             IN THE SUPERIOR COURT OF THE STATE OF DELAWARE


 NOVIPAX HOLDINGS LLC and                       )
 NOVIPAX LLC,                                   )
                                                )
                Plaintiffs,                     )
                                                )
        v.                                      )
                                                )     C.A. No.: N17C-03-1682 EMD CCLD
 SEALED AIR CORPORATION,                        )
 CRYOVAC, INC., SEALED AIR                      )
 CORPORATION (US), and SEALED AIR               )
 (CANADA) CO./CIE,                              )
                                                )
                Defendants.
                                                )

                                Submitted: September 25, 2017
                                 Decided: November 28, 2017

                              Upon Defendants’ Motion to Dismiss
                                         DENIED

Jeffrey Moyer, Esquire, Richard P. Rollo, Esquire, Travis S. Hunter, Esquire, Richards, Layton
& Finger, P.A., Wilmington, Delaware and Robert M. Hoffman, Esquire, Michael J. Chiusano,
Esquire, James C. Bookhout, Esquire, Andrews Kurth Kenyon LLP, Dallas, Texas. Attorneys for
Novipax Holdings LLC and Novipax LLC.

Kenneth J. Nachbar, Esquire, John P. DiTomo, Esquire, Barnaby Grzaslewicz, Esquire, Morris,
Nichols, Arsht & Tunnell LLP, Wilmington, Delaware and Robin L. Cohen, Natasha Romagnoli,
Esquire, McKool Smith P.C., New York, New York. Attorneys for Sealed Air Corporation,
Cryovac, Inc., Sealed Air Corporation (US), and Sealed Air (Canada) Co./CIE.

                                     I. INTRODUCTION

       This breach of contract and fraud case is assigned to the Complex Commercial Litigation

Division of this Court. This civil action arises out of a sale and purchase of a North American

foam tray and absorbent pad business. Plaintiffs Novipax Holdings LLC and Novipax LLC

(collectively, “Novipax”), the purchasers, allege that Defendants Sealed Air Corporation,

Cryovac, Inc., Sealed Air Corporation (US), and Sealed Air (Canada) (collectively, “Sealed

Air”) intentionally misled and induced Novipax to purchase the business based on omissions,
  concealments, and material misrepresentations. Novipax now brings an action against Sealed

  Air. Through a complaint filed on or about March 31, 2017 (the “Complaint”), Novipax asserts

  claims for: Fraud, Fraudulent Inducement, and Willful or Intentional Misrepresentations (Count

  I), Breach of Asset Purchase Agreement (Count II); Breach of Transition Services Agreement

  (Count III); Declaratory Judgment and Setoff (Count IV); and Unjust Enrichment (Count V).

           Sealed Air has filed its Motion to Dismiss (the “Motion to Dismiss”). Through the

  Motion to Dismiss, Sealed moves to dismiss Counts I-V for failure to state a claim upon which

  can be granted. For the reasons set forth below, the Court will DENY the Motion to Dismiss.

                                           II. RELEVANT FACTS1

  A. THE FOAM TRAY AND ABSORBENT PAD INDUSTRY

           According to the Complaint, there are two types of foam trays in the industry—barrier

  and non-barrier foam trays.2 Barrier foam trays provide an airtight package that extends the shelf

  life of meat, poultry, seafood, and other protein products.3 Barrier foam trays are sold to

  processors, who then package the food in the barrier foam trays and sell the packaged food to

  retail outlets like Walmart.4 Non-barrier foam trays are more of a “commodity product sold

  directly to customers for over-wrapped applications.”5




  1
     Unless otherwise indicated, the following are the Relevant Facts as alleged in the Complaint. For purposes of the
   Motion to Dismiss, the Court must view all well-pleaded facts alleged in the Complaint as true and in a light most
   favorable to Novipax. See, e.g., Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 27 A.3d 531, 536
   (Del. 2011); Doe v. Cedars Acad., LLC, C.A. No. 09C-09-136, 2010 WL 5825343, at *3(Del. Super. Oct. 27, 2010).
2
  Compl. ¶ 24.
3
  Id. ¶ 25.
4
  Id. ¶ 26.
5
  Id. ¶ 27.


                                                           2
               Absorbent pads are used in conjunction with both barrier and non-barrier foam trays.6

    Absorbent pads are designed to absorb product fluids in order to create a more attractive

    presentation of the product to consumers.7

    B.    SEALED AIR SELLS ITS BARRIER FOAM TRAY AND PAD BUSINESS

               Sealed Air owned and operated a food tray business that sold rigid trays, foam trays, and

    absorbent pads to food handlers and processors.8 In 2013, Sealed Air attempted to sell its foam

    tray and pads business, which at that time included European and South American assets.9

    During the initial sale process, Sealed Air was purportedly receiving bids of over $300 million.10

    Sealed Air, however, was unable to close a sale at that price.11

               In the summer of 2014, Sealed Air initiated a second sale process, this time for the North

    American assets only.12 Sealed Air sought to sell its North American foam tray and pads

    business, but not its rigid tray business.13 On September 16, 2014, Novipax bid $152.5 million

    for the foam tray and pad business (the “Business”).

               Sealed Air conducted its first management presentation to Novipax on October 21,

    2014.14 At this meeting, Sealed Air disclosed to Novipax that the Business’s largest customer,

    Tyson, might demand a price concession in order to continue purchasing foam trays and pads.15

    Sealed Air therefore asked all remaining bidders, including Novipax, for new bids reflecting the




6
  Id. ¶ 28.
7
  Id.
8
  Id. ¶ 3.
9
  Id. ¶ 41.
10
   Id.
11
   Id.
12
   Id. ¶ 42.
13
   Id. ¶ 4.
14
   Id. ¶ 44.
15
   Id.


                                                        3
     valuation impact of Tyson’s demand.16 On November 4, 2014, Novipax reduced its bid to $80

     million.

            On February 11, 2015, Novipax and Sealed Air entered into an Asset Purchase

     Agreement (the “APA”) for the Business.17 Novipax and Sealed Air also executed a Transition

     Services Agreement (the “TSA”). Novipax closed its purchase of the Business on April 1, 2015

     (the “Closing”).18

     C.   THE APA

            The APA defines the parties as: (i) Sealed Air Corporation, referred to as the “Parent”;

     (ii) Cryovac, Inc., (iii) Sealed Air Corporation (US), and (iv) Sealed Air Corporation (Canada),

     referred to with the Parent as the “Sellers”; and (iii) DankPak LLC19, referred to as the “Buyer.”

     For internal consistency, unless quoting the language of the APA, the Court will refer to the

     “Sellers” as “Sealed Air,” and the Court will refer to the “Buyer” as Novipax.

            As part of the sale and purchase of the Business, the APA imposes certain disclosure

     duties and alike on Sealed Air and Novipax. This includes representations and warranties and

     affirmative and negative covenants.

            i. Sealed Air’s Representations and Warranties

            Article IV of the APA specifies Sealed Air’s representations and warranties.20 Section

     4.5 requires Sealed Air to represent and warrant about changes related to the Business.21 Under

     Section 4.5, Sealed Air represents and warrants that:



16
   Id. ¶ 45.
17
   Id. ¶ 19.
18
   Id. ¶ 20.
19
   DankPak LLC was the former name of Novipax Holdings LLC, the holding company for the other Novipax entity.
   See Compl. Ex. A. Asset Purchase Agreement p. 1. Exhibit A to the Complaint will be cited to as “APA § __” or
   “APA p. __” if no section is specified.
20
   See APA Art. IV.
21
   Id. § 4.5.


