreement, the parties

agreed to execute joint instructions to the designated escrow agent, Wells

Fargo, N.A., for the release of the escrowed funds “at such times as releases are

required by [the Escrow Agreement] and the [Agreement].”28 In Section 11.8(b) of

the Agreement, the parties agreed that if Bass Pro properly asserted a claim for

indemnification before February 10, 2016, and the claim remained pending as of that

date, the aggregate amount of the pending claim would be withheld from the

Indemnification Escrow Amount and released upon satisfaction or resolution of the

claim.29

      C. The 2014 Triton 21 TrX

          PBH Marine acquired Ranger, Triton and Stratos in 2010 at a time when each

was a struggling manufacturer of recreational fishing boats.30 After the acquisition,

PBH Marine consolidated manufacturing for the three brands at Ranger’s

headquarters in Flippin, Arkansas to take advantage of Ranger’s larger facility and

to streamline operations.31 In the years following the consolidation, boat sales



27
     JX 225.
28
     Id. at 4, 26.
29
     JX 192 § 11.8(b).
30
     Tr. 152–55, 160-62 (Wolf); JX 315 (Bentz Dep.) 18.
31
     Tr. 158–59 (Wolf); JX 409 (Zittrower Dep.) 10–11; JX 315 (Bentz Dep.) 18.

                                            12
improved. In 2014, when Bass Pro acquired PBH Marine, its three boat brands

manufactured 71 boat models.32 Ranger was regarded as the “premier” brand,

manufacturing 37 models constituting 79 percent of PBH Marine’s sales in 2014.33

Triton was considered the middle-tier brand and produced 24 models comprising

17 percent of sales in 2014.34 Stratos was a more discreet brand with ten models

comprising four percent of annual sales in 2014.35

           This litigation concerns just one of the 71 boat models Bass Pro acquired in

the sale. The TrX is a 21-foot fiberglass bass fishing boat introduced in May 2013

to take the place of Triton’s aging flagship model, the 21 HP.36 With a more modern

design, wider deck and 250-horsepower outboard engine,37 the TrX was not unlike

Ranger’s best-selling Z521, a boat that was also approximately 21-feet in length with

a wide beam and designed to carry high horsepower engines.38 But the hulls of the



32
     PTO ¶ 12.
33
     Id.; JX 115 at 10; JX 313 (Adkisson Dep.) 27–28.
34
     Id.
35
     Id.
36
  Tr. 17–18, 99, 105 (Hopper), 441 (Zittrower); JX 313 (Adkisson Dep.) 26; JX 409
(Zittrower Dep.) 22–23, 33–34.
37
 Tr. 236 (Adkisson), 540 (Maliszewski); JX 313 (Adkisson Dep.) 26; JX 409 (Zittrower
Dep.) 22–23.
38
     Tr. 18–20 (Hopper), 360–61 (Adkisson); JX 339 at 13; JX 405 (Hopper Dep.) 163–64.

                                             13
2014 Triton and Ranger boats had important differences. The fiberglass structure

for the hulls of Triton boats, by design, included at least three layers of chopped

strand mat and two to three layers of woven roving (the “Triton Layup”).39 Ranger

boat hulls, on the other hand, were designed to have three layers of chopped strand

mat but only a single layer of woven roving (the “Ranger Layup”).40

         With all manufacturing occurring at the Ranger facility, it is not surprising

that PBH Marine sought to achieve certain economies of scale.                  Given the

similarities in the boats, the Product Improvement Team floated the possibility of

using the Ranger Layup on Triton models.41 In May 2012, a team of Ranger

employees requested an order from Triton’s Vice President of Engineering, Gary

Zittrower, to create a prototype Triton 21 HP constructed with the Ranger Layup

(the “Test Boat”).42 Consistent with its typical testing practices, Fishing Holdings




39
   Tr. 369 (Adkisson), 638–39, 642–45, 664–67, 677–78, 851–52 (Taylor); JX 322 at 5–6,
12–13; JX 339 at 15–17; JX 373; JX 376; JX 409 (Zittrower Dep.) 45–47. In a fiberglass
boat, the laminate is the outer structural shell of the hull. Tr. 239–40 (Adkisson), 443–45
(Zittrower). The lamination schedule determines the type and quantity of materials to be
used in the laminate. Tr. 22 (Hopper), 443–45 (Zittrower); JX 373. Typically, the outer
layer of the laminate is a gelcoat that is laid onto a boat mold, followed by layers of
fiberglass, resin, chopped strand mat and woven roving. Tr. 239–40 (Adkisson); JX 372.
40
     Tr. 643, 667–68 (Taylor); JX 322 at 6; JX 372.
41
     JX 314 (Houk Dep.) 75–76, 101; JX 405 (Hopper Dep.) 163–64.
42
  Tr. 23–24, 99–102 (Hopper), 497 (Zittrower); JX 1; JX 399; JX 409 (Zittrower Dep.)
23–25. Zittrower testified he was not aware that the Test Boat was made with the Ranger
Layup, but had he known, he “wouldn’t have stopped them from building the boat to test
                                             14
took the Test Boat to a nearby lake where it was operated for 20 to 30 hours,

including one day in rough seas, and then loaned the boat to two professional anglers

for a few weeks of additional testing.43 After testing, the Test Boat was returned to

the plant for inspection of the hull, which exhibited no signs of cracking or other

structural issues.44 Satisfied with the Test Boat’s performance, in June 2013, Fishing

Holdings decided to manufacture the 2014 line of TrX boats with the Ranger Layup

instead of the Triton Layup that had been deployed in prior Triton models.45 The

first sign of trouble with the TrX surfaced less than a year later.

      D. Early Problems with the TrX Hulls

         On April 17, 2014, Triton warranty manager, Marty Morris, received an email

from a TrX owner reporting cracks on the side of his TrX hull below the rod box



it to see what happens, because that’s how you learn things in this business.” Tr. 498
(Zittrower).
43
   Tr. 23–24 (Hopper), 703 (Taylor); JX 252 at 2; JX 315 (Bentz Dep.) 11, 13–14, 17–18
(testifying that testing of a fiberglass bass boat is typically performed in the water, not in a
laboratory), 93 (testifying that boats were tested through 100 hours of “use and abuse,” not
stress testing); JX 409 (Zittrower Dep.) 31. I note that Bass Pro’s expert, Robert Taylor,
determined that the testing approach used by Fishing Holdings was inadequate. He reached
that opinion, however, long after the time for expert discovery had closed. On Project
Boat’s motion, I struck that portion of Taylor’s opinion as untimely. See D.I. 197 (letter
opinion granting Project Boat’s motion to strike). After reviewing the matter anew, I stand
by that decision.
44
     Tr. 25 (Hopper).
45
  Tr. 20–21 (Hopper); JX 313 (Adkisson Dep.) 26–27, 125; JX 353; JX 405 (Hopper Dep.)
98, 146, 163–64, 225–26, 228, 238–43; JX 409 (Zittrower Dep.) 12, 17–18.

                                              15
(the “Anderson Boat”).46 Later that day, Morris forwarded the email to Zittrower,

who sent the report to an engineering team and asked them to check whether “there

was anything unusual about [the] construction” of the boat.47

         Less than a month later, on May 7, 2014, Morris received a second complaint

about a TrX with significant cracking on one side of the boat (the “Govreau Boat”).48

This time, Morris forwarded the report to Zittrower and others, including Tim Houk,

who was in charge of managing warranty claims for all three boat brands.49 Morris

suggested that the team bring the boat to Flippin for inspection and repair to make

sure there were no issues with the lamination.50 By mid-June, however, the Govreau

Boat remained with its owner, and on June 16, 2014, the owner informed his boat

dealer that the cracks on his boat had grown larger and new cracks had emerged on



46
   JX 19. The rod box is a hatch below the deck used to store fishing rods. Tr. 25 (Hopper).
The reported cracks in the Anderson Boat and in the boats discussed below are distinct
from cracks in the gelcoat layer (i.e., the painted surface) of the boat, which are typically
viewed as a minor cosmetic problem. Cracks that extend past the gelcoat layer to the
lamination can lead to delamination, which occurs when water pressure acts to separate the
fiberglass and the layers beneath it. If left unrepaired, the hull can peel apart entirely. See
Tr. 457, 462, 467–68 (Zittrower); JX 351 (Taylor Dep.) 51, 53.
47
     JX 21.
48
     JX 43.
49
  JX 44; JX 314 (Houk Dep.) 9–10. Houk is now Bass Pro’s Director for Customer Service
and Warranty for Ranger, Triton and Stratos. Id. His testimony was presented by
deposition; he did not appear at trial.
50
     JX 44; JX 66.

                                              16
the other side of the boat.51 When Morris brought the issue to Houk’s attention and

showed him photos of the Govreau Boat in its damaged state, Houk noted, “quite a

bit of white glass” and asked, “what did he [the owner] hit?”52 Morris responded,

“[i]t would appear that way [that the boat had hit something] with the exception of

getting these photos a month ago prior to the delam.”53

           A third TrX owner, who was also a boat dealer, reported damage to his hull

two days later, on June 18, 2014 (the “Boat Doc Boat”).54 The owner emailed several

photos of his TrX directly to several members of the Fishing Holdings team and

described multiple cracks as well as a “huge void” in the boat’s hull.55 Morris

forwarded the email to Houk and stated, “[s]ure looks like impact to me.”56 Houk

forwarded the report to the President and CEO of Fishing Holdings, Randy Hopper,

and commented, “[h]ere’s another.”57 Later that day, Houk opined in an email to



51
     JX 66.
52
  JX 70. It is apparently easy to determine when fiberglass has been damaged by impact
because it delaminates at the area of impact and turns white where it is usually clear.
Tr. 42–43 (Hopper).
53
     JX 70.
54
     JX 81.
55
     Id.
56
     Id.
57
     Tr. 14 (Hopper); JX 81.

                                           17
Morris and Zittrower that the damage was impact-related but asked if the cracks

were in the same place as the previous boats.58 Morris confirmed that the cracks on

the Govreau Boat and the Anderson Boat were in the same area and suggested

“we may have an issue here.”59 Houk was not swayed, however, and expressed to

Morris, Zittrower and later to Hopper that, in his judgement, the damage was caused

by impact.60

      E. Triton Discovers That the TrX Is Manufactured With the Ranger Layup

           In May or June of 2014, Zittrower toured the Flippin manufacturing plant with

Ron Marler, a process engineer for Ranger and Triton, and Vernon Goodman,

Fishing Holding’s lamination manager who was also a member of the team in charge

of introducing the Ranger Layup to the TrX.61 The trio discussed the recurrent issues

with TrX hulls and viewed the damage on the Anderson Boat.62 Despite having

verified Goodman’s request to produce the Test Boat with a different lamination


58
     JX 82.
59
     Id.
60
     JX 83; JX 84.
61
  Tr. 471–75, 517 (Zittrower); JX 1; JX 409 (Zittrower Dep.) 31, 35. The exact date of
Zittrower’s visit to the Flippin plant, and whether it was before or after the Boat Doc Boat’s
report, are not clear, Tr. 474–75 (Zittrower) (“That would have been in the late May, June,
sometime in that—I’m not real familiar with the date . . . .”), but Zittrower made trips to
Flippin roughly twice per month during the summer of 2014. JX 409 (Zittrower Dep.) 16–
17.
62
     Tr. 472–73 (Zittrower).

