     IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

JD HOLDINGS, L.L.C., JONESBORO FUNDING     )
LLC, and EASTGATE FUNDING LLC,             )
                                           )
              Plaintiffs,                  )
                                           )
          v.                               )   C.A. No. 7480-VCL
                                           )
JACQUELINE A. DOWDY, as Trustee of THE     )
REVOCABLE TRUST OF JOHN Q. HAMMONS,        )
DATED DECEMBER 28, 1989, AS AMENDED        )
AND RESTATED; JACQUELINE A. DOWDY, as )
the Personal Representative of the JOHN Q. )
HAMMONS ESTATE; GREGGORY D. GROVES, )
as Trustee of THE REVOCABLE TRUST OF JOHN )
Q. HAMMONS, DATED DECEMBER 28, 1989,       )
AS AMENDED AND RESTATED; THE               )
REVOCABLE TRUST OF JOHN Q. HAMMONS,        )
DATED DECEMBER 28, 1989, AS AMENDED        )
AND RESTATED; HAMMONS OF NEW               )
MEXICO, LLC; HAMMONS OF FRISCO, LLC;       )
HAMMONS OF COLORADO, LLC; HAMMONS          )
OF ARKANSAS, LLC; HAMMONS OF SOUTH         )
CAROLINA, LLC; CITY CENTRE HOTEL           )
CORPORATION; HAMMONS OF HUNTSVILLE, )
LLC; HAMMONS OF OKLAHOMA CITY, LLC;        )
HAMMONS OF LINCOLN, LLC; HAMMONS OF )
FRANKLIN, LLC; HAMMONS OF                  )
RICHARDSON, LLC; RICHARDSON                )
HAMMONS, LP; JOHN Q. HAMMONS CENTER, )
LLC; CHATEAU LAKE, LLC; JQH – EAST         )
PEORIA DEVELOPMENT, LLC; JOHN Q.           )
HAMMONS FALL 2006, LLC; JQH – FT. SMITH )
DEVELOPMENT, LLC; JQH – GLENDALE, AZ       )
DEVELOPMENT, LLC; JQH – KANSAS CITY        )
DEVELOPMENT, LLC; JQH – LA VISTA III,      )
DEVELOPMENT, LLC; JQH – LA VISTA           )
CONFERENCE CENTER DEVELOPMENT, LLC; )
JQH – MURFREESBORO, DEVELOPMENT,           )
LLC; JQH – NORMAN DEVELOPMENT, LLC;        )
JQH – NORMAL DEVELOPMENT, LLC; JQH –       )
OKLAHOMA CITY BRICKTOWN                    )
DEVELOPMENT, LLC; JQH – ROGERS             )
CONVENTION CENTER DEVELOPMENT, LLC;        )
JQH – SAN MARCOS DEVELOPMENT, LLC;         )
HAMMONS OF SOUIX FALLS, LLC;               )
HAMMONS OF TULSA, LLC; JQH – LA VISTA      )
CY DEVELOPMENT, LLC; JQH – ALLEN           )
DEVELOPMENT, LLC; and JQH – CONCORD        )
DEVELOPMENT, LLC,                          )
                                           )
              Defendants.                  )
__________________________________________ )
JACQUELINE A. DOWDY, as Trustee of THE     )
REVOCABLE TRUST OF JOHN Q. HAMMONS,        )
DATED DECEMBER 28, 1989, AS AMENDED        )
AND RESTATED; JACQUELINE A. DOWDY, as )
the Personal Representative of the JOHN Q. )
HAMMONS ESTATE; GREGGORY D. GROVES, )
as Trustee of THE REVOCABLE TRUST OF JOHN )
Q. HAMMONS, DATED DECEMBER 28, 1989,       )
AS AMENDED AND RESTATED; THE               )
REVOCABLE TRUST OF JOHN Q. HAMMONS,        )
DATED DECEMBER 28, 1989, AS AMENDED        )
AND RESTATED; HAMMONS OF NEW               )
MEXICO, LLC; HAMMONS OF FRISCO, LLC;       )
HAMMONS OF COLORADO, LLC; HAMMONS          )
OF ARKANSAS, LLC; HAMMONS OF SOUTH         )
CAROLINA, LLC; CITY CENTRE HOTEL           )
CORPORATION; HAMMONS OF HUNTSVILLE, )
LLC; HAMMONS OF OKLAHOMA CITY, LLC;        )
HAMMONS OF LINCOLN, LLC; HAMMONS OF )
FRANKLIN, LLC; HAMMONS OF                  )
RICHARDSON, LLC; RICHARDSON                )
HAMMONS, LP; JOHN Q. HAMMONS CENTER, )
LLC; CHATEAU LAKE, LLC; JQH – EAST         )
PEORIA DEVELOPMENT, LLC; JOHN Q.           )
HAMMONS FALL 2006, LLC; JQH – FT. SMITH )
DEVELOPMENT, LLC; JQH – GLENDALE, AZ       )
DEVELOPMENT, LLC; JQH – KANSAS CITY        )
DEVELOPMENT, LLC; JQH – LA VISTA III,      )
DEVELOPMENT, LLC; JQH – LA VISTA           )
CONFERENCE CENTER DEVELOPMENT, LLC; )
JQH – MURFREESBORO, DEVELOPMENT,           )
LLC; JQH – NORMAN DEVELOPMENT, LLC;                  )
JQH – NORMAL DEVELOPMENT, LLC; JQH –                 )
OKLAHOMA CITY BRICKTOWN                              )
DEVELOPMENT, LLC; JQH – ROGERS                       )
CONVENTION CENTER DEVELOPMENT, LLC;                  )
JQH – SAN MARCOS DEVELOPMENT, LLC;                   )
HAMMONS OF SOUIX FALLS, LLC;                         )
HAMMONS OF TULSA, LLC; JQH – LA VISTA                )
CY DEVELOPMENT, LLC; JQH – ALLEN                     )
DEVELOPMENT, LLC; JQH – CONCORD                      )
DEVELOPMENT, LLC,                                    )
                                                     )
               Counterclaims Plaintiffs,             )
                                                     )
          v.                                         )
                                                     )
JD HOLDINGS, L.L.C.,                                 )
                                                     )
               Counterclaim Defendant,               )
                                                     )
          and                                        )
                                                     )
ATRIUM HOTELS, LP., and ATRIUM GP, LLC,              )
                                                     )
               Third-Party Defendants.               )