                                                        4
             (a) there has not been any Material Adverse Effect, (b) the Business has been
             operated in the Ordinary Course in all material respects . . . (d) except as set forth
             on Section 4.5 of the Disclosure Schedule, there has not been any action by any
             Seller that, if taken during the period from the date of this Agreement through the
             Closing Date, would constitute a breach of Section 6.1(a), (f), (g), (i), or (l).22

     Material Adverse Effect is defined as “any change, event, circumstance, condition, or effect that

     is materially adverse to . . . (ii) the condition (financial or otherwise), assets, business,

     operations, or results of operations of the Business.”23 Ordinary Course is defined as the

     ordinary and usual course of normal day-to-day operations consistent with past practice.24

             Section 4.6(b) requires Sealed Air to represent and warrant regarding possible changes to

     certain Material Contracts.25 Under Section 4.6(b), Sealed Air represents and warrants that:

             There is not any existing material default or event of material default, or any event
             which, with or without notice or lapse or time or both, would constitute a material
             default under any Material Contract by any Seller, or, to the Knowledge of Parent,
             by any other party thereto. No Seller has received any notice of the intention of
             any party to terminate any such Material Contract.26

     The Material Contracts are listed in Section 4.6(a) to the Disclosure Schedule and include the

     supply agreements with certain customers of the Business such as Tyson, Perdue, and Cargill.27

             Section 4.7 then requires Sealed Air to represent and warrant about Purchased Assets,

     specifically that the Purchased Assets “constitute the rights, assets, and services required to

     conduct the Business following the Closing.”28 Purchased Assets include tangible and intangible

     assets of the Business, including Sealed Air’s goodwill.29




22
   Id.
23
   Id. p. 9.
24
   Id. p. 10.
25
   Id. § 4.6.
26
   Id.
27
   Id. § 4.6 to the Disclosure Schedule.
28
   Id. § 4.7.
29
   Id. p. 11.


                                                         5
            Finally, Section 4.18 requires Sealed Air to make certain representations related to the

     Business’s Major Customers.30 Under Section 4.18, Sealed Air represents and warrants that “in

     the last 12 months, no Major Customer has provided written notice to Sellers of its intention to

     terminate its relationship with any Seller with respect to the Business, whether as a result of the

     Transaction or otherwise.”31 The Major Customers are the ten largest customers of the Business

     (in terms of dollar volume of purchases from Sellers) and are defined on Section 4.18 of the

     Disclosure Schedule and include Tyson, Perdue, and Cargill.32

            Article IV of the APA concludes by providing a disclaimer about Sealed Air’s

     representations and warranties—that neither Sealed Air nor any of its representatives or alike

     made any other representation or warranty, express or implied, other than those provided in

     Article IV.33

            ii Novipax’s Representations and Warranties

            Article V of the APA sets forth Novipax’s representations and warranties.34 Under

     Section 5.7, Novipax must represent and warrant that it has conducted a financial investigation of

     the Business, which includes Novipax’s “own estimate of the value of the Business and the

     Purchased Assets.35 Section 5.7 also requires Novipax to represent and warrant that:

            Buyer has received certain estimates, budges, forecasts, plans and financial
            projections (collectively, “Forward Looking Statements”). There are uncertainties
            inherent in the Forward Looking Statements, and Buyer is familiar with such
            uncertainties. Buyer is taking full responsibility for making its own evaluation of
            the adequacy and accuracy of all Forward Looking Statements (including the
            reasonableness of the assumptions underlying the Forward Looking Statements).36



30
   Id. § 4.18.
31
   Id.
32
   See § 4.18 of Disclosure Schedule.
33
   Id. § 4.20.
34
   See id. Art. V.
35
   Id. § 5.7
36
   Id.


                                                      6
     Section 5.7 also required Novipax to represent and warrant that:

             Buyer is not relying on any representations, warranties, omission or covenants of
             Sellers or any of their Representatives (including any financial statements not
             expressly covered in Section 4.4, any projections, and the information contained in
             the confidential information memorandum, management presentation and other due
             diligence materials made available to Buyer) except as expressly set forth in this
             Agreement and any Seller Related Agreement executed and delivered to any Buyer
             Party pursuant to this Agreement.37

             iii The Covenants

             Article VI of the APA places certain affirmative and negative covenants on the parties

     before the Closing.38 As it related to Sealed Air’s operation of the Business, Section 6.1 states

     that:

             Sellers shall conduct the Business in all material respects in the Ordinary Course
             and, to such extent, use reasonable best efforts to preserve intact its current business
             organization and the goodwill of the Business . . . maintain its existing relationships
             with customers, suppliers, vendors, distributors, agents . . . including the Major
             Customers and Major Suppliers . . . Sellers shall maintain all of the Purchased
             Assets in their current condition, ordinary wear and tear excepted.39

     Section 6.1 further places negative covenants on Sealed Air’s operation of the Business:

             Sellers shall not do any of the following with respect to the Business without the
             prior written consent of Buyer (which consent will not be unreasonably withheld,
             conditioned, or delayed):

                  (a) breach any material obligation or duty imposed upon a Seller by any
                      applicable Law;

                  (b) except in the Ordinary Course, make any purchase, sale, or disposition of
                      any Purchased Asset

                  (c) except in the Ordinary Course, (i) amend or terminate any Assumed
                      Contract or (ii) materially amend or terminate any material business
                      arrangements40



37
   Id. § 5.7.
38
   See id. Art. VI.
39
   Id. § 6.1.
40
   Id. § 6.1 (a)-(c).


                                                        7
              Section 6.3(b) then places affirmative duties on Sealed Air and Novipax related to party

     communications.41 Section 6.3 states that:

              Parent and Buyer shall give written notice to the other promptly upon becoming
              aware of (i) any representation or warranty contained in this Agreement becoming
              untrue or (ii) the failure of any party to comply with or satisfy in any respect any
              covenant, condition, or agreement to be complied with or satisfied by it under this
              Agreement.42

              Article VII makes compliance with the foregoing representations, warranties and

     covenants a condition precedent to the Closing.43 Sections 7.2 and 7.3 state that the obligations

     of Novipax and Sealed Air to effect the Closing shall be subject to the fulfillment of the

     representations, warranties, and covenants contained in the Agreement.44

              iv. Indemnification Rights

              Article IX provides indemnification rights to Sealed Air and Novipax.45 Under Sections

     9.1 and 9.2, Sealed Air and Novipax are entitled to indemnification for all losses arising from

     breach of any representation or warranty or breach or non-fulfillment of any covenant in the

     APA.46     Section 9.3, however, places limits on these indemnification rights.47 Section 9.3(b)

     requires the indemnifying party to receive notice of the indemnification claim within certain

     timeframes:

              A party otherwise liable for indemnification under this Article IX (an
              “Indemnifying Party”) shall have no liability for and Indemnification Claim under
              Section 9.1(a) or 9.2(a) unless such Indemnifying Party shall have received a Claim
              Notice with respect thereto on or before the following applicable deadline: (A) for
              a claim relating to a Core Representation or a claim that involves fraud, at any time
              after Closing . . . (C) for any other claim, the eighteen (18) month anniversary of
              the Closing Date.48

41
   Id. § 6.3(b).
42
   Id.
43
   See id. Art. VII.
44
   Id. §§ 7.2(a)-(b), 7.3(a)-(b).
45
   See id. Art. IX.
46
   Id. §§ 9.1(a)-(b), 9.2(a)-(b).
47
   Id. § 9.3.
48
   Id. § 9.3(a).