                                             18
schedule, Zittrower was surprised when Goodman informed him that the TrX had

“a more Ranger-like” laminate.63 Zittrower then informed Goodman, and later

Hopper, that the laminate was too thin and that a change back to the original Triton

Layup was required.64 On June 25, 2014, Fishing Holdings began manufacturing

TrX boats with the Triton Layup.65

      F. Project Boat Begins Discussions of a Sale to Bass Pro as More Complaints
         of Hull Damage Surface

         By June 2014, Hopper and Project Boat executives were preparing sales

materials for Bass Pro on the Ranger, Triton and Stratos boat lines.66 Bass Pro’s due

diligence continued through November of that year. Kevin Maliszewski, Bass Pro’s

Vice President of Finance, represented Bass Pro in the negotiations with the

assistance of Moelis & Co. and PricewaterhouseCoopers LLP.67 The team that

supported Project Boat’s diligence efforts included Hopper, CFO of Fishing

Holdings, Mendel Hughes, Vice President of Sales for Fishing Holdings, Keith

Daffron, Platinum Equity Principal, David Wolf and three other Company


63
  Tr. 472–73, 480 (Zittrower). Zittrower testified that Dan Goodwin, also a member of
the team in charge of introducing the Ranger Layup to the Triton boats, expressed his belief
that Zittrower knew about the lamination schedule change. Tr. 473 (Zittrower); JX 1.
64
     Tr. 116–17 (Hopper), 368–69 (Adkisson), 473–75 (Zittrower).
65
     Tr. 115–17 (Hopper), 364–65, 368–69 (Adkisson), 482 (Zittrower).
66
     PTO ¶ 15; Tr. 168–70 (Wolf); JX 115.
67
     JX 309 (Maliszewski Dep.) 26–28, 49–51.

                                            19
representatives.68 Hopper, Hughes and Daffron were responsible for satisfying Bass

Pro’s due diligence requests and ensuring Project Boat’s compliance with its

representations and warranties.69 They were also designated as three of the four

Project Boat “Persons with knowledge” for purposes of certain covenants in the

Agreement, along with another Ranger executive, Bart Schad.70 Ernst & Young

audited the Company’s financial statements, including Fishing Holding’s

methodology for assessing the sufficiency of the warranty reserve.71

         While Project Boat and Bass Pro negotiated the transaction, reports

concerning problems with the TrX hulls continued to surface. On August 1, 2014,

Zittrower and then-Vice President of Sales and Marketing for Triton, Adam

Adkisson, received a report of delamination that the owner thought might be due to

the boat having hit a piece of rebar that cut through its gelcoat and fiberglass layers

(the “Card Boat”).72 Three days later, another TrX owner reported cracking and

delamination on both sides of his hull in the same place as the Boat Doc Boat and



68
     JX 312 (Wolf Dep.) 17–18, 65‒69.
69
     Id. 69, 73–76, 81, 93–94, 144–45, 155‒56, 217‒18.
70
     JX 192 § 1.3; JX 313 (Adkisson Dep.) 141.
71
     Tr. 552–53 (Maliszewski); JX 193 at 18, 31.
72
  Tr. 216 (Adkisson); JX 117. After Bass Pro purchased PBH Marine, Adkisson continued
his role at Triton. Tr. 215 (Adkisson). He left the company only recently when Bass Pro
decided to relocate Triton’s headquarters to Springfield, Missouri. Id.

                                             20
the Govreau Boat (the “Sensabaugh Boat”).73 The dealer expressed concern that

“there may have been something out of the ordinary there.”74 In early September

2014, three more TrX owners reported damage to their hulls.75

         With the exception of the Card Boat, which was covered by insurance,76

Fishing Holdings addressed each reported instance of TrX hull damage under the

TrX warranty.77       As with all Triton fiberglass boats, Fishing Holdings/Triton

represented to TrX purchasers that Triton would “repair or replace, at its sole

discretion, defects in materials or workmanship that occur and are reported to Triton,


73
     Tr. 292, 377–81 (Adkisson), 495 (Zittrower); JX 118–20.
74
     JX 119.
75
  Tr. 302–303, 305–308 (Adkisson); JX 366. Bass Pro prepared JX 366 as a compilation
of other spreadsheets and databases concerning the TrX hull issues. Tr. 421–22
(Adkisson). The supporting sources include JX 368 and JX 375 (printouts of the warranty
claims database for Triton boats); JX 410 (a compilation of PDFs of warranty claims made
for the TrX); JX 243 (a list Houk compiled of TrX hull repairs and replacements). See also
Tr. 259–62 (Adkisson) (explaining the warranty claims database). Although JX 243 was
not introduced as an exhibit in Houk’s deposition, it is fair to assume from his descriptions
of his list that it is the same compilation. JX 314 (Houk Dep.) 73–75, 80, 83–84. I note
Project Boat’s limited objection to the “First Fail Notice” column in JX 366; the objection
is moot, however, as these three September boat failures are also listed in Houk’s
compilation with similar dates.
76
   JX 144 (Morris wrote to Houk, “Card’s boat has hull damage resulting from impact
damage which caused port side delamination. The insurance company has requested an
estimate for hull replacement cost transferring accessories over to the new hull.”).
Adkisson testified that Triton later determined that the boat’s damage was due to the
lamination schedule, though there is no credible evidence as to how or why that
determination was made. Tr. 395–96, 398 (Adkisson).
77
  JX 366. In 2014, Fishing Holdings repaired five of the affected boats and replaced the
hulls of three. Id.; JX 243. The hull of the Boat Doc Boat was replaced in 2015. Id.

                                             21
or its factory authorized fiberglass dealer, within the applicable warranty periods.”78

The warranty specifically covers a “Structural Hull Defect,” meaning, for fiberglass

boats, “a substantial defect in the fiberglass boat’s Hull, which causes the fiberglass

boat to be unfit or unsafe for general use as a pleasure craft under normal operating

conditions.”79

           According to Houk, who, as a warranty manager, was “charged with making

happy customers out of mad customers for the least amount that I have to spend to

do that,” the normal course of dealing with damaged hulls was (and should be) to

repair or replace the boats, as appropriate, when the customer reported a problem.80

Indeed, Fishing Holdings had a number of employees devoted to repairs of fiberglass

hulls since gelcoat and fiberglass damage comprised a large portion of its warranty

claims.81 Because the hulls were consistently showing damage in the area around

the rod box, an accessible central location, Fishing Holdings viewed the repairs as




78
     JX 395; JX 396.
79
     Id.
80
     JX 314 (Houk Dep.) 27, 86–87.
81
     Tr. 33–34 (Hopper), 166–67 (Wolf).

                                          22
easy to make and as a permanent solution.82 Moreover, the repairs were not costly,

reaching, at most, just over $5,000 per hull.83

         At Triton, however, Adkisson and Triton’s CEO and founder, Earl Bentz,

believed the hull damage, when viewed alongside the decision to use the Ranger

Layup, indicated a serious problem affecting an entire production run of 2014 TrX

boats.84 They reasoned that putting a patch inside of the hull would not be equivalent

to putting an extra layer of lamination throughout the hull, and thus concluded the

repairs were inadequate and likely to fail.85 According to Bentz and Adkisson, the

only way to handle the problem properly would be to recall and replace all affected

TrX hulls.86


82
 Tr. 25, 60, 71–72, 86 (Hopper); JX 278 at 4; JX 314 (Houk Dep.) 86–87; JX 405 (Hopper
Dep.) 165.
83
     JX 243; JX 410.
84
  Tr. 319–21, 325–26, 371, 431–32 (Adkisson); JX 315 (Bentz Dep.) 14, 16, 36–37, 87.
When Triton was owned by Platinum Equity, Bentz reported to Hopper. JX 315 (Bentz
Dep.) 22. Bentz continues to hold the title of CEO and founder of Triton at Bass Pro, where
he works a few days a month. Id. His testimony was presented by deposition; he did not
appear at trial.
85
  Tr. 321–22 (Adkisson); JX 313 (Adkisson Dep.) 189, 190; JX 315 (Bentz Dep.) 55, 86–
87. For his part, Zittrower testified that he did not know at the time whether the repairs
would work but was hopeful they would solve the problem. Tr. 492 (Zittrower).
86
   Bentz and Adkisson testified that, on a regularly scheduled conference call held shortly
after Zittrower’s visit to Flippin, Bentz expressed to Fishing Holdings management his
view that a recall of the TrX was necessary. Tr. 317–21 (Adkisson); JX 315 (Bentz Dep.)
28–30. According to Bentz and Adkisson, Hopper disagreed and decided on this call to
repair the affected boats on a case-by-case basis. Id. Neither Hopper nor Houk, who
participated in the weekly calls, remember discussion of a recall or a decision to repair the
                                             23
         In late September 2014, Triton and Ranger separately sponsored several

participants at the Bassmaster Elite Series Angler of the Year event in Escanaba,

Michigan (“Escanaba”).87 As the second largest bass fishing tournament of 2014,

Escanaba hosted the top fifty professional bass fishermen for a nationally televised

qualifier tournament for the Bassmaster Classic—the annual championship

tournament for bass fishermen.88 The poor weather conditions at Escanaba were

described as “unprecedented,” with steady winds over 20 mph causing high seas that

resulted in a small craft advisory from the National Weather Service.89 Several

practice days were cancelled and the tournament was suspended for three days due

to “unsafe boating conditions.”90 When the anglers did make it onto the water, five

of six TrX boats reportedly experienced damage to their hulls, and Triton sent two

employees to Michigan to repair the boats so they could continue to fish the

tournament.91


boats on a case-by-case basis. JX 314 (Houk Dep.) 37–38; JX 405 (Hopper Dep.) 115–21.
While it would appear that Bentz and Adkisson expressed their views concerning the issue
to Hopper, I make no findings of fact with respect to whether Hopper decided on this call
to address the cracks and delamination on a case-by-case basis.
87
     Tr. 51–52 (Hopper), 303–304 (Adkisson).
88
     Tr. 49–50 (Hopper), 303–304 (Adkisson).
89
     Tr. 52–54 (Hopper), 765 (Taylor); JX 151; JX 351 (Taylor Dep.) 41–42.
90
     Id.; Tr. 310 (Adkisson).
91
     Tr. 55–56 (Hopper), 485–87 (Zittrower); JX 153.