                              MEMORANDUM OPINION

                           Date Submitted: September 3, 2014
                            Date Decided: October 1, 2014

David J. Teklits, Kevin M. Coen, MORRIS, NICHOLS, ARSHT & TUNNEL LLP,
Wilmington, Delaware; Scott A. Edelman, Alan J. Stone, Jed M. Schwartz, MILBANK,
TWEED, HADLEY & McCLOY LLP, New York, New York; Attorneys for Plaintiffs JD
Holdings, L.L.C., Jonesboro Funding, LLC, and Eastgate Funding, LLC, Counterclaim
Defendant JD Holdings, L.L.C., and Third Party Defendants Atrium, Hotels, LP, and
Atrium GP, LLC.

Shannon Larner Brainard, Richard R. Wier, Jr., MARSHALL DENNEHY WARNER
COLEMAN & GOGGIN, Wilmington, Delaware; Janene Marasciullo, WILSON ELSER
MOSKOWITZ EDELMAN & DICKER LLP, New York, New York; Attorneys for
Defendants, Counterclaim Plaintiffs, and Third Party Plaintiffs Jacqueline A. Dowdy and
Greggory D. Groves as Trustees of the Revocable Trust of John Q. Hammons, Dated
December 28, 1989, As Amended and Restated.

Blake Rohrbacher, Thomas A. Beck, Susan M. Hannigan, RICHARDS, LAYTON &
FINGERS, P.A., Wilmington, Delaware; C. Vincent Maloney, Jonathan R. Buck, Jade D.
Lambert, PERKINS COEI LLP, Chicago, Illinois; Attorneys for All Defendants,
Counterclaim Plaintiffs, and Third Party Plaintiffs Other Than Jacqueline A. Dowdy and
Greggory D. Groves as Trustees of the Revocable Trust of John Q. Hammons, Dated
December 28, 1989, As Amended and Restated.

LASTER, Vice Chancellor.
       In 2005, hotel-entrepreneur John Q. Hammons entered into a complex transaction

involving a public company he controlled, various private entities that he also controlled,

and a third party investor (the ―2005 Transaction‖). In the 2005 Transaction, the public

stockholders received cash and Hammons received assorted consideration that included a

short-term loan of $25 million, a long-term loan of $275 million, and a preferred equity

interest in the privately held post-transaction entity. This structure allowed Hammons to

exit from the public markets, obtain a degree of liquidity, and avoid a deemed sale that

would trigger capital gains taxes.

       Hammons‘s counterparties in the 2005 Transaction were entities affiliated with

Jonathan Eilian. Eilian emerged with operational control of the post-transaction entity

and ownership of all of its common equity. Eilian and Hammons also entered into an

agreement that gave Eilian a right of first refusal and various other rights regarding hotels

that Hammons had developed and owned through separate entities that were not part of

the 2005 Transaction, or which the parties anticipated that Hammons would develop and

own outside of the post-transaction entity after the 2005 Transaction closed (the ―ROFR

Agreement‖ or ―RA‖).

       The plaintiffs in this action are entities affiliated with Eilian. The defendants are

predominantly entities that were affiliated with Hammons. The plaintiffs originally filed

suit to resolve certain disputes over the ROFR Agreement. During the pendency of the

case, Hammons passed away. The ROFR Agreement addresses the parties‘ obligations

upon Hammons‘s death, but the parties could not agree on its requirements.              The

plaintiffs then amended their complaint to seek a determination that the ROFR

                                             1
Agreement imposes an affirmative obligation on Hammons‘s estate, a trust Hammons

created, and the entities Hammons controlled to sell the hotels covered by the ROFR

Agreement for cash within two years of Hammons death, subject to Eilian‘s right of first

refusal.   The defendants contend that the ROFR Agreement does not create any

affirmative obligation to sell and, if it did, would be void under the rule against

perpetuities. These are the principal claims; the parties have raised other issues and

arguments.