                                                       8
     Section 9.3(h) then provides that:

            From and after the Closing, the indemnification rights provided by this Article IX
            shall constitute the sole and exclusive remedy of the Indemnified Parties for any
            breach of representation, warranties, covenants, or agreements contained in this
            Agreement or any Closing Instrument; provided, however, that nothing herein shall
            limit (i) any claim based on fraud, willful misrepresentation or willful breach, or
            (ii) any party’s right to seek specific performance, injunctive relief, or other
            equitable remedies.49

            Finally, Article X, Section 10.3 affirms that the APA and the other instruments and

     agreements contemplated by the APA “constitute the entire agreement amount the parties and

     supersede any prior understanding, agreement, or representations by or among the parties. 50

     D.   THE TSA

            Novipax and Sealed Air executed the TSA concurrently with the APA. The only parties

     to the TSA are Sealed Air Corporation and Novipax LLC.

            The TSA specifies certain transition services that Sealed Air must provide to Novipax

     following the Closing.51 For example, Service Schedule 1, A requires Sealed Air to work to

     maintain its relationship with customers of the Business as of the Closing.52 In addition, Service

     Schedule 1, B requires Sealed Air to provide sales administration support for: (i) formula pricing

     for U.S. customers, and (ii) U.S. barrier foam tray pricing and rebate management.53

            In the event of a dispute or an alleged breach of the TSA, the parties agreed under Section

     5.15 to engage in good faith negotiations to resolve the dispute.54 Specifically, Section 5.15

     provides that:



49
   Id. § 9.3(h).
50
   Id. § 10.3.
51
   See Compl. Ex. B, Transition Services Agreement p. 1. Exhibit B to the Complaint will be cited to as “TSA § __”,
   “TSA Sch. __”, or “TSA p. __” if no section is specified.
52
   TSA Serv. Sch. 1, A.
53
   Id. Serv. Sch. 1, B.
54
   Id. § 5.15.


                                                         9
            In the event of a dispute or alleged breach of the Agreement by either Party, the
            Parties agree to engage in a good faith effort and negotiation in an attempt to resolve
            the dispute or alleged breach. In the event that this initial negotiation is not
            successful, the parties agree to elevate the dispute or alleged breach to the executive
            level of each Party, and the senior executives of each Party agree to negotiate in
            good faith and attempt to arrive at a mutual resolution of such dispute or alleged
            breach. In the event that this discussion is unable to resolve the controversy within
            a reasonable period of time, the Parties may then pursue their respective remedies
            pursuant to applicable Law and in accordance with Section 10.6 of the [APA].55

     E.   NOVIPAX MAKES CERTAIN DISCOVERIES AFTER CLOSING

            Following the Closing, Sealed Air gave Novipax access to its pre-acquisition e-mails

     pursuant to the terms of the APA and the TSA.56 Through such e-mails, Novipax contends that it

     discovered various representations and discussion about the Business that were contrary to the

     representations in the APA.57

            i. Sealed Air failed to disclose material information about the Business

            Novipax claims that Sealed Air knew of material information relevant to the value of the

     Business but failed to disclose it to Novipax.58 Specifically, Novipax alleges that Sealed Air

     knew that: (i) major customers were migrating, or preparing to migrate, to rigid trays; (ii) barrier

     foam trays were not cost advantaged relative to rigid trays; and (iii) the cost for customers to

     shift from barrier foam trays to rigid trays was de minimus.59

            In early December 2014, Bimal Kalvania (VP & GM Rigids & Absorbents) sent an e-

     mail to others at Sealed Air chastising them for working to switch Cargill (one of its clients)

     from foam trays to rigid trays, stating, “it will confirm their worst fears that [foam] is changing

     to [rigid] . . . we can expect buyers to walk away or deeply discount the valuation/price for the




55
   Id.
56
   Compl. ¶ 1; see also APA § 6.4(b).
57
   Compl. ¶ 5.
58
   Id. ¶ 47.
59
   Id.


                                                      10
     business.”60 In another e-mail, Sealed Air decided to withhold information about then on-going

     customer negotiations with Cargill for a 2% foam tray price reduction because disclosing it

     “could put the deal at risk.”61

            ii. Sealed Air concealed material information about the Business

            Novipax also alleges that Sealed Air concealed material information about the Business,

     mainly the Business’s customer base.62 While Sealed Air disclosed Tyson’s demand for a price

     reduction, Sealed Air purportedly concealed facts undermining the value of the Perdue and

     Cargill businesses.63

            On March 2, 2015, Perdue advised Sealed Air of its intent to transition its foam business

     to rigid trays sometime in “the middle of April.”64 In an e-mail dated March 3, 2015, Sealed Air

     confirmed that it “[l]ooks like Perdue is planning on moving all of its foam trays to a solid

     barrier rigid tray mid-April.”65 Another e-mail dated March 4, 2015 included a statement from

     Perdue that orders for two of the barrier foam trays “will taper down beginning the week of

     March 23rd.”66 Despite acknowledging that this information likely had to be disclosed to

     Novipax, Sealed Air’s in-house counsel claimed there was no “legal obligation” to notify

     Novipax and left it up to Sealed Air’s VP of Global Mergers to inform Novipax.67 Sealed Air

     supposedly never notified Novipax.

            As noted above, Novipax contends that Sealed Air concealed the potential loss of Cargill

     before the APA was signed.68 In Mr. Kalvani’s December 14, 2014 e-mail, he instructed sales


60
   Id. ¶ 48.
61
   Id. ¶ 49.
62
   Id. ¶¶ 87–89.
63
   Id. ¶ 92.
64
   Id. ¶ 93
65
   Id.
66
   Id. ¶ 95.
67
   Id. ¶¶ 97–99.
68
   Id. ¶ 104.


                                                     11
     teams to stop attempting to switch Cargill from soft to rigid trays because it could undermine the

     transaction with Novipax since the Cargill business “represents more than 33% of barrier

     trays.”69 Sealed Air also discussed Cargill’s request for a 2% price reduction on barrier foam for

     the next contract cycle based on the fact that the price of rigid trays was becoming competitive

     with the price of foam trays.70 In an internal e-mail pertaining to the 2% reduction, Sealed Air’s

     Jackie Anderson stated that it “must disclose anything above $150,000 P&L change to the

     Business,” and confirmed that the Cargill P&L change would have exceeded $300,000.71 Rather

     than disclose the facts undermining the value of Cargill, Sealed Air concealed the information to

     preserve the deal—“having this discussion with [Buyer] could put the deal at risk as we already

     have difficult conversations about Tyson RFP.”72

            iii Sealed Air provided false assurances about the Business

            Finally, Novipax alleges that Sealed Air made false assurances about the Business after

     execution of the APA and before the Closing.73 First, Sealed Air purportedly misrepresented that

     the Business constituted a viable, sustainable product line which was protected from competing

     packaging, including Sealed Air’s rigid tray business.74 In the Confidential Information

     Memorandum, provided pursuant to Section 6.4 of the APA, Sealed Air stated that “foam will

     remain the material of choice going forward due to consumer preference, pricing advantages, and

     the significant capital investment required to upgrade equipment to other resin-based packaging

     solutions.”75 Sealed Air’s management presentation also confirmed that “foam is the resin of




69
   Id.
70
   Id. ¶ 105.
71
   Id. ¶ 106.
72
   Id. ¶ 109.
73
   Id. ¶ 51.
74
   Id.
75
   Id. ¶ 53.


                                                     12
     choice,” that “switching to rigid trays negatively impacted retailer sales,” and that “foam trays

     are more cost effective than rigid trays.”76

            Novipax discovered numerous e-mails from Sealed Air’s Regional Sales Manager Scott

     Mauer admitting that foam trays were not as cost advantageous as originally believed. Mr.