                                            24
           The day after Escanaba concluded, on September 22, 2014, Zittrower

consulted with Bentz92 and emailed Hopper regarding the hull failures at the

tournament.93 Zittrower explained,

           The hull failures were due to the laminate reduction that I brought to
           your attention earlier this summer. The boat hulls that failed in
           Escanaba were manufactured last November. There are several other
           21 TRX hulls that have been repaired that were manufactured after
           November. Since we do not know when the laminate reduction in the
           hull was made, it is foreseeable the entire 2014 model year of 21 TRX’s
           is affected. 182-21 TRX models were manufactured in the 2014 model
           year. The potential for a significant increase in warranty cost for 2015
           is real for the 21 TRX models that did not get the proper laminate during
           the manufacturing process. . . .94

Hopper did not respond to the email.95 Instead, based on conversations with Houk

and the team’s previously demonstrated ability to repair hull cracks and

delamination, he determined that Fishing Holdings should continue to repair the TrX

hulls on a case-by-case basis.96




92
     JX 152.
93
     JX 153.
94
     Id.
95
     Tr. 59 (Hopper).
96
   Tr. 59–61 (Hopper). Hopper claims he spoke with Houk in making this decision.
Id. Houk did not recall the conversation, but he estimated he spoke with Hopper about the
TrX hull issues between five and ten times. JX 314 (Houk Dep.) 66–67, 94.

                                              25
         Four additional damaged TrX hulls were reported to Triton after Escanaba in

September and October 2014.97 Project Boat repaired two of the boats in 2014 and

replaced the hulls of the other two in 2015.98 On or about October 21, 2014, the

owner of the Sensabaugh Boat, whose hull had been repaired in August 2014,

reported cracks on the opposite side of the boat.99 By November 14, 2014, the day

the Agreement was executed, one more TrX had shown damage to its hull and was

repaired.100

      G. The Warranty Claims

         Altogether, by the time of the Agreement, Project Boat had sold 172 TrX boats

and had received reports of 17 hull cracks or delamination, all of which appeared

around the same area of the hull.101 Twelve of these hulls had been repaired and five



97
     Tr. 311 (Adkisson); JX 243; JX 366.
98
     Tr. 311–13 (Adkisson); JX 243; JX 366.
99
     Tr. 293–98 (Adkisson), 495 (Zittrower), 726 (Taylor); JX 249; JX 410 at 11–13.
100
    Tr. 313–14 (Adkisson); JX 243; JX 366. I do not include the Buckingham Boat,
although it is referenced in JX 366 as having failed on November 1, 2014, because there is
no credible evidence of a November failure date.
101
    Tr. 314–15 (Adkisson); JX 366. This number for hull damage excludes the Card Boat
and the Buckingham Boat. It also excludes the Coble Boat. JX 366 indicates a report of
“port bow hull cracks” at the end of April 2014 for the Coble Boat, but it has no repair
listed until the hull was replaced in the Replacement Program. The supporting exhibits,
however, indicate repairs for “port bow hull gel separated, port bow hull cracks,” at a cost
of $520 on April 29, 2014. JX 410 at 13; see also JX 368 at 1, JX 375 at 180 (repairs for
“hull gelcoat flake” at the same cost). Additionally, the Coble Boat is not listed on JX 243.
This evidence suggests the cracks were not of the type typically considered to reflect the
                                              26
had been replaced, or were expected to be replaced, under warranty.102 At the end

of 2014, by Bass Pro’s count, Fishing Holdings had incurred approximately $59,000

in third-party warranty costs for the TrX; $41,885 of those costs were related to the

hull issue.103 The warranty reserve at that time was approximately $8,017,000.104

         Neither the interim financial statements for the period between January 1,

2014 and July 27, 2014, nor the disclosure schedules attached to the Agreement

reported the TrX hull issue.105 The transaction closed on February 10, 2015.

      H. Bass Pro Learns of the TrX Lamination Issue

         In May 2015, Bentz met with Bass Pro President, Jim Hagale, and its founder,

Johnny Morris, to discuss Triton’s loss of market share to a particular competitor.106

Bentz expressed to Hagale that Hopper’s team was focused on Ranger and that

management of the Triton brand should be turned over to Bentz.107 As one example




lamination issue, or that the repair was not of the kind typically performed to address the
issue.
102
      JX 243; JX 366.
103
   JX 310 at 13, Ex. H. JX 313 (Adkisson Dep.) 42–43. These amounts are consistent
with the repair costs listed on JX 243.
104
      JX 210 at 15.
105
      JX 193.
106
      JX 315 (Bentz Dep.) 40.
107
      Id. 42–43.

                                            27
of poor management, Bentz cited the lamination problems with the TrX and

suggested that the approach of making case-by-case repairs to the boats was

damaging the image of the Triton brand.108 According to Bentz, Hagale did not

respond to, or even seem to register, the issue.109

          In late September or early October 2015, Bentz and Adkisson met with

Maliszewski to inform him of the hull issue.110 Bentz stated that at least Hopper and

Daffron had known about the problem prior to the sale but had done nothing

about it.111 Maliszewski reported this to Bass Pro’s general counsel.112




108
      Id. 43.
109
      Id. 43–44.
110
   Tr. 326 (Adkisson); JX 309 (Maliszewski Dep) 113. According to Bentz and Adkisson,
Bentz told Maliszewski about the hull issue because Maliszewski was asking why the
warranty costs were continuing to rise. Tr. 327 (Adkisson); JX 313 (Adkisson Dep.) 132;
JX 315 (Bentz Dep.) 46. Maliszewski, however, did not recall that he noticed the warranty
costs increasing; he recalled that he became aware of the TrX issues after Bentz told him
that knowledge of the problem within the industry had spread after Escanaba. JX 309
(Maliszewski Dep.) 113 (Q: Did he say why he was telling you now in September or
October of 2015 about the hull issue? A: . . . [Bentz] had raised it to the leadership in
Fishing Holdings who had done nothing about it, but yet at key events they were having
these failures and it was becoming predominantly known within the industry that there
were issues with the boats.”).
111
      JX 309 (Maliszewski Dep) 113–14.
112
      Id. 24, 114.

                                           28
         In October 2015, Bass Pro hired a products liability attorney and Robert

Taylor, a marine forensics expert, to investigate the problems with the TrX.113

Taylor visited the manufacturing facility at Flippin, inspected several boats,

interviewed company management and employees and conducted a burn test of

samples of the Ranger Layup and Triton Layup that confirmed the laminates were

different.114 He concluded his investigation in late November or early December

2015 and determined that a safety recall of the TrX was not necessary under

U.S. Coast Guard regulations. 115

         After informing Bass Pro of this conclusion, Taylor was asked to determine

what repairs were necessary to correct the affected boats.116 In December 2015,

consistent with Bentz and Adkisson’s views, Taylor concluded that the TrX needed



113
      Tr. 329 (Adkisson); JX 351 (Taylor Dep.) 6.
114
    Tr. 621–27, 694 (Taylor); JX 322. A burn (or “burnout”) test determines the
constituents of a sample of laminate by melting the materials off at different temperatures.
Tr. 637–38 (Taylor). Taylor did not conduct a load analysis to quantify the strength of the
Ranger and Triton Layups until November 2017. Tr. 669–72 (Taylor); JX 320; JX 344;
JX 351 (Taylor Dep.) 67.
115
   Tr. 574 (Maliszewski), 628 (Taylor); JX 351 (Taylor Dep.) 62. Taylor concluded that
the TrX failures did not prevent boat operators from returning to shore safely, that there
were no reported injuries or deaths caused by the hull issue, and that the TrX is designed
to have “upright level flotation,” a requirement of the Code of Federal Regulations
mandating that the boat continue to float if it is filled with water. Tr. 627–29 (Taylor);
JX 351 (Taylor Dep.) 42–43. For these reasons, the TrX defect “did not rise to the level of
a safety recall to the Coast Guard.” Tr. 628 (Taylor).
116
      JX 351 (Taylor Dep.) 63–66.

                                             29
thicker lamination throughout the boat and any repair to the hull short of replacement

would be expensive, complicated and ultimately insufficient.117

         While Taylor conducted his investigation, Adkisson was tasked with

estimating the cost of replacing all TrX boats produced with the Ranger Layup.118

He concluded that the “Replacement Program” would cost $5 million based on the

costs to manufacture replacement hulls, transport defective hulls to the Ranger

factory, transport replacement hulls to dealers and transfer owners’ equipment onto

the replacement hulls, as well as the costs for legal and public relations assistance

and miscellaneous smaller costs.119

         On March 14, 2016, by letter from Bentz to all TrX owners, Bass Pro

announced that it would replace the 209 boats determined to have been produced

with the Ranger Layup.120 At the Replacement Program’s conclusion, Bass Pro had

inspected and replaced 173 hulls (not including those that had been replaced prior to




117
      Tr. 691–93 (Taylor); JX 351 (Taylor Dep.) 63–64.
118
      Tr. 331–32 (Adkisson).
119
    Tr. 332–33 (Adkisson); JX 313 (Adkisson Dep.) 186 (“Q: [Y]ou’re the guy who
calculated per-boat cost of the replacement program, and you were projecting something
just north of $23,000 on a per-boat basis, right? A: That’s correct.”).
120
   Tr. 332–33 (Adkisson); JX 275; see also Tr. 334 (Adkisson) (explaining the process of
establishing the databases for the Replacement Program, which took place between
November 2015 and March 2016); id. 252–55 (explaining how Bass Pro determined the
209 boats to be replaced).