       The parties have cross-moved for judgment on the pleadings as to certain counts

of the complaint and counterclaims. As to Count X of the Complaint, which seeks a

declaration that the ROFR Agreement applies to property interests owned by three

specific entities, the plaintiffs‘ motion for judgment on the pleadings is denied. As to the

other counts at issue, judgment is granted in favor of the plaintiffs and against the

defendants.

                            I.   FACTUAL BACKGROUND

       Because the parties have cross-moved for judgment on the pleadings, the facts are

drawn from the operative pleadings and the documents incorporated by reference. When

evaluating each movant‘s motion, the facts are viewed in the light most favorable to the

non-movant. The background facts are largely undisputed, although the parties disagree

about their implications.

       Additional facts are drawn from decisions in prior litigation in this court. After

the announcement of the 2005 Transaction, stockholder plaintiffs challenged the deal.

They argued that Hammons breached his fiduciary duties as a controlling stockholder by

                                             2
structuring the 2005 Transaction to secure personal benefits for himself, and they

contended that Eilian‘s acquiring entities aided and abetted Hammons‘s breaches of duty.

Hammons was the principal defendant in that case, and Eilian participated actively. The

litigation generated a summary judgment opinion, In re John Q. Hammons Hotels Inc.

S’holder Litig., 2009 WL 3165613 (Del. Ch. Oct. 2, 2009) [hereinafter the ―Summary

Judgment Opinion‖ or ―SJ Op.‖], and a post-trial opinion, In re John Q. Hammons Hotels

Inc. S’holder Litig., 2011 WL 227634 (Del. Ch. Jan. 14, 2011) [hereinafter the ―Post-

Trial Opinion‖ or ―PT Op.‖]. The Summary Judgment Opinion included a thorough

discussion of the events leading up to the 2005 Transaction and its terms, and the Post-

Trial Opinion incorporated that discussion by reference and adopted its contents as post-

trial findings of fact. See id. at *2 (―I will not repeat the extensive (and identical) factual

background of the case, which has been thoroughly documented in [the Summary

Judgment Opinion.] All of the factual details recited in my earlier opinion are fully

adopted here.‖) (footnote omitted). This decision relies on the findings of fact made in

the Post-Trial Opinion, although it cites to the Summary Judgment Opinion for the details

of those findings.

A.     Hammons And His Hotel Companies

       In 1994, Hammons formed a Delaware corporation called John Q. Hammons

Hotels, Inc. Because shares issued by this entity traded publicly, this decision refers to it

as the ―Public Hotel Company.‖ It had two classes of common stock: Class A shares

with one vote per share, and Class B shares with fifty votes per share. The Class A

shares were issued to the public. The Class B shares were privately held. Through a

                                              3
revocable trust created by Hammons under a trust agreement dated December 28, 1989

(the ―JQH Trust‖), Hammons owned approximately 5% of the Class A shares and all of

the Class B shares. These combined holdings gave Hammons control over nearly 76% of

the Public Hotel Company‘s outstanding voting power. Hammons served as Chairman

and CEO of the Public Hotel Company.

      The Public Hotel Company used the proceeds of its initial public offering to

purchase a 28% general partner interest in a privately held Delaware limited partnership

called John Q. Hammons Hotels, LP (the ―Hotel Limited Partnership‖). Through the

JHQ Trust, Hammons owned the remaining 72% of the Hotel Limited Partnership‘s

equity as its sole limited partner. Through his control over the Public Hotel Company,

Hammons controlled the Hotel Limited Partnership. The Hotel Limited Partnership in

turn owned various entities that either owned or managed hotels.

B.    The Public Hotel Company Obtains A Right of First Refusal

      Hammons‘s passion was developing hotels. He appears to have been less attuned

to the corporate governance consequences of taking other people‘s money through an

initial public offering. The board of directors of the Public Hotel Company (the ―Board‖)

believed (correctly) that it, and not Hammons, had the authority to manage the business

and affairs of the Public Hotel Company. Hammons and the Board disagreed over

matters such as the pace at which Hammons wanted to develop new hotels, the Board‘s

use of stock options to compensate employees, Hammons‘s hiring of a senior executive

without Board approval, and the sale of hotels that the Board (but not Hammons) no

longer regarded as core assets. See SJ Op., 2009 WL 3165613, at *3-4.

                                           4
       The disagreement over the pace of hotel development progressed to a point where

the Board imposed a moratorium on Hammons‘s development of new hotels. To resolve

the impasse, Hammons and the Board negotiated an agreement that allowed Hammons

―to use [Public Hotel] Company resources for his private [hotel] development activities,

in exchange for giving the [Public Hotel] Company the opportunity to manage such

hotels and acquire them if they were offered for sale.‖ Id. at *3.

C.     Hammons Explores Alternatives For The Public Hotel Company.

       ―In early 2004, Hammons informed the Board that he had begun discussions with

third parties regarding a potential