     Mauer stated that “to move from foam to solid is not too expensive . . . around $2000-2,500 for a

     single lane,” and that for certain processing machines “no changes are required” to switch from

     foam to rigid trays.77 Mr. Mauer also stated that the estimate provided to Novipax of the cost to

     convert production lines was “significantly high” and “much higher than would actually occur,”

     and acknowledged that he may have “misled the decision” and caused Novipax to believe that

     “foam barrier trays don’t have serious competition.”78

            Second, Novipax alleges that Sealed Air provided the false assurance that it would

     preserve and protect the value of the Business to be transitioned to Buyer. Novipax contends

     that Sealed Air breached the representations and warranties under Article IV by migrating the

     Business’s Major Customers to non-Business products, failing to conduct the Business in the

     Ordinary Course, and amending material business arrangements. Novipax points to the fact that

     Sealed Air helped transition Perdue from the Business’s barrier foam trays to its retained rigid

     trays. Novipax also argues that Sealed Air knew Cargill planned to perform testing on rigid tray

     replacement and confirmed that Cargill would use Sealed Air’s rigid tray product.

            Finally, Novipax contends that Sealed Air provided the false assurance that it would

     advise Novipax if it breached a representation or covenant between the signing and the Closing

     pursuant to Section 6.3 of the APA. Instead, in March of 2015, Sealed Air provided notice of



76
   Id. ¶ 55
77
   Id. ¶ 58.
78
   Id. ¶¶ 59–63.


                                                     13
     certain de minimus inaccuracies under Section 6.3, but did not disclose any of the inaccuracies

     surrounding foam trays and rigid trays, the Business, and the Business’s customer base. The

     closing certificate provided before the Closing did not disclose any of the foregoing inaccuracies

     or material changes.79

     F.    NOVIPAX INITIATES THIS CIVIL ACTION AGAINST SEALED AIR

            Based on these discoveries, Novipax filed the Complaint against Sealed Air principally

     for fraud. The Complaint also asserts claims for breach of the APA and TSA, unjust enrichment,

     and declaratory judgment.

            On May 16, 2017, Sealed Air moved to dismiss Counts I-V and filed Defendants’

     Opening Brief in Support of Motion to Dismiss. Novipax filed Plaintiffs’ Answering Brief in

     Opposition to Defendants’ Motion to Dismiss (the “Opposition”) on July 21, 2017. On August

     15, 2017, Sealed Air filed Defendants’ Reply Brief in Further Support of their Motion to Dismiss

     (the “Reply”).

            The Court heard argument on the Motion to Dismiss, the Opposition and the Reply on

     August 25, 2017. At this hearing, the Court also heard argument on the Motion for a Protective

     Order to Stay Discovery, filed by Sealed Air and the Opposition to Defendants’ Motion for

     Protection Order and to Stay Discovery, filed by Novipax. By Order dated July 21, 2017, the

     Court temporarily stayed discovery, but must decide at the hearing whether a further stay is

     required pending resolution of the Motion to Dismiss.




79
     Id.


                                                     14
                                IV. PARTIES’ CONTENTIONS

A.     Sealed Air’s Contentions

       Sealed Air argues that the Complaint must be dismissed in its entirety because Novipax

failed to comply with certain contractual prerequisites to litigation. Sealed Air next contends

that the individual claims in Counts I-V fail to state cognizable causes of action. On the fraud

claim, Sealed Air claims that the non-reliance and integration provisions of the APA—Sections

4.20, 5.7, and 10.3—bar Novipax from claiming it relied on extra-contractual representations or

warranties. Sealed Air also argues that the fraud claim is not pleaded with particularity and fails

to demonstrate that the damages are separate from the breach of contract damages. On the

breach of contract claims, Sealed Air contends that the Complaint fails to allege any act that

constitutes a breach of the APA or the TSA. On the equitable claims, Sealed Air alleges that the

claim for unjust enrichment fails because it arises out of the parties’ contractual relationship.

Finally, Sealed Air claims that Novipax is not entitled to declaratory judgment negating the

APA’s requirement with respect to alternative dispute resolution (“ADR”).

B.   Novipax’s Contentions

       Novipax argues that there are no contractual prerequisites that bar this civil action. On

the fraud claim, Novipax contends that the non-reliance and integration provisions do not

unambiguously bar a fraud claim and that Section 9.3(h) in fact expressly permits a fraud claim.

Novipax also asserts that the fraud damages are separate from the breach of contract damages.

On the breach of contract claim, Novipax claims that the Complaint asserts numerous breaches

of the APA, specifically Sections 4.5, 4.18, 6.1, and 6.3(b). As to the equitable claims, Novipax

contends it may bring an unjust enrichment claim as an alternative remedy based on the theory

that no contract exists because of Sealed Air’s fraud. Finally, Novipax argues that it is entitled to




                                                 15
     declaratory judgment as to its right to offset the damages in this suit from the Closing Net

     Working Capital, and that this determination can only be made by this Court.

                                      V. STANDARD OF REVIEW

            Upon a motion to dismiss, the Court (i) accepts all well-pleaded factual allegations as

     true, (ii) accepts even vague allegations as well-pleaded if they give the opposing party notice of

     the claim, (iii) draws all reasonable inferences in favor of the non-moving party, and (iv) only

     dismisses a case where the plaintiff would not be entitled to recover under any reasonably

     conceivable set of circumstances.80 However, the Court must “ignore conclusory allegations that

     lack specific supporting factual allegations.”81

                                              V. DISCUSSION

     A.     SEALED AIR HAS NOT DEMONSTRATED THAT THERE ARE PROCEDURAL OR TIME BARS
            THAT REQUIRE DISMISSAL OF THIS CIVIL ACTION IN ITS ENTIRETY

            Sealed Air first argues that the lawsuit must be dismissed because Novipax has not

     complied with certain contractual prerequisites to litigation set forth in the APA and TSA.

            i. Sealed Air’s construction of Article IX of the APA is not the only reasonable
               construction as a matter of law

            Sealed Air first argues that Novipax did not provide appropriate Claim Notice (as defined

     in the APA) that Sealed Air breached a representation or warranty as required by Section 9.4 of

     the APA. Section 9.4, under Article IX “Indemnification,” provides that “any claim for

     indemnification under this Article IX shall be brought and asserted by Buyer or Parent . . . by

     delivering written notice of such claim to the Indemnifying Party.”82 Section 9.4 clarifies that

     the Claim Notice must set forth the facts giving rise to the claim and, in the event of any claim


80
   See Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 227 A.3d 531, 536 (Del. 2011); Doe v.
   Cedars Academy, No. 09C-09-136, 2010 WL 5825343, at *3 (Del. Super. Oct. 27, 2010).
81
   Ramunno v. Crawley, 705 A.2d 1029, 1034 (Del. 1998).
82
   APA § 9.4.


                                                        16
     for indemnification against Sealed Air, Novipax must provide Sealed Air access to its books and

     records.83 Sealed Air asserts the Claim Notice was insufficient and that it was not provided

     access to Novipax’s books and records and seeks to dismiss the entire Complaint on this basis.

            Under this same theory, Sealed Air also seeks to dismiss the breach of contract and

     equitable claims because Novipax did not provide Sealed Air notice of those claims within

     eighteen months as required under Section 9.3(a). Section 9.3(a) clarifies that no party shall be

     liable for an indemnification claim unless it has received notice of the claim within certain

     timeframes—for a fraud claim, the party must receive notice “at any time after Closing” and for

     “any other claim” within the “eighteen (18) month anniversary of the Closing Date.”84 Sealed

     Air contends it did not receive notice of the claim until Novipax filed the Complaint on March

     31, 2017—long after the time to serve notice expired on October 1, 2016.