                                            30
the program).121 Bass Pro identified cracks in 28 of the hulls; the remainder showed

no signs of damage.122 As of trial, the program’s cost was $6,651,840.29, including

attorneys’ and expert fees incurred in connection with the litigation and $62,880 for

a social media expert.123

      I. Bass Pro’s Claim Notice and the Commencement of Litigation

            About a month before Bass Pro notified TrX purchasers of the Replacement

Program, it notified Project Boat of its indemnification claims in a February 10, 2016

letter (the “Claim Notice”).124      The Claim Notice states that “certain [] 2014

Triton 21 TrX boats have developed cracks in their hull-side panels and, in some

cases have suffered delamination and/or required hull repairs due to such cracking,”

and that “other 2014 Triton 21 TrX boats constructed with a Ranger hull lamination

schedule are at risk for the same cracking and delamination issue.”125 As a result of

these issues, Bass Pro predicted that the damages would be at least $5 million,

including the cost of “repairing or replacing the deck/hull assembly, if and as

appropriate, in certain 2014 Triton 21 TrX boats constructed with the Ranger hull



121
      JX 366.
122
      Id.
123
      Tr. 337–52 (Adkisson); JX 308; JX 352.
124
      JX 257.
125
      Id.

                                               31
lamination schedule” as well as “responding to any consumer claims based on the

use of the Ranger hull lamination schedule in the construction of certain 2014

Triton 21 TrX boats.”126 The Claim Notice made no reference to a plan to recall and

replace all affected hulls.127

            Project Boat objected to the Claim Notice on March 3, 2016, arguing that Bass

Pro had failed to provide the level of detail required under the Agreement and had

failed to state a claim for relief.128 Almost two weeks later, Bass Pro notified Project

Boat that it had decided to replace all affected boats through the Replacement

Program.129


126
      Id.
127
    It appears that Bass Pro, and Taylor, were under the impression that Fishing Holdings
had mistakenly utilized the Ranger Layup as a consequence of confusion at the “cut shop.”
JX 351 (Taylor Dep.) 36l; JX 409 (Zittrower Dep.) 34–35 (explaining how he initially
believed that use of the Ranger Layup in the TrX had been a mistake). It also appears that
this was the factual predicate upon which the Claim Notice and Bass Pro’s Counterclaim
rested—that Project Boat had discovered the “mistake” but had hidden the mistake from
Bass Pro. See Answer to Verified Compl., Affirmative Defenses and Countercls.
(“Answer”) (D.I. 19) 27 ¶ 6 (describing “hull mismatch”). It was not until the deposition
of Hopper, taken on May 2, 2018, that it was made clear to all that Fishing Holdings had
made a deliberate move to use a Ranger lamination schedule on the TrX hull. See JX 405
(Hopper Dep.) 96–104 (Hopper confirming that Fishing Holdings had decided to use the
Ranger Layup on the TrX and explaining the reasons for that decision). I will confess that
Bass Pro’s change in narrative, and failure to own that change, has raised questions, in my
mind, regarding the credibility of its current claims of breach and, especially, of its claim
of fraud. See Answer 29 ¶ 11, 43 ¶ 51 (alleging fraudulent concealment of the “hull
mismatch”). The about face was by no means dispositive, however.
128
      JX 267.
129
      JX 278.

                                              32
      J. Procedural History

         On July 29, 2016, Project Boat filed its Verified Complaint setting forth two

counts. Count I seeks a declaratory judgment that Bass Pro is not entitled to

indemnification with respect to Project Boat’s alleged breaches of the Agreement

asserted in Bass Pro’s Claim Notice. Count II alleges that Bass Pro breached the

Agreement by failing to release the escrowed funds to Project Boat and, on that basis,

seeks an order compelling Bass Pro to release the escrow funds. Bass Pro answered

the Complaint on October 5, 2016, asserting Affirmative Defenses and Verified

Counterclaims for breach of warranty (Count I), indemnification (Count II),

fraudulent concealment (Count III), fraudulent inducement (Count IV), breach of the

covenant of good faith and fair dealing (Count V) and declaratory judgment and

injunctive relief (Count VI).130

         On July 26, 2017, the Court dismissed Counts III and V of Bass Pro’s

counterclaims and Count IV to the extent it alleged fraudulent inducement with

respect to Section 4.8 of the Agreement regarding the accuracy of Project Boat’s

financial statements.131 On May 1, 2018, the Court denied Project Boat’s motion for


130
      Answer 25–51.
131
   D.I. 64. I dismissed Bass Pro’s fraudulent inducement claim with respect to Section 4.8
upon finding that Bass Pro failed to allege facts allowing a reasonable inference that Project
Boat’s failure to account for the warranty claims would materially affect the accuracy of
the financial statements or their compliance with GAAP. See Arg. on Pl.’s Partial Mot. to
Dismiss Tr. (D.I. 228) 67–68.

                                             33
partial summary judgment as to Counts I and II of Bass Pro’s counterclaims. 132 Trial

proceedings concluded on June 7, 2018, and the parties presented post-trial oral

argument on February 1, 2019.         On February 22, 2019, the parties submitted

supplemental letters regarding their requests for attorneys’ fees.133 The matter was

submitted for decision that day.

                                    II. ANALYSIS

         Bass Pro alleges Project Boat breached representations and warranties in the

Agreement, specifically those set forth in Section 4.8, 4.9, 4.23 and 4.26, and

fraudulently induced Bass Pro to enter the Agreement by intentionally concealing

the TrX manufacturing defects and failing to set aside an adequate warranty reserve

to address the inevitable warranty claims to follow. Project Boat counters that Bass

Pro breached Sections 8.2 and 11.8 of the Agreement, and Section 4(g) of the Escrow

Agreement, by improperly withholding the escrowed funds. Each party bears the

burden of proving its claims or counterclaims by a preponderance of the evidence.134

         I first address Bass Pro’s breach and indemnification claims. To prevail on a

breach of contract claim, a party must prove: (1) the existence of a contract, (2) the



132
      D.I. 146.
133
      D.I. 225; D.I. 226.
134
   See eCommerce Indus., Inc. v. MWA Intelligence, Inc., 2013 WL 5621678, at *13
(Del. Ch. Sept. 30, 2013).

                                           34
breach of an obligation imposed by the contract; and (3) damages suffered because

of the breach.135 Because the existence of a valid agreement is undisputed, I focus

on the allegations of breach and resulting damages. For reasons I explain below,

I have determined that Project Boat did not breach the seller’s representations and

warranties in Section 4.8 and 4.9 by failing to set aside $5 million as an additional

warranty reserve to cover the costs of replacing the TrX hulls. Though Project Boat

should have disclosed the TrX warranty claims under Section 4.26, as they were

claims made outside of the ordinary course of business, Bass Pro has not proven that

the warranty claims could not be addressed under the existing warranty reserve, and

so has not proven damages as a result of the non-disclosure. Bass Pro also has not

proven that the warranty claims resulted in a Material Adverse Effect on PBH

Marine as a whole, so I find no breach of Section 4.23.

      I next address Bass Pro’s claim for fraudulent inducement. Bass Pro has not

provided credible evidence that Project Boat intended to induce Bass Pro to enter

the transaction by withholding disclosure of the TrX warranty claims. Nor has

Bass Pro proven that it would not have entered the transaction had it known about

the warranty claims. Its claim for fraudulent inducement, therefore, fails as well.




135
   Id. (citing Barkerman v. Sidney Frank Importing Co., 2006 WL 3927242, at *19
(Del. Ch. Oct. 10, 2006)).

                                         35
        Next, I take up Project Boat’s claim that Bass Pro breached the Agreement

and Escrow Agreement. As initial matters, I find that Bass Pro’s Claim Notice was

sufficient under the Agreement, and Bass Pro did not breach the Agreement or the

Escrow Agreement by withholding the escrowed funds pending the resolution of its

breach of contract claims.         But, having failed to prove any breaches of

representations and warranties under the Agreement, Bass Pro must now give its

consent to the Escrow Agent to release the escrowed funds to Project Boat.

        Finally, I address the competing claims for counsel fees. Because neither

party has breached the contract and neither is entitled to indemnification, I conclude

that neither party is entitled to recover its attorneys’ fees under the Agreement.

      A. Project Boat Did Not Breach the Agreement by Failing to Set Aside an
         Additional $5 Million Warranty Reserve

        The parties agree that, under GAAP, Project Boat was required to report and

reserve for a contingent liability (which includes a warranty liability) if the

information available to Project Boat as of July 27, 2014, November 14, 2014, and

February 10, 2015, indicated that (1) it was probable a liability had been incurred

and (2) the liability was reasonably estimable.136 The FASB ASC glossary defines


136
    JX 378 (Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) at 460-10-25-5) (“Because of the uncertainty surrounding claims
that may be made under warranties, warranty obligations fall within the definition of a
contingency . . . losses from warranty obligations shall be accrued when the conditions in
paragraph 460-20-25-2 are met.”); JX 379 at FASB ASC 460-20-25-2 (“An estimated loss
from a loss contingency shall be accrued by a charge to income if both of the following
                                           36
“probable” to mean that “the future event or events are likely to occur.”137

According to Bass Pro, if the liability was not estimable because the range of

possible loss was too wide, then Project Boat should have postponed recording

revenue from the TrX sales until after the warranty period or until it had more

information regarding the likely magnitude of the liability.138

         Bass Pro’s breach claims under Sections 4.8 and 4.9 rest on the premise that

Project Boat knew that each of the TrX boats produced with the Ranger Layup would

probably have to undergo a total hull replacement.139 With this knowledge in hand,

Bass Pro posits that Project Boat’s Financial Statements, as described in Section 4.8,

did not “present fairly, in all material respects, the consolidated financial position

and results of operations of the Company and its Subsidiaries . . . in conformity with

GAAP . . . .”140 Nor, according to Bass Pro, could Project Boat accurately represent


conditions are met: a. Information available prior to issuance of the financial statements
indicates that it is probable that an asset had been impaired or a liability had been incurred
at the date of the financial statements . . . b. The amount of loss can be reasonably
estimated.”). See also Tr. 971 (Orr) (Bass Pro’s accounting expert explaining ASC 450’s
“probability requirement”).
137
  FASB ASC 540-20-20, https://asc.fasb.org/glossarysection&trid=2127172 (last visited
May 2, 2019).
138
      See JX 378 at FASB ASC 460-10-25-6.
139
   See Post-Trial Arg. Tr. (D.I. 227) 69 (counsel for Bass Pro acknowledging that if a
repair or replace approach to addressing the TrX hull issues was adequate, Bass Pro does
no “prevail on [its] breach claim”).
140
      JX 192 § 4.8.

                                             37
that “there is no liability, debt or obligation of or claim against the Company . . . of

a type required to be reflected or reserved for on a balance sheet prepared in

accordance with GAAP . . . .”141

          The problem with Bass Pro’s theory is that the preponderance of the evidence

does not support that Project Boat knew that all TrX hulls produced with the Ranger

Layup probably would have to be replaced. For that matter, the preponderance of

the evidence does not support the contention that case-by-case repairs were

inadequate to address the cracking and delamination issues that plagued the TrX.

Fishing Holdings historically did not issue broad product recalls unless the defect

presented a fundamental safety issue.142 There is no evidence that the cracking and

delamination of TrX hulls presented any safety concerns. Indeed, before assuming

his role as a litigation expert witness, Taylor investigated that very issue on behalf

of Bass Pro and determined that a product recall was not required by Coast Guard




141
      Id. § 4.9.
142
    JX 2 (email from Mendel Hughes indicating that Project Boat’s warranty reserve
calculation was modified in 2012 to account for the recall of a digital start keypad); JX 11
(financial analysis of the recall); Tr. 45 (Hopper) (testifying that he had no knowledge of a
recall, except for safety issues); Tr. 522–23 (Zittrower) (testifying that since his time at
Triton beginning in 1997, he was not aware of a product recall); JX 405
(Hopper Dep.) 171–73; 255–56 (testifying to prior recalls of an electrical component and
steering component by vendors that were performed in cooperation with the Coast Guard).