            In response to the above arguments, Novipax contends that Sections 9.4 and 9.3(a) do not

     apply because they are under Article IX, which is entitled “Indemnification.” Moreover, the

     language in Sections 9.4 and 9.3(a) are conditioned on a claim for indemnification. Novipax

     contends these indemnification provisions do not apply to this case or its claims because

     Novipax is not seeking indemnification. In fact, the Complaint does not mention

     indemnification or seek a declaration from the Court as to its right to indemnification. Instead,

     Novipax asserts fraud, willful misrepresentation, willful breach, and equitable claims, which are

     exempt from Article IX under Section 3.9(h).85 Therefore, Novipax argues that the requirements

     in Sections 9.4 and 9.3(a) do not impose any prerequisites to litigation.




83
   Id.
84
   Id. § 9.3(a).
85
   Id. § 9.3(h) (explaining that indemnification rights under Article IX are the exclusive remedy for breach of any
   representation or warranty in the APA, but clarifying that “nothing herein shall limit (i) any claim based on fraud,
   willful misrepresentation or willful breach, or (ii) any party’s right to seek . . . other equitable remedies”).


                                                           17
            In deciding a motion under Rule 12, the Court cannot choose between two differing

     reasonable interpretations of a contract. Rather, dismissal is proper only if the defendant’s

     interpretation is the only reasonable construction as a matter of law. Here, the language of the

     APA is reasonably susceptible to different interpretations, as illustrated by the above

     discussion.86 The Court, therefore, must resolve any ambiguity in favor of Novipax at this stage

     in the litigation and, on this basis, cannot grant the Motion to Dismiss on this basis.

            ii. Sealed Air does not demonstrate that Section 5.15 is a clear and unambiguous
                condition precedent that bars all claims in this case

            Sealed Air next argues that Novipax did not engage in pre-litigation negotiation as

     required under Section 5.15 of the TSA. Section 5.15 provides that in the event of a dispute

     relating to an alleged breach of the TSA, the parties agree to engage in good faith negotiation to

     resolve the dispute.87 If, however, the parties cannot resolve their dispute, “the Parties may then

     pursue their respective remedies pursuant to applicable Law and in accordance with Section

     10.6” of the APA.88 Section 10.6 of the APA permits the parties to pursue legal action for any

     dispute arising out of the APA.89 Therefore, Sealed Air argues that the negotiations mentioned

     in Section 5.15 of the TSA are a condition precedent to litigation under Section 10.6 of the APA.

            Novipax argues that Section 5.15 does not bar the claims in this case because the APA

     does not require negotiation prior to filing a lawsuit.90 Moreover, Novipax contends Section

     5.15 cannot be incorporated into the APA because Section 5.15 contains limiting language that it



86
   Eni Holdings, LLC v. KBR Group Holdings, LLC, 2013 WL 6186326, at *6 (Del. Ch. Nov. 27, 2013) (“Faced with a
   question of contract interpretation on a motion to dismiss, [the Court] must determine whether the contractual language
   at issue is unambiguous. If so, [the Court] must give effect to its meaning. If, however, the contractual language is
   reasonably or fairly susceptible to different interpretations, [the Court] must resolve the ambiguity in favor of the non-
   moving party.”).
87
   TSA § 5.15
88
   Id.
89
   See APA § 10.6.
90
   See id.


                                                              18
     applies only to a dispute or alleged breach of “this Agreement,” which is defined as the TSA.91

     In addition, Section 5.15, or any other provisions of the TSA, cannot be incorporated in the APA

     because the parties to the two agreements are different—the APA is between all defendants in

     this case and the TSA is just between Novipax and Sealed Air.

             Sealed Air does not demonstrate that Section 5.15 operates as a clear and unambiguous

     condition precedent to filing this civil action. In fact, this condition precedent is not reaffirmed

     or included in Article VII of the APA, entitled “Conditions Precedent.”92 Novipax in turn

     provides an alternative reasonable interpretation of Section 5.15. Therefore, the Court cannot

     dismiss the civil action in its entirety.

             However, neither party addresses the fact that Novipax brings a claim specifically for

     breach of the TSA. While it is still unclear whether Section 5.15 is an unambiguous condition

     precedent, Novipax’s argument seems to be that Section 5.15 applies only to claims for breach of

     the TSA. If this is the argument, then Count III may be the grounds for a counterclaim by Sealed

     Air. In any event, it is not a procedural bar to the litigation (like a mandatory mediation or

     arbitration provision).

     B.    THE COMPLAINT ASSERTS A VIABLE CLAIM FOR FRAUD

             Sealed Air next argues that the fraud claim must be dismissed because it is barred by the

     non-reliance and integration provisions of the APA. Sealed Air also argues that the fraud claim

     is not pleaded with particularity and fails to demonstrate that the damages are separate from the

     breach of contract damages.

             i. The non-reliance provision limits fraud claims to written representations in the
                APA



91
     See TSA p. 1.
92
     See APA Art. VII.


                                                      19
            Sealed Air first argues that the Court should dismiss the fraud claim because it is barred

     by the non-reliance and integration provisions of the APA. According to Sealed Air, these

     provisions bar Novipax from claiming it reasonably relied on any alleged misrepresentation or

     omission by Sealed Air outside of those representations and warranties specified in the APA.

            Article IV of the APA pertains to Sealed Air’s representations and warranties about the

     Business. Section 4.5 requires Sealed Air to represent and warrant that there has not been any

     Material Adverse Effect, that the Business has been operated in the Ordinary Course, and that it

     has not taken any action before the Closing that would constitute a breach of the covenants

     provided in Section 6.1.93 Section 4.6(b) then requires Sealed Air to represent and warrant that

     there is no material default of any Material Contract and that Sealed Air has not received notice

     of any party’s intention to terminate any such Material Contract, which includes supply

     agreements with certain key customers of the Business.94 Finally, Section 4.18 requires Sealed

     Air to represent and warrant that “in the last 12 months, no Major Customer has provided written

     notice to Sellers of its intention to terminate its relationship with any Seller with respect to the

     Business, whether as a result of the Transaction or otherwise.”95

            Sealed Air relies principally on the purported non-reliance and integration provisions

     Sections 4.20, 5.7, and 10.3 of the APA to make its argument. Section 4.20 provides that, except

     as set forth in Article IV (the representations and warranties of Sealed Air):

            [N]ONE OF THE SELLERS, THEIR RESPECTIVE AFFILIATES OR ANY OF
            THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR
            REPRESENTATIVES MAKE OR HAVE MADE ANY OTHER
            REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR
            IN EQUITY, IN RESPECT OF SELLERS, THEIR RESPECTIVE AFFILIATES
            OR THE BUSINESS.96

93
   See id. § 4.5.
94
   Id. § 4.6(b).
95
   Id. § 4.18.
96
   Id. § 4.20.


                                                       20
     Section 5.7, under the heading “Representations and Warranties of Buyer” reaffirms this same

     principle:

            Buyer is not relying on any representations, warranties, omission or covenants of
            Sellers or any of their Representatives (including any financial statements not
            expressly covered in Section 4.4, any projections, and the information contained in
            the confidential information memorandum, management presentation and other due
            diligence materials made available to Buyer) except as expressly set forth in this
            Agreement and any Seller Related Agreement executed and delivered to any Buyer
            Party pursuant to this Agreement.97

     Finally, Section 10.3 provides that the APA and accompanying Schedules, Exhibits, and

     Annexes and other agreement contemplated by the APA “collectively constitute the entire

     agreement among the parties and supersede any prior understanding, agreement, or

     representations by or among the parties.”98

            Sealed Air argues that these provisions preclude all of the alleged misrepresentations and

     omissions cited in the Complaint because they all occurred prior to closing or outside the

     Agreement. For example, Sealed Air alleges that Novipax’s reliance on statements in the

     management presentations and Confidential Information Memorandum is expressly barred by the

     language of Section 5.7. Sealed Air relies on a number of Delaware cases to argue that these

     express non-reliance provisions bar any claim based on extra-contractual fraudulent

     misrepresentations.99

            In response, Novipax argues the Sections 4.20, 5.7, and 10.3 do not bar the fraud claim

     because Section 9.3(h) expressly preserves fraud claims. As previously discussed, Section

     9.3(h), in the Article entitled “Indemnification,” provides that the indemnification rights


97
   Id. § 5.7.
98
   Id. § 10.3.
99
   See e.g., Prairie Capital III, L.P. v. Double E Holding Corp., 132 A.3d 35 54–55 (Del. Ch. 2015) (Representation-
   limiting language defines the universe of information on which the contracting party relied. If the contract says the
   buyer only relied on the representations in the four corners of the agreement, then that is sufficient).