                                             38
standards.143      Even Bentz stated that it was highly unlikely the TrX hull issues

compromised boater safety given that the “boats have upright, level flotation, and a

crack in the bottom of the hull may cause some delamination but it’s highly unlikely

that it would result in a [sic] accident . . . .”144

         Rather than initiate full product recalls, Fishing Holding’s practice was to

repair damaged boats as needed on a case-by-case basis, typically under warranty.145

The damaged TrXs were treated no differently. This is not surprising given that the

applicable TrX warranty covered cracks and delamination of the hulls and reserved

to the boat manufacturer the right to repair or replace as it deemed appropriate.146

According to Houk, a particularly credible witness, in my view, given his past

position with Fishing Holdings and current position with Bass Pro, the practice of

repairing or replacing on a case-by-case basis was a cost-efficient and effective




143
    Taylor does not mention the conclusion of his preliminary investigation into the safety
of the hull issue in his report, but he explained his initial conclusions at trial. See Tr. 627–
29 (Taylor).
144
      JX 315 (Bentz Dep.) 48–49.
145
      Tr. 31–32, 60–61 (Hopper).

  JX 395 (“THE SOLE AND EXCLUSIVE REMEDY UNDER THIS LIMITED
146

WARRANTY AND ANY APPLICABLE IMPLIED WARRANTY IS THE REPAIR
OR REPLACEMENT, AT TRITON’S SOLE OPTION, OF WARRANTED PARTS
AND COMPONENTS.”) (emphasis in original).

                                              39
solution to dealing with all prior claims for damaged fiberglass hulls.147 In his

opinion, even now, there was no reason to recall and replace all TrX hulls.148

            The cost-effectiveness of repairing or replacing as necessary is supported by

Houk’s records, which show that the cost of repairs ranged from $2,250 to, at most,

$5,383.149 Indeed, Project Boat had incurred just $41,885 in third-party warranty

costs due to the TrX hull issues by the end of 2014, when its warranty reserve was

over $8 million.150 Not one hull was replaced prior to the date of the Interim

Financial Statements.151 Indeed, the Company had not incurred a single dollar in

warranty costs related to the alleged hull issues by the date of the Interim Financial

Statements.152

            Bass Pro argues that, at the time of the Interim Financial Statements, the

warranty reserve did not reflect the earliest TrX claims. Project Boat agrees that


147
      JX 314 (Houk Dep.) 28, 81–82, 86–87.
148
      Id. 26–27, 86–87.
149
   JX 243. The maximum exposure, assuming repairs of all 209 TrX hulls produced with
the Ranger Layup, at the highest projected cost of repair, is $1,125,047 (209 x $5,383).
Of course, there is no evidence that all 209 boats would have required repairs, nor is there
evidence that all repairs would have cost more than $5,000.
150
   JX 210 at 15; JX 310 at 13, Ex. H; JX 313 (Adkisson Dep.) 42–43. Bass Pro argued that
there were costs in addition to the amount identified but did not put forward any credible
evidence to prove it.
151
      JX 243; JX 366.
152
      Id.

                                              40
because the first three warranty claims had not yet been paid, the reserve as of

July 27, 2014, did not yet account for the TrX issue.153 But there is no indication

that the reserve at that time (approximately $7 million) would have been insufficient

to address the claims, which included one repair and two replacements.154 According

to Ernst & Young, the Company’s “[p]rovisions for estimated future warranty claims

are made at the time of the product sale, with actual payments for such claims being

charged against the reserve for warranty when incurred.”155 Consistent with this

practice, the Interim Financial Statement reserve reflected an increase to

accommodate the sale of each TrX that should have been sufficient for claims made

under the warranty.156

         Going forward from the date of the Interim Financial Statements, the warranty

reserve would have reflected and accommodated increasing warranty claims.


153
    Tr. 217–18, 249 (Hopper); JX 405 (Hopper Dep.) 193–94 (“It’s possible [that the
warranty reserve in the interim financial statement would not have reflected anything to do
with the 21 TrX lamination issue]. There was a—there’s a lag between, you know, actual
and getting the claims paid. . . . If it hadn’t been, you know, posted, it shouldn’t be
included.”); 252 (“[I]f the claims were not paid, they would not have been in the financial
statement.”).
154
   I note that Fishing Holdings was operating on a belief that the cracks in two of the first
three TrXs reported to have hull problems were likely caused by impacts. See Tr. 41–42
(Hopper); JX 72; JX 83; JX 314 (Houk Dep.) 70–72.
155
      JX 210 at 14.
156
  Additionally, Hopper testified that he and CFO Hughes tried to reserve more than
was required and that the reserve was reviewed on a quarterly basis. JX 405 (Hopper
Dep.) 216–17, 247–48, 252–53.

                                             41
The Company calculated its reserve by using the total claims paid during a given

year to find the percentage of the cost of goods sold attributable to the claims.157

That percentage was used to project the costs of future claims. 158 There is no

suggestion that the Company’s reserve formula was unsatisfactory. 159 Indeed,

Ernst & Young noted in each of its audits of the 2012, 2013 and 2014 financial

statements that the methodology and calculation were appropriate.160 The audit of

the 2014 statements also reflects that, as of August 25, 2015, when the combined

financial statements were available, no events had occurred that would require

disclosure.161




157
    Tr. 862–63, 927 (Vanderveen) (Project Boat’s accounting expert explaining the
warranty reserve calculation); Tr. 207 (Wolf); JX 324 at 9–10; see also Tr. 166 (Wolf)
(explaining that a warranty reserve has two purposes—to capture what is known and to
estimate what is unknown but may occur).
158
      Tr. 927 (Vanderveen); JX 324 at 9–10.
159
   Bass Pro argues that the warranty reserve could not have accurately accounted for the
TrX hull issues because the TrX was a new model and Fishing Holdings had never dealt
with the particular hull issues it was encountering with that model. But, based on the
language of the Triton warranty, the warranty reserve accounts for the possibility of
repairing or replacing the hull of every TrX sold. The record also shows that Fishing
Holdings was familiar with repairs to damaged hulls and, as discussed below, does not
support that the repairs were insufficient. For these reasons as well, the range of loss that
PBH Marine faced as a result of the TrX issue was not so great as to be inestimable.
160
      JX 193 at 31; JX 210 at 14.
161
   JX 210 at 16. I also note that E&Y interviewed Houk on March 19, 2015, and reported
that, “[w]arranty claims have remained consistent for the past 5 years. Claim cases are
relatively similar between the three main product lines. [Houk] sees a greater amount of
                                              42
         Of course, the evidence that the hull issue did not present a safety problem,

that the case-by-case repairs were cost effective, and that the warranty reserve was

audited by a third-party auditor and deemed appropriate would mean nothing if the

hull repairs did not fix the problem such that hull replacement was the only option.

But that is not what the evidence shows. At trial, Adkisson identified four instances

where the hull repairs allegedly failed—the Beck Boat, the Coble Boat, the Govreau

Boat and the Sensabaugh Boat.

         With regard to the Beck Boat and Coble Boat, Adkisson testified that

previously repaired cracks were evident again when the boats were returned for

inspection in connection with the Replacement Program.162                      But no

contemporaneous evidence corroborates that testimony, including the evidence that

should be corroborative. Bass Pro provided dealers with a detailed inspection form

to be completed in connection with the Replacement Program.163 The inspection

reports submitted as evidence, however, offer very little, and at times inconsistent,




claims being processed for the fiber glass boats than he does for the aluminum boats (and
for a smaller dollar value), which is within EY’s expectations.” JX 205.
162
      Tr. 372–75, 380–81 (Adkisson).
163
      See, e.g., JX 271 at 14.

                                           43
detail.164 They certainly do not reveal to my satisfaction as fact-finder that the

repairs on the Beck and Coble boats failed.

         As for the Govreau Boat, the record suggests the first and only repair to

address the cracks from the thinner lamination was a replacement of the hull.165

If any subsequent cracks occurred, they would not be related to a failed repair.

         This leaves the Sensabaugh Boat, which happened to serve as Taylor’s only

evidence that case-by-case repairs were insufficient.166 The Sensabaugh Boat was

returned to Flippin twice—the first time for cracks in the hull and the second time

because the deck and hull had separated.167 In Taylor’s opinion, the separation of

the hull occurred because the hull-deck joint was weakened when the boat was

opened to conduct the initial repair of the laminate.168 During the repair of the

separated hull, cracks further aft of the initial repair were reported, suggesting, in



164
   See, e.g., JX 286 at BPG000240433 (inspection report for the Coble Boat referring only
to the number of hours and apparently attaching a picture). Compare JX 286 at
BPG000240349 (inspection report for TRT14131C414 indicating that cracks were found
on port side and starboard side) and JX 366 (indicating inspection report for
TRT14131C414 showed cracks on both sides) with JX 286 at BPG000240475 (inspection
report for TRT15101J314 with same indications as for TRT14131C414) and JX 366
(indicating a clean inspection for TRT15101J314).
165
      Tr. 134 (Hopper), 373, 375–77 (Adkisson), 456–57, 460–64 (Zittrower); JX 366.
166
      JX 322 at 20–21; JX 351 (Taylor Dep.) 79–83, 115–16.
167
      Tr. 85 (Hopper), 294–98 (Adkisson), 494–96 (Zittrower); JX 322 at 20–21.
168
      JX 322 at 20–21; JX 351 (Taylor Dep.) 79–82.

                                            44
Taylor’s opinion, that the initial repairs merely relocated the problem. 169 But, in

speaking with Sensabaugh, a former safety for the Dallas Cowboys and valued

Triton customer,170 Taylor learned that the owner had been operating the boat in four

foot seas on Lake Champlain when it first cracked, and in four to five foot seas on

Lake Eerie when the hull separated.171 At trial, Taylor opined that this was a normal,

foreseeable use of a bass fishing boat because “[i]t’s fishing,” but he also admitted

that these water conditions with a large operator would make a hull crack more

likely.172 I cannot conclude, based on the repair history of the Sensabaugh Boat

alone, that case-by-case repairs to the TrX hulls were inadequate such that a total

product recall was required.173




169
      JX 322 at 20.
170
      Tr. 86 (Hopper), 293 (Adkisson), 793 (Taylor).
171
      JX 351 (Taylor Dep.) 83–85.
172
   Tr. 833 (Taylor) (“Q: Would you agree with me that a large former NFL football player
who uses his boat five times a week and jumps off 4- to 5-foot waves is more likely to
crack his hull than someone who uses his boat occasionally on a placid lake. A: Sure.”).
173
    During post-trial argument, I inquired whether possible reputational harm caused by
any publicity surrounding the hull issues might be a reason to employ a product recall
strategy even if the case-by-case repair approach was adequate to address the problem.
Post-Trial Arg. Tr. 36–39. As it turns out, after carefully reviewing the record and Bass
Pro’s trial briefs, there is no evidence to suggest there was any meaningful publicity
surrounding the hull issue, much less evidence of potential reputational harm.

                                             45
         I also reject Bass Pro’s argument that the persuasive evidence reveals that

every TrX hull produced with a Ranger Layup was destined to fail.174 I accept that

a thinner laminate may crack more easily than a thicker one,175 but Taylor provided

no cogent explanation as to how or why cracking and delamination occurs in bass

boats generally, or the TrX in particular.176 Taylor performed a load analysis of the

Triton and Ranger Layup samples to show that the Triton Layup breaks under less

pressure than the Ranger Layup, but he provided no context or basis to assess how

the “pressure” correlated to expected uses of the boat or conditions in which the boat

might be operated.177 Taylor pointed out that the marketing materials for the TrX


174
    Tr. 674–79, 682, 685–86, 693, 695–96, 725–29 (Taylor); JX 322 at 3–4, 19–20; JX 347
at 2–3.
175
   See JX 351 (Taylor Dep.) 13–16 (explaining that when bending any material, a force or
pressure pulls fibers apart at the outer edge, and the thinner the material the more stress
that material will suffer).
176
    At best, Taylor credits the cracking to hydrodynamic forces present beneath “planing
boats,” which include bass boats by design. Tr. 614–17 (Taylor). According to Taylor,
planing boats are designed so that the force of the water beneath the boats allows them
essentially to float above the surface. Id.; see also JX 322 at 18 (“When the Triton boats
were mismatched with Ranger hulls, and built without the floatation foam in the space
[between the deck and hull], the less-stiff Ranger hull was then able to deflect inwards due
to the hydrodynamic forces being applied to the exterior of the hull. This deflection led to
the failures that were seen on the [TrX].”). But Taylor failed to explain how these forces
cause the boats to crack. See, e.g., Tr. 677–78 (Taylor) (when asked by the Court to identify
a “prevailing principle by either naval architecture or engineering or some other discipline”
that should have informed Fishing Holdings that the Ranger Layup would not work, Taylor
responded, “I think responsible engineers would have known that if you lessen the laminate
by two-thirds, it’s not going to be as strong”).
177
      JX 322 at 14–16.

                                             46
appeal to fisherman seeking a fast boat,178 but the history of the Sensabaugh Boat,

testimony from Bentz, and the Escanaba tournament confirm that the TrX may be

used in a variety of water and weather conditions.179 And Taylor provided no

indication of how, if at all, the breaking points of the Triton and Ranger Layups

differ in varying conditions.180

            For his part, Bentz testified that different laminate schedules are used on

different lengths of boats to prevent the boats from twisting and then cracking.181

He stated that more laminate is required for longer boats.182 With this in mind, I note

that Taylor did not credibly explain whether, much less why, the 21-foot Triton TrX

should be produced with a different laminate schedule than the 21-foot Ranger boats.

Instead, he posited that the thinner Ranger Layup does not crack because Ranger



178
      JX 322 at 19.
179
    Tr. 831–33 (Taylor) (testifying that whether a boat cracks is a function of usage, amount
of usage, and aggressiveness of usage); JX 315 (Bentz Dep.) 87–88 (“Q: Did the incidence
of failure that occurred prior to the replacement program give you a sense for how quickly
these failures would occur in the boats at issue? A: Depends on the conditions that the boat
is in.); 97 (“. . . if it was used on a lake that would have six-to-twelve-inch-high waves,
there’s a possibility that it would not fail. . . . Q: So failure is dependent on how it’s used;
would you agree with that? A: The conditions in which it is used.”).
180
    When asked about his lack of analysis of the Escanaba Tournament, Taylor simply
stated, “[g]uys were fishing. The boats should take it.” Tr. 765 (Taylor). He then posited
that if the boats were on the water, “[i]t couldn’t have been that bad.” Id.
181
      JX 315 (Bentz Dep.) 92.
182
      Id.

                                              47
boats achieve additional strength from foam between the bottom hull and top deck

that is not used in Triton boats.183 Hopper, however, testified that the same type of

foam (two pounds per cubic foot density) is used in Triton boats for flotation, and

that it would not add structural integrity at that density.184 Taylor did not perform

any substantial analysis of the role of foam in the two boats or how the presence, or

not, of foam affected the integrity of the hulls in question.185

         The paucity of real analysis in Taylor’s report and testimony belies his

conclusion that “any reasonably competent boat designer” would know that the TrX

hulls would crack and delaminate with a thinner lamination schedule. 186 Indeed,



183
   JX 322 at 3–4 (“[W]ithin a Ranger bass boat, there are additional structural components
that provide support and rigidity for the hull (foam backing) that were not a part of the
Triton boat design . . . . [The lamination substitution] error was exacerbated by not adding
support/flotation foam, normally found in Ranger bass boats, but which the Triton intended
hull laminate schedule did not need because it was designed strong enough to be viable
without the Ranger design flotation foam providing additional backing support.”).
184
    Tr. 47 (Hopper) (Q: Is the 21 TrX full of foam? A: It has foam, yes. Q: Is the foam
there for structural support? A: No. The foam that’s used is floatation foam . . . I’ll say it’s
like two-pound-per-cubic-foot density. So it wouldn’t lend a lot of structural integrity.
It’s stiffness, sound deadening, and then obviously for flotation.); JX 405 (Hopper Dep.)
162–63.
185
   As best I can discern, the extent of Taylor’s analysis is as follows: JX 322 at 18 (“[T]he
presence of flotation foam restricts the amount of deflection of the hull fiberglass
material.”); Tr. 668–69 (“[The foam] is very good in compression. It’s 2 pounds per square
foot, per cubic foot. . . . It’s put in under pressure. It expands, fills the gaps. And what it
does is it provides, for the Ranger hull, it provides continuous support of that single-
laminate-layer outer hull that they have.”).
186
      JX 322 at 4.

                                              48
Bass Pro, and the presumably “reasonably competent boat designer[s]” it employed,

did not make the decision to recall the boats until after they had investigated the

issue for five months.187 Even then, Bass Pro’s decision was made in the midst of

its post-closing fuss with Project Boat when it likely was anticipating the litigation

to come.188

       Although the TrX hull failures may have been attributable to Project Boat’s

decision to substitute lamination schedules, the evidence does not suggest that

failures required Project Boat (or Bass Pro) to recall and replace all TrX hulls. The

warranty reserve Project Boat set aside was sufficient to handle the repair or

replacement of the boats, as deemed appropriate, in accordance with the warranty.189

Accordingly, there was no liability incurred that was probable or reasonably

estimable that had not already been disclosed and accounted for in the Financial

Statements.


187
   Bass Pro did not record any warranty liability for the TrX in its December 31, 2014
financial statements. Rather, that liability was not recorded until December 31, 2015. Tr.
869 (Vanderveen).
188
   Tr. 557–59 (Maliszewski) (testifying that he alerted the legal department in September
or October 2015, after which the primary focuses for the TrX problem were safety and the
image of its newly acquired boat brands).
189
   In reaching his opinion that Project Boat was required to reserve for the Hull issue under
Section 4.8, and to disclose the liability under Section 4.9, Bass Pro’s accounting expert,
Terry Orr, was directed to assume that the hulls had to be replaced, rather than repaired, to
address the problem. Tr. 978, 992–93 (Orr). With that assumption removed as a predicate
of his opinion, Orr’s testimony does not support Bass Pro’s breach claim.

                                             49
      B. Project Boat Did Not Breach the Agreement by Failing to Disclose the
         TrX Warranty Claims

         In Section 4.26 (“Product and Service Warranties”), Project Boat represented

that:

         [t]here is no pending or, to the knowledge of Seller, threatened
         (in writing) claim alleging any breach of any warranty or guaranty as
         to goods sold by the Company or its Subsidiaries, other than as reserved
         for on the Reference Balance Sheet or for claims made in the ordinary
         course of business consistent with past practice, individually which do
         not exceed $100,000.190

         Before determining whether Project Boat breached Section 4.26, as alleged

by Bass Pro, I must first construe the provision. When the parties presented

competing reasonable constructions of this clause at the summary judgment stage,

I determined it was ambiguous and invited the parties to submit extrinsic evidence

in support of their respective positions.191 Despite presenting a rather large trial

record, the parties elected not to accept the invitation to present extrinsic evidence

regarding Section 4.26, so I am left to interpret that provision on my own.192

         Section 4.26’s inceptive phrase, “[t]here is no pending or, to the knowledge

of Seller, threatened (in writing) claim alleging any breach of any warranty or


190
      JX 192 § 4.26.
191
      Arg. on Pl.’s Mot. for Partial Summ. J. Tr. (D.I. 176) 62–63.
192
   See, e.g., Comerica Bank v. Glob. Payments Direct, Inc., 2014 WL 3779025, at *10
(Del. Ch. Aug. 1, 2014) (interpreting contract provision where plaintiff offered no legal
authority or extrinsic evidence to support its construction).

                                               50
guaranty as to goods sold by the Company or its Subsidiaries” appears

straightforward enough. It captures pending warranty claims and known claims that

have been “threatened” in writing.193 The ambiguity lies in the balance of the

provision.

      From the inceptive phrase we know that Project Boat was to disclose pending

or threatened (in writing) warranty claims. But then the clause appears to create an

exception, “. . . other than as reserved for on the Reference Balance Sheet or for

claims made in the ordinary course of business consistent with past practice,

individually which do not exceed $100,000.” At first glance, I interpreted “other

than reserved for on the Reference Balance Sheet” to exclude from Project Boat’s

representation those claims that are disclosed on the Reference Balance Sheet.

The Reference Balance Sheet is defined in the Agreement,194 and the parties agree

there are no TrX claims disclosed there. Again, easy enough if that clause stood on

its own. But does it? The rest of the clause states, “. . . or for claims made in the

ordinary course of business consistent with past practice, individually which do not

exceed $100,000.” The placement of the comma to separate the final phrase,



193
   See JX 193 (Schedule 4.26 cross-referencing Schedule 4.10, item #3 (Andre P. Guidry
v. Ranger Boats, LLC and Cabela’s Retail LA, LLC, civil action 3:14-CV-00567,
U.S. District Court, Middle District of Louisiana, filed September 11, 2014)).
194
   Section 2.4(a) defines Reference Balance Sheet as “the most recent audited balance
sheet included in the Financial Statements.” JX 192 § 2.4; JX 193.