                                                           21
  provided by Article IX shall be the “sole and exclusive remedy” for any breach of

  representations, warranties, or covenants in the APA.100 However, Section 9.3(h) qualifies that

  remedy by stating, “nothing herein shall limit (i) any claim based on fraud, willful

  misrepresentation, or willful breach, or (ii) any party’s right to seek . . . other equitable

  remedies.”101

          Novipax relies on Anvil Holding Corp. v. Iron Acquisition Co. Inc.102 to argue that its

  fraud claim is cognizable in spite of the non-reliance provisions.103 In Anvil, the Delaware Court

  of Chancery declined to dismiss a fraud claim based on the non-reliance provisions of an

  agreement for two reasons.104 First, the Anvil court found that the non-reliance provisions did

  not unambiguously demonstrate that both parties disclaimed reliance on extra-contractual

  statements.105 Instead, the non-reliance provisions at issue merely stated that neither the seller

  nor any of its representatives was making extra-contractual representations.106 Second, the Anvil

  court found that the “exclusive remedies” clause, in which the parties agreed to reserve all rights

  to claims based on fraud, preserved the fraud claim.107 The exclusive remedies provision thus

  provided further evidence that the parties intended that fraud claims could be based on extra-

  contractual representations.108

          Novipax also relies on Airborne Health, Inc. v. Squid Soap LP.109 In Airborne, the

  Delaware Court of Chancery found that an asset purchase agreement did not contain a non-



100
    APA § 9.3(h).
101
    Id.
102
    2013 WL 2249655, at *1 (Del. Ch. May, 17, 2013).
103
    Anvil, 2013 WL 2249655, at *1.
104
    Id. at *8.
105
    Id.
106
    Id.
107
    Id.
108
    Id.
109
    984 A.2d 126 (Del. Ch. 2009).


                                                       22
  reliance provision that barred a fraud claim. 110 The Airborne court found that an integration

  clause could not form the basis for a non-reliance provision because that clause was standard in

  most contracts and did not contain any language resembling anti-reliance.111 The Airbone court

  also found that the exclusive remedy provision preserved the fraud claim and that, absent any

  limit on that fraud claim through a non-reliance provision, extra-contractual representations were

  allowed.112

          The facts of this case lie somewhere in between Anvil and Airborne. Here, unlike Anvil

  and Airborne both parties expressly represented in Sections 4.20 and 5.7 that they were not

  relying on any extra-contractual representations.113 Section 10.3 is a standard integration clause

  that should not be considered a non-reliance provision. However, as in Anvil and Airborne, the

  parties also included an exclusive remedies provision and expressly provided that fraud and other

  equitable claims were reserved. In this instance, the non-reliance provision likely places a limit

  on the types of fraud claims that can be brought to those based on written representations in the

  APA. As Airborne explained, “when drafters specifically preserve the right to assert fraud

  claims, they must say so if they intend to limit that right to claims based on written

  representations in the contract.”114 Therefore, at this stage of the proceedings, the Court finds

  that the parties preserved a fraud claim in Section 9.3(h), but limited that fraud claim through the

  non-reliance provisions in Section 4.20 and 5.7 to written representations in the APA.




110
    Airborne, 984 A.2d at 140–41.
111
    Id. at 141.
112
    Id.
113
    See APA §§ 4.20, 5.7.
114
    Airborne, 984 A.2d at 141.


                                                   23
          ii. As alledged, the representations relied upon are intra-contractual, however, to the
              extent that Novipax is relying on extra-contractual representations, those are
              barred by the non-reliance provisions

          Novipax’s alternative argument is thus that that Sections 4.20, 5.7, and 10.3 do not bar

  the fraud claim because each of the representations it relied upon were intra-contractual or based

  on the written representations in the APA. A fraud claim can be based on representations found

  in a contract.115 However, as discussed more fully below, the allegations of fraud must be

  separate from the breach of contract claim.116 Allegations that are focused on inducement to

  contract are separate and distinct conduct.117

          Here, Novipax alleges that Sealed Air fraudulently induced it into closing the transaction.

  In making this argument, Novipax relies on the representations, warranties, and covenants

  contained in Sections 4.5, 4.18, 6.1, and 6.3. Under these sections, Sealed Air represented,

  warranted, and covenanted to perform certain functions related to the Business and to make

  certain disclosures about the Business prior to the Closing. For example, Sealed Air represented

  that it has operated the Business in the Ordinary Course and that there has not been any Material

  Adverse Effect.118 Additionally, Sealed Air represented that no Major Customer had provided

  written notice of its intent to terminate the relationship with the Business for any reason.119

  Moreover, Sealed Air covenanted to conduct the Business in “all material respects in the

  Ordinary Course” and to use its best efforts to “preserve intact its current business organization”

  and “maintain its existing relationships with customers, suppliers, vendors, distributors, and




115
    ITW Glob. Invest. Inc. v. Am. Indus. Partners Cap. Fund IV, L.P., 2015 WL 3970908, at *5 (Del. Super. June 24,
   2015).
116
    Id. at * 6.
117
    Id.
118
    APA ¶ 4.5.
119
    Id. ¶ 4.18.


                                                        24
  agents having business dealing with them.”120 Finally, Sealed Air covenanted to provide written

  notice to Novipax if any representation became untrue or if it failed to comply with any of its

  covenants.”121

          Despite these representations, Novipax alleges that Sealed Air affirmatively worked to

  harm the Business by helping certain customers migrate from foam trays to rigid trays.122

  Novipax alleges that Sealed Air concealed its conduct, as well as information regarding the

  viability of the Business and customers such as Tyson and Perdue’s intent to switch from foam to

  rigid trays.123 Instead of alerting Novipax to this change, however, Sealed Air represented in the

  closing certificate that all of the representations and warranties contained in the APA are true and

  correct as of the date of the closing certificate.124 Sealed Air also represented that it performed in

  all material respects the covenants and agreements in the APA.125 Therefore, Novipax contends

  that the representations in the APA, and Sealed Air’s attestation to those representations,

  fraudulently induced Novipax into closing the transaction.

          The facts of this case are similar to the facts in Abry Partners V, L.P. v. F & W

  Acquisition, LLC.126 In Abry, the parties entered into a Stock Purchase Agreement (the

  “Agreement”) for the buyer's purchase of a portfolio company.127 The Agreement contained

  several representations and warranties about the company's financial statements.128 After the

  parties entered into the Agreement, the buyer discovered that the financial statements prior to the




120
    Id. ¶ 6.1.
121
    Id. ¶ 6.3(b).
122
    Compl. ¶¶ 52–64.
123
    Id.
124
    See id. Ex. W.
125
    Id.
126
    981 A.2d 1032.
127
    Abry, 981 A.2d at 1034–35.
128
    Id.


                                                   25
  Agreement were fraudulently manipulated by the buyer.129 The Court of Chancery refused to

  dismiss the fraudulent inducement claim, finding that the “financial statements were represented

  and warranted in the Agreement and were therefore intended to induce the Buyer to sign the

  Agreement and close the sale to purchase the Company.”130

           Here, Novipax points to representations in the APA about how Sealed Air was to conduct

  the Business and about the financial viability of the Business before the Closing, including the

  Business’s Major Customers. However, after the parties closed the transaction, Novipax learned

  that those representations were false, and that Sealed Air did not correct the misrepresentations

  before the Closing in an attempt to induce Novipax into closing the transaction. This is

  sufficient to support a claim for fraudulent inducement at this stage in the litigation.

           To the extent, however, that Novipax is relying on extra-contractual misrepresentations,

  those misrepresentations are barred by the non-reliance provision, as well as, other express

  provisions in the relevant agreements.131 It appears that Novipax is relying on certain statements

  made by Sealed Air outside the APA. In paragraphs 51–57 of the Complaint, Novipax cites to

  false assurances provided by Sealed Air that the Business constituted a viable, sustainable

  product line.132 However, Novipax doesn’t allege that these representations are contained in the

  APA. Rather, Novipax relies on representations made by Sealed Air in the Confidential

  Information Memorandum and the management presentation.133 Both of these documents are

  expressly excluded under the non-reliance provision in Section 5.7.




129
    Id. at 1038–40.
130
    Id. at 1051.
131
    See ITW Glob. Invest. Inc. v. Am. Indus. Partners Cap. Fund IV, L.P., 2015 WL 3970908, at *5 (Del. Super. June 24,
   2015) (permitting a fraudulent inducement claim based on representations contained in the parties’ agreement, but
   excluding a fraudulent inducement claim based on representations made outside the agreement).
132
    Compl. ¶¶ 51–57.
133
    Id. ¶¶ 53–56.


                                                          26
           ii. The Fraud Claim is pleaded with the requisite particularity including the claim for
               damages

           Sealed Air also attacks the fraud claim on the basis that it is not pleaded with particularity

  and is not separate from the breach of contract damages.

           As to the first argument, it is abundantly clear that the Complaint pleads fraud with the

  requisite particularity, and this opinion will not highlight each specific fraud allegation made.

  Generally, however, the Complaint alleges that: Defendants made material misrepresentations,134

  that Novipax justifiably relied on those misrepresentations,135 that Sealed Air knew the

  representations were false or made them recklessly and with the intent to deceive Novipax,136

  that Novipax was fraudulently induced into the transaction,137 and that Novipax suffered

  damages as a result.138

           As to the second argument, Sealed Air argues that Novipax is attempting to “bootstrap”

  its fraud claim to a breach of contract claim because the fraud damages are not separate and apart

  from the breach of contract damages. Delaware courts have consistently held that to successfully

  plead a fraud claim, the allegedly defrauded plaintiff must have sustained damages as a result of

  a defendant’s action.139 The damages allegations, however, may not simply rehash the damages

  allegedly caused by breach of contract.140 Moreover, plaintiff cannot “bootstrap a claim of

  breach of contract into a claim for fraud by alleging that a contracting party never intended to




134
    See e.g., Compl. ¶¶ 5, 6, 32, 33, 46–53, 55, 57–59, 65, 66, 68, 71, 94, 103, 104, 110, 118–20, 125, 135, 136, 155.
135
    Id. ¶¶ 112–16, 121, 122, 127, 128, 147, 165.
136
    Id. ¶¶ 29, 47–50, 58–62, 68, 71–73, 76, 77, 90, 91, 96–99, 102–09, 111, 112, 118–20, 125, 126, 133.
137
    Id. ¶¶ 86, 101, 116, 119, 121,122, 165.
138
    Id. ¶¶ 167, 170, 171.
139
    ITW Glob. Invest. Inc., 2015 WL 3970908, at *5.
140
    Id.


                                                            27
  perform its obligations.”141 In other words, plaintiff cannot adequately state a fraud claim merely

  by adding the term “fraudulently induced” to a claim for breach of contract.142

           Here, at this point, the Court does not find that Novipax is trying to “bootstrap” a fraud

  claim to a breach of contract claim. In fact, the principal claim in the Complaint is for fraud and

  fraudulent inducement that renders the APA void. The breach of contract claim is an alternative

  remedy. Novipax alleges that it obtained contractual representations and covenants to ensure

  that the Business, including stability of customers, still existed at the Closing.143 Sealed Air,

  however, purportedly misrepresented and concealed information regarding the viability of the

  Business, including obstacles to customers converting to rigid trays, and Sealed Air’s facilitation

  of customer migration to rigid trays, before the Closing in order to induce Novipax to purchase

  the Business.144 These allegations, if true, go beyond a mere intention not to comply with the

  terms of the Agreement. As such, at this juncture, the fraud claim is different from the breach of

  contract claim.

           While the two claims are different, Seal Air is correct that Novipax pleads damages that

  are similar for both claims.145 However, Novipax prays for rescission of the transaction or

  recessionary damages, which is a remedy for fraud.146 This Court has twice held that a claim for

  rescission or recessionary damages separates a fraudulent inducement claim from breach of

  contract damages.147 Nonetheless, if discovery demonstrates that Novipax’s damage claims for

  breach of contract and fraud are the same, the Court can revisit the issue prior to a trial.


141
    Narrowstep, Inc. v. Onstream Media Corp., 2010 WL 5422405, at *15 (Del. Ch. Dec. 22, 2010).
142
    Id.
143
    Compl. ¶¶ 30–40, 66–86
144
    Id. ¶¶ 47–50, 54–64, 87–91, 92–114, 117 –124.
145
    See id. ¶¶ 167, 175, 179.
146
    See id. VI.3.
147
    See ITW Glob. Invest. Inc., 2015 WL 3970908, at *6 (“Count I for fraud must be dismissed because it pleads damages
   that are simply a “rehash” of the breach of contract damages. Because Count II for fraud in the inducement pleads
   damages for rescission or rescissory damages, the Court will not address Count II.”); see also EZLinks Golf, LLC v.


                                                          28
  C.       THE COMPLAINT ASSERTS FACTS WHICH, IF TRUE, SUPPORT A CLAIM FOR BREACH OF
           THE APA AND TSA

           Sealed Air next seeks to dismiss the breach of contract claims. Sealed Air argues that

  Novipax has not alleged any facts that demonstrate that Sealed Air breached any provision of the

  APA and TSA. This is not true.

           Similar to the basis for Novipax’s fraud claim, Novipax argues that Sealed Air breached

  the representations, warranties, and covenants in Sections 4.5, 4.18, 6.1, and 6.3 of the APA. As

  it relates to the representations, the Complaint alleges that Sealed Air breached the representation

  in Section 4.5 that there has not been any Material Adverse Effect and that the Business has been

  operated in the Ordinary Course.148 The Complaint cites to e-mails from several Sealed Air

  employees acknowledging that customer preference is moving away from foam trays and that the

  cost to convert specialty production lines from foam trays to rigid trays was de minimus.149 In

  addition, the Complaint alleges that Sealed Air breached Section 4.18 when it represented that in

  the last 12 months, no Major Customer had provided written notice to Sealed Air of its intent to

  terminate its relationship with any Seller with respect to the Business.150 The Complaint alleges

  that Sealed Air knew of Cargill and Perdue’s intent to migrate away from foam trays, but that

  this intent was never disclosed to Novipax.151

           As it relates to the covenants, the Complaint alleges that Sealed Air breached Section 6.1

  because it was not “Ordinary Course” to migrate the Business’s customers such as Cargill and

  Perdue to non-Business products.152 Moreover, this conduct did not amount to Sealed Air’s


   PCMS Datafit, Inc., 2017 WL 1312209, at *6 (Del. Super. Mar. 21, 2017) (finding that plaintiff’s count for fraud in
   the inducement is materially identical to the breach of contract complaint and rejecting plaintiff’s reliance on ITW
   because plaintiff pleads neither for rescission or rescissory damages as did the ITW complaint).
148
    Compl. ¶¶ 71–73.
149
    Id. ¶¶ 47–49; 71 –74.
150
    Id. ¶¶ 78–80.
151
    Id. ¶¶ 80–82.
152
    Id. ¶ 66.