                                         51
“individually which do not exceed $100,000,” raises questions.195 Does that phrase

modify the entire provision such that Project Boat would not be obliged to disclose

warranty claims that were made outside the ordinary course of business if those

claims, individually, did not exceed $100,000? Or, is Project Boat obliged to

disclose all warranty claims made not in the ordinary course of business?

       After carefully reading the provision, I interpret it as follows: Project Boat

was required to disclose all pending claims or claims threatened in writing that

individually exceeded $100,000, unless those claims were already disclosed on the

Reference Balance Sheet. Project Boat was also required to disclose all pending

warranty claims and all claims threatened in writing if those claims were not “made

in the ordinary course of business consistent with past practice” regardless of the

amount of those claims. In short, I agree with Bass Pro that the $100,000 threshold

does not apply if the warranty claim was made outside of the ordinary course of

business, which I interpret to mean “not consistent with past practice,” as stated in

Section 4.26. In turn, I interpret “consistent with past practice” to mean the past

practice of receiving and processing warranty claims on Triton boats.196


195
   See Gibraltar Private Bank & Trust Co. v. Bos. Private Hldgs., Inc., 2011 WL 6000792,
at *3 (Del. Ch. Nov. 30, 2011) (noting that the “the case would be much easier to decide”
if the scrivener of a contract had been more careful in the placement of a comma);
Microstrategy, Inc. v. Acacia Res. Corp., 2010 WL 5550455, at *6 (Del. Ch. Dec. 30, 2010)
(holding that errant placement of a comma rendered contract ambiguous).
196
   Project Boat urges a construction of “ordinary course of business” that is consistent with
the court’s construction of the phrase in Ivize of Milwaukee, LLC v. Compex Litig., LLC,
                                             52
         The evidence relating to Fishing Holding’s history of receiving and

processing warranty claims is difficult to distill. On the one hand, Bass Pro’s

witnesses observed that cracks in the laminate of a Triton boat were nearly unheard

of.197 The email correspondence following the first reports of cracks in the TrX hull

lends some support to that observation. In response to the first customer complaint,

Morris asked the engineering team to check if there was anything unusual about the

construction of the boat.198 Houk had a similar initial reaction when he asked Morris

if the cracks in the Boat Doc Boat were in the same location on that hull as the cracks



2009 WL 1111179, at *9 (Del. Ch. Apr. 27, 2009). There, the court relied on Black’s Law
Dictionary, which “defines ‘ordinary’ as ‘occurring in the regular course of events; normal;
usual,’ and defines ‘course of business’ as ‘[t]he normal routine in managing a trade of
business - Also termed ordinary course of business.’” Id. at *8 (internal citation omitted).
According to Project Boat, its “ordinary course of business” encompasses “anything related
generally to [the business of building and selling boats],” including warranty claims related
to the manufacture of the TrX hull. Project Boat Hldgs., LLC’s Proposed Findings of Fact
and Conclusions of Law (“PFF”) (D.I. 211) ¶ 190 (quoting JX 309 (Maliszewski Dep.) 29).
Bass Pro does not appear to take issue with Project Boat’s definition of “ordinary course
of business.” See Bass Pro Gp., LLC’s Resp. to Project Boat Hldgs., LLC’s Proposed
Findings of Fact and Conclusions of Law (“DR”) (D.I. 218) 28 (citing Cooper Tire &
Rubber Co. v. Apollo (Mauritius) Hldgs. Pvt. Ltd., 2014 WL 5654305, at *17 (Del. Ch.
Oct. 31, 2014) (quoting Ivize, 2009 WL 1111179, at *9) (“This Court has previously
interpreted the contractual term ‘ordinary course’ to mean ‘[t]he normal and ordinary
routine of conducting business.’”). Instead, Bass Pro argues that the warranty claims at
issue here relate to a product-wide defect in the hull and, therefore, cannot be within the
ordinary course of Project Boat’s business. In this regard, Bass Pro argues there is no
evidence that Project Boat previously faced this kind of defect, specifically “a too-thin
laminate throughout the entire hull,” or resulting financial impact, specifically “a $5
million liability affecting over 200 boats.” DR 27–28.
197
      Tr. 242–44, 278 (Adkisson), 453, 471 (Zittrower).
198
      JX 21.

                                             53
that had been reported on the Anderson and Govreau Boats.199 The dealer that sold

the Boat Doc Boat also appeared surprised by the cracks and suggested they were

out of the ordinary.200

            On the other hand, Project Boat’s witnesses suggested cracks in the laminate

are relatively common, with fiberglass and gelcoat cracks by far comprising most of

the warranty claims Fishing Holdings received and processed.201 As support, Project

Boat introduced its third-party warranty claims database.202 According to Project

Boat, this document demonstrates that it received 22 claims for reimbursement for

third-party warranty work on cracking or delaminated Triton hulls, only two of

which were for the TrX.203 Project Boat also points to the fact that Fishing Holdings

maintains a fully-staffed facility dedicated to making repairs on fiberglass hulls.204

Finally, Project Boat presented emails from the Boat Doc Boat dealer expressing

concern about cracks in a “216FH,” a different boat model.205



199
      JX 82.
200
      Id.
201
      Tr. 29–30 (Hopper), 166–67 (Wolf); JX 314 (Houk Dep.) 86–87.
202
      JX 375.
203
      PFF ¶ 121.
204
      Tr. 33–34 (Hopper).
205
      See JX 195, JX 201.

                                             54
      After carefully considering this evidence, I am satisfied that Bass Pro has

carried its burden of proving that the warranty claims related to the cracked and

delaminated TrX hulls were not claims made within the ordinary course of business,

albeit just barely. Project Boat did not provide any substantial analysis of its past

warranty claims, through either witness testimony generally, or in a useful

explication of its third-party warranty claims database. While cracks in the hull of

a boat may occur on occasion, the evidence suggests that these particular cracks in

the TrX were unusual. Even though the warranty claims were individually less than

$100,000, they were not within the ordinary course of business and Project Boat was

obliged under Section 4.26 to disclose them.

      Although Bass Pro has proven that disclosure was required under

Section 4.26, it has not taken the further necessary step of proving that the non-

disclosure matters.206 Bass Pro relies only on the costs of its Replacement Program

to reach its $5 million damage number. Having determined that the Replacement

Program was unnecessary, it follows that the disclosure of the handful of TrX

warranty claims that had been made as of the Agreement would have readily been

captured by the warranty reserve Project Boat had booked on its financial statements




206
   Post-Trial Arg. Tr. 54 (Bass Pro acknowledging that, “[t]he question . . . is whether
Project Boat was obligated to disclose the whole defect and book a reserve for it”)
(emphasis supplied).

                                          55
and disclosed to Bass Pro. In other words, I cannot find that Bass Pro was harmed

in any way by Project Boat’s failure to disclose warranty claims.207

      C. The TrX Hull Failures Did Not Result in a Material Adverse Effect on
         the Company

         In Section 4.23(a) of the Agreement, Project Boat represented to Bass Pro that

there had “not been any change, event, development or occurrence that individually

or in the aggregate, has had or would, individually or in the aggregate, reasonably

be expected to have a Material Adverse Effect on the Company.”208 The Agreement

defines Material Adverse Effect to mean “a material adverse effect on the business,

results of operations, financial condition or assets of the Company and its

subsidiaries, taken as a whole.”209

         While frequently alleged, breaches of a MAE clause are rarely proven.210

“The ubiquitous . . . clause should be seen as providing a ‘backstop protecting the

acquirer from the occurrence of unknown events that substantially threaten the



207
   Given this finding, I need not address Project Boat’s argument that Bass Pro has failed
to present any claims that exceed the $75,000 Claims Basket in Section 11.04(b) because
none of the individual warranty claims at issue would come close to reaching the $75,000
threshold. JX 192 §11.04(b). See PFF at ¶¶ 156–59.
208
      JX 192 § 4.23.
209
      JX 192 at 7.
210
   See, e.g., ChyronHego Corp. v. Wight, 2018 WL 3642132, at *9 (Del. Ch. July 31, 2018)
(“A contractual material adverse effect (‘MAE’) is like a Delaware tornado—frequently
alleged but rarely shown to exist.”).

                                           56
overall earnings potential of the target in a durationally-significant manner.’”211

Buyers seeking to enforce a MAE clause, thus, face a “heavy burden” to prove an

“adverse change in the target’s business that is consequential to the company’s long-

term earnings power over a commercially reasonable period, which one would

expect to be measured in years rather than months.”212

            Bass Pro argues that the burden confronting a typical buyer seeking to enforce

a MAE clause does not apply here because Bass Pro seeks to establish a MAE to

support an indemnification claim, rather than to withdraw from the transaction.

Instead of arguing that the TrX hull issues presented an adverse effect of any

durational significance on the business it was acquiring, Bass Pro asks the Court to

define materiality in reference to the Agreement’s indemnification provisions,

which, as noted, provide for a per claim basket of $75,000 and an aggregate basket

amount of $350,000. Alternatively, Bass Pro points to the materiality threshold used

by Project Boat’s auditors—2% of net revenues or $2.6 million as of July 27, 2014,

and $4 million as of November 14, 2014—as a marker for materiality under the

MAE clause.213 Since Project Boat’s alleged $5 million liability exceeds both the



211
   Hexion Specialty Chems., Inc. v. Huntsman Corp., 965 A.2d 715, 738 (Del. Ch. 2008)
(quoting In re IBP, Inc. S’holders Litig., 789 A.2d 14, 68 (Del. Ch. 2001)).
212
      Id.
213
      JX 321 at 13.

                                              57
claim baskets that support indemnification and the auditor’s definition for

materiality, Bass Pro argues that Project Boat’s misrepresentations are “material”

for purposes of establishing a MAE.

         After considering the evidence and the law, I am satisfied that Bass Pro has

not demonstrated that a MAE occurred as a result of the TrX hull issues. First, as

explained above, the evidence does not support Bass Pro’s claim that Project Boat

should be accountable for the amounts Bass Pro incurred to implement its

Replacement Program.             Second, I decline to adopt Bass Pro’s definitions of

materiality. Those definitions find no support in the Agreement or in Delaware

law.214 The magnitude of the event that will trigger a finding of “materiality” must

be substantial if the MAE clause is to serve its purpose as a contractual

“backstop.”215 That purpose does not change just because a buyer seeks to invoke

the clause to support an indemnification claim rather than to back out of the

transaction. This is especially true where, as here, “MAE” is explicitly defined to

require an effect on the Company as a whole, whether on its business, operations,



214
   Bass Pro relies on I/Mx Info. Mgmt. Sols., Inc. v. MultiPlan, Inc., 2013 WL 3322293, at
*6 (Del. Ch. June 28, 2013), where the court used basket amounts in the indemnification
provision of an agreement to construe the standard for “material breach” and “material
contract” in an agreement that did not define materiality. Here, the Agreement clearly
defines MAE and Bass Pro has not provided a persuasive reason why that definition should
not control Project Boat’s breach of the Agreement.
215
      Hexion, 965 A.2d at 738.

                                              58
financial condition or assets. The amounts included in the Agreement’s provisions

limiting the indemnification rights do not speak to any of these aspects of the

definition.

         Setting aside its “claims basket” argument, Bass Pro has provided no context

in which to consider the impact of the TrX problem on the companies it acquired,

and any effort to do so would face challenges. The hull issue relates to one

production year of one model among 71 models produced by Project Boat. Not

surprisingly, sales of the TrX were approximately 1% of the Company’s overall sales

during the relevant time period.216 And assuming, at best for Bass Pro, that this is

an isolated $5 million problem, it is difficult to discern how this would affect PBH

Marine in a “durationally-significant manner.”217 Nor is it clear that there has been

a negative impact on the Company’s earning power. Indeed, PBH Marine’s gross

margin and net income improved from 2014 to 2016.218 Project Boat did not suffer

a MAE.




216
      JX 115.
217
      Hexion, 965 A.2d at 738.
218
      JX 324 at 26–28.

                                          59
      D. Bass Pro Has Not Proven Fraudulent Inducement

         Bass Pro argues that Project Boat knowingly made misrepresentations in

Sections 4.9, 4.23 and 4.26 fraudulently to induce Bass Pro to execute the

Agreement.219 Under Delaware law,

         [a] claim for fraud requires (i) a false representation, (ii) the defendant’s
         knowledge of or belief in its falsity or the defendant’s reckless
         indifference to its truth, (iii) the defendant’s intention to induce action
         based on the representation, (iv) reasonable reliance by the plaintiff on
         the representation, and (v) causally related damages.220

There is some uncertainty in our law as to whether a plaintiff asserting fraud must

prove the claim by clear and convincing evidence or whether a preponderance of the

evidence will suffice.221 I need not decide the question, however, because Bass Pro’s

proofs fail under either standard.

         As an initial matter, I note that Bass Pro’s fraudulent inducement claim may

well be an improper “bootstrap” of its “breach of contract claim into a claim of




219
   Bass Pro Gp. LLC’s Proposed Findings of Fact and Conclusions of Law (D.I. 210) 39–
40. Bass Pro includes Section 4.8 in its analysis but, as stated, the Court dismissed Bass
Pro’s fraudulent inducement claim with respect to Section 4.8 on Project Boat’s motion to
dismiss.
220
      Prairie Capital III, L.P. v. Double E Hldg. Corp., 132 A.3d 35, 49 (Del. Ch. 2015).
221
   Compare Ross Hldg. & Mgmt. Co. v. Advance Realty Gp., LLC, 2014 WL 4374201, at
*37 (Del. Ch. Sept. 4, 2014) (requiring plaintiffs to prove fraud by clear and convincing
evidence), with Trascent Mgmt. Consulting, LLC v. Bouri, 2018 Wl 4293359, at *17
(Del. Ch. Sept. 10, 2018) (requiring plaintiff to prove fraudulent inducement by a
preponderance of the evidence).

                                              60
fraud.”222 I decline to decide that issue, however, because the fraud claim fails for

lack of proof.

         After carefully considering the evidence, I am satisfied that Bass Pro has

failed to prove that Project Boat intended to induce Bass Pro to enter the contract by

not disclosing the TrX warranty claims or any financial impact that might flow from

those claims. “A result is intended if the actor either acts with the desire to cause it

or acts believing that there is a substantial certainty that the result will follow from

his conduct.”223 The evidence does show that Triton management told Hopper,

a designated “knowledge person” under the Agreement, about the problem with the

TrX hulls. Bentz recommended a recall of the TrX and Zittrower suggested that

there would be an increase in warranty claims after the Escanaba Tournament.224

But others within Fishing Holdings disagreed.225 Viewing this evidence most

favorably for Bass Pro, there was uncertainty at Fishing Holdings about what they



222
   Narrowstep, Inc. v. Onstream Media Corp., 2010 WL 5422405, at *15 (Del. Ch.
Dec. 22, 2010) (internal quotation omitted) (“Delaware law holds that a plaintiff cannot
‘bootstrap’ a claim of breach of contract into a claim of fraud merely by alleging that a
contracting party never intended to perform its obligations.”).
223
      Vichi v. Koninklijke Philips Elecs., N.V., 85 A.3d 725, 811 (Del. Ch. 2014).
224
      Tr. 317–21 (Adkisson); JX 315 (Bentz Dep.) 28–30; JX 153.
225
   JX 314 (Houk Dep.) 86–87 (“My opinion to—at the time, and continues, is that the
boats should have been dealt with as they come in with a problem, correct the problem,
send them back out. . . . That would include either [repair or replace]. What needed to be
done to correct it.”).

                                               61
were dealing with and how best to address it. There is no credible evidence that

Hopper believed Fishing Holdings was confronting a massive product failure but

failed to disclose that fact to Bass Pro in order to lock down the Agreement. Nor

has Bass Pro presented credible evidence that it would not have executed the

Agreement had it known of the TrX warranty claims, i.e., reasonable reliance,

particularly given the limited scope of the problem when compared to the much

broader scope of the transaction. In light of Fishing Holding’s history of dealing

with hull damage on a case-by-case basis and Fishing Holding’s belief that the hull

damage could be dealt with under the existing warranty reserve, I cannot find that

there was fraudulent concealment or inducement, or that Bass Pro would not have

closed the transaction if Project Boat had disclosed the warranty claims.

      E. Bass Pro Did Not Breach the Agreement by Failing to Release the
         Escrowed Funds

        Project Boat alleges Bass Pro breached Sections 11.8 and 8.2 of the

Agreement as well as Section 4(g) of the Escrow Agreement by failing to release the

escrowed funds and by failing to execute joint instructions when the release of the

escrowed funds was required. Under Section 11.8, Bass Pro may withhold the

escrowed funds if it properly asserts a claim for indemnification.226 To assert a claim


226
   JX 192 § 11.8 (“[I]f any claim pursuant to Article XI shall have been properly asserted
by [Bass Pro] in accordance with the Agreement on or prior to [February 10, 2016] and
remain pending on [February 10, 2016] (any such claim, a “Pending Claim”) . . . (ii) any
funds that remain in escrow following [February 10, 2016] in respect of any such Pending
                                           62
properly under the Agreement, Bass Pro was required to notify Project Boat and

provide Project Boat with

            a written notice . . . (A) describing in reasonable detail the nature of the
            circumstances giving rise to the Indemnification Claim, (B) including
            [Bass Pro’s] good faith estimate (based on facts then known) of the
            amount of Damages that may arise from such circumstances and
            (C) describing in reasonable detail the basis for [Bass Pro’s] request for
            indemnification under this Agreement.227

Importantly, however, “[f]ailure to notify [Project Boat] in accordance with this

Section 11.3(c) will not relieve [Project Boat] of any liability that it may have to

[Bass Pro], except to the extent . . . the defense of such Indemnification Claim is

actually materially prejudiced by [Bass Pro’s] failure to give such notice . . . .”228

            Bass Pro’s Claim Notice, timely submitted to Project Boat by the one-year

anniversary of the closing, identifies the issue related to the TrX hulls,229 the

provisions of the Agreement potentially impacted by Project Boat’s failure to


Claim . . . shall be released to Seller . . . upon resolution or (if applicable) satisfaction of
such Pending Claim.”).
227
      JX 192 § 11.3(c).
228
      Id.
229
   JX 257 at 2–3 (“[F]or some period of time 2014 Triton 21 TrX boats were constructed
with a Ranger hull lamination schedule rather than a Triton lamination schedule; certain
such 2014 Triton 21 TrX boats have developed cracks in their hull-side panels, and in some
cases have suffered delamination and/or required hull repairs due to such cracking; that the
cracking and delamination issues with 2014 Triton 21 TrX boats are attributable to the use
of a Ranger hull lamination schedule rather than a Triton lamination schedule in their
construction . . . and that other 2014 Triton 21 TrX boats constructed with a Ranger hull
lamination schedule are at risk for the same cracking and delamination issues.”).

                                                63
disclose the issue230 and the amount of expected damages with supporting reasons

for the damages.231 The Claim Notice does not, however, reveal Bass Pro’s intention

to recall and replace all TrX boats produced with the Ranger Layup.

          Project Boat maintains that it would have stopped Bass Pro from

implementing the Replacement Program had Bass Pro disclosed that it intended to

pursue that program in its Claim Notice. I reject the argument for two reasons. First,

it is not clear that Bass Pro had determined to initiate the Replacement Program at

the time it sent the Claim Notice. Second, and more importantly, Bass Pro apprised

Project Boat of the possibility that it might seek to replace all affected TrX hulls

when it disclosed that its damages were in the range of $5 million. Accordingly,

I am satisfied that Project Boat received sufficient notice of Bass Pro’s claims under

the Agreement, and Bass Pro did not breach the Agreement by withholding the

escrowed funds while it pressed its indemnification claims in court.

      F. Attorneys’ Fees

          The indemnification clauses in Sections 11.2 (a) and (b) of the Agreement

give the buyer and seller the right to indemnification for “any and all Damages”

arising from a breach of the representations and warranties or of a covenant or




230
      Id. at 3–4.
231
      Id. at 4–5.

                                          64
agreement to be performed after the closing.232 The parties agree that attorneys’ fees

fall within the language providing for indemnification of “any and all Damages”

incurred in connection with making an indemnification claim because the

Agreement defines Damages to mean “all losses, damages and other costs and

expenses.”233 But Sections 11.2 (a) and (b) provide for Damages only “to the extent

arising from [] any breach of any representation or warranty” in Article IV or V.234

Having concluded that neither party breached the Agreement, it follows that neither

party is entitled to an award of attorneys’ fees.

                                  III.   CONCLUSION

            For the reasons stated above, I find for Project Boat and will enter final

declaratory judgments in its favor as requested in the Complaint, with the exception

of its request for attorneys’ fees. As for Bass Pro’s counterclaims, I find for Project

Boat. Project Boat shall submit a conforming final judgment, upon notice as to form,

within ten days.




232
      JX 192 § 11.2(a), (b).
233
      JX 192 at 4.
234
      Id.

                                            65