                                                           29
  “reasonable best efforts to preserve intact the Business” or Sealed Air’s maintenance of “existing

  relationships with customers,” including the Major Customers such as Cargill and Perdue.153 In

  addition, the Complaint alleges that Sealed Air breached the covenant in Section 6.1 by failing to

  “maintain all of the Purchased Assets” in their current condition.154 The Complaint contends that

  Sealed Air breached this covenant because it actively transitioned patronage to their rigid tray

  business, which harmed the Business and devalued the goodwill that Novipax acquired.155

           Finally, as it relates to the TSA, the Complaint asserts minimal, but sufficient facts to

  support breach of the TSA. The Complaint alleges that under the TSA, Sealed Air agreed to

  provide specific transition services to Novipax after the Closing so that Novipax could receive

  the full benefit of its Purchased Assets.156 The TSA sets forth Sealed Air’s commitment to assist

  in maintaining existing customer relationships in Service Schedule 1, A and to provide sales

  administrative support for formula pricing and U.S. barrier foam tray pricing in Service Schedule

  1,B.157 Based upon Sealed Air’s conduct and its statements in various e-mails of Sealed Air

  employees, Sealed Air breached these provisions of the TSA, specifically by attempting to

  improperly transition barrier foam trays to the rigid trays sold by Seller.158

           The Court need not address each allegation in support of the breach of contract claims.

  At this stage in the litigation, the Court must accept all well-pleaded allegations as true. Sealed

  Air can argue that its conduct did not breach the APA or TSA, but Novipax alleges that Sealed

  Air’s pattern of conduct before the Closing demonstrates that Sealed Air did breach the APA and

  TSA. The Court must construe these allegations and the inferences to be drawn therefrom in the



153
    Id.
154
    Id. ¶ 67.
155
    Id.
156
    Id. ¶ 40.
157
    Id. ¶¶ 40, 145.
158
    Id. ¶¶ 145–147.


                                                    30
  light most favorable to Novipax. In doing so, the Court finds that the allegations, if true, support

  a claim for breach of contract, specifically Sections 4.5, 4.18, 6.1, and 6.3 of the APA and

  Schedule I, A, and Schedule I, B of the TSA. Therefore, the Court will not dismiss Counts II and

  III for breach of contract. As discussed previously, however, the claim for breach of the TSA

  may be barred by Novipax’s failure to engage in pre-litigation negotiation as provided in 5.15,

  but the briefing is not clear on this point.

  D.         THE EQUITABLE CLAIMS FOR UNJUST ENRICHMENT AND DECLARATORY JUDGMENT
             ARE, AT THIS TIME, COGNIZABLE

             As a final argument, Sealed Air seeks to dismiss the equitable claims for unjust

  enrichment and declaratory judgment.

             i. The unjust enrichment claim is a viable alternative remedy at this stage in the
                litigation

             Sealed Air argues that Novipax cannot recover for unjust enrichment because the APA

  governs the relationship between the parties. In other words, Sealed Air argues that Novipax

  cannot maintain both a cause of action for breach of contract and unjust enrichment. Sealed Air

  is correct; however, Novipax is asserting the two claims as alternative, not parallel, claims for

  relief.159 The principle claim in this case is for fraud and fraudulent inducement. Sealed Air

  argues that this fraudulent inducement renders the APA void. A claim for unjust enrichment

  may thus proceed under the theory that no valid contract exists. The breach of contract claim is

  an alternative theory of relief. Therefore, the Court will not dismiss the unjust enrichment claim,

  but Novipax must eventually decide under what theory it wishes to proceed—fraud and unjust

  enrichment or breach of contract.




159
      Avantix Labs, Inc. v. Pharmion, LLC, 2012 WL 2309981, at *9 (Del. Super. June 18, 2012).


                                                           31
            ii. The declaratory judgment claim is appropriate based on the relief sought in this
                case

            Novipax seeks declaratory judgment as to the purchase price adjustment mentioned in

  Sections 3.3 and 3.4 of the APA. Specifically, Novipax seeks a declaration that there is no

  remaining claim by Sealed Air for any adjustment amount due to Sealed Air. Alternatively,

  should the claim remain, Novipax seeks a declaration that it is entitled to a set off its damages in

  this case with any working capital obligation that Novipax might owe Sealed Air.

            Sealed Air argues that declaratory judgment as to setoff is improper because any

  disagreement pertaining to working capital adjustments must be resolved by an accounting

  referee under Section 3.4(d) of the APA. Sealed Air contends that declaratory judgment is

  improper because it would negate Section 3.4(d)’s requirement that these disputes be resolved

  via binding ADR.

            Section 3.3. states that at the Closing, Novipax will pay Sealed Air an amount equal to

  $80,000,000, which is the purchase price.160 The purchase price, however, may be adjusted by

  adding the Estimated Working Capital Adjustment to that amount.161 The Estimated Working

  Capital Adjustment equals the difference between the Closing Net Working Capital and the Base

  Net Working Capital.162 At least three days prior to the Closing, Sealed Air must deliver to

  Novipax a certificate setting forth Sealed Air’s calculation of this Estimated Working Capital

  Adjustment, which shall be used to determine the Adjusted Purchase Price payable at the

  Closing.163 If, however, Novipax disputes Sealed Air’s calculation of the Closing Net Working




160
    APA § 3.3.
161
    Id.
162
    Id. p. 6.
163
    Id. § 3.4(a).


                                                    32
  Capital, Novipax may deliver to Sealed Air a certificate setting forth its calculation of the closing

  Net Working Capital.164

            If Sealed Air then contests in good faith Novipax’s calculation, it may deliver notice to

  Novipax of its calculation of the Closing Net Working Capital.165 If after all this, Sealed Air and

  Novipax still disagree on the amount, they must retain an accounting referee to resolve all

  disputed items or amounts and to calculate the Closing Net Working Capital.166

            Novipax argues that Section 3.4(d) does not bar the declaratory judgment claim because

  Novipax is seeking to rescind the APA. In other words, Sealed Air’s fraud vitiates its right to

  rely on any provision of the APA to bar Novipax’s claims. Since the Court is permitting the

  fraud claim to go forward, the declaratory judgment claim is also cognizable at this time.

            While not argued by the parties, it does not appear that Novipax’s request for declaratory

  judgment even implicates Sections 3.3 and 3.4. Novipax appears to seek a declaration only as to

  Sealed Air’s right to make a claim for an adjustment amount. If true, then this is an issue for the

  Court to determine in the first instance. This is not a dispute between the parties over the

  Closing Net Working Capital that must be resolved by an account referee.

                                           V. CONCLUSION

            For the reasons set forth above, the Court will DENY the Motion to Dismiss. The Court

  understands this to be a large sales transaction between sophisticated parties. Those parties were

  represented by quality lawyers. The various agreements were extensively negotiated and the

  provisions, even ones characterized as “boilerplate,” have to be enforced as intended by the

  parties when they negotiated the sales transaction. The Court believes that appropriate discovery



164
    Id. § 3.4(b).
165
    Id. § 3.4(c).
166
    Id. § 3.4(d).


                                                    33
should allow the parties to narrow the issues in this case leading up to dispositive motions and/or

trial.

Dated: November 28, 2017
Wilmington, Delaware

                                                     /s/ Eric M. Davis
                                                     Eric M. Davis, Judge




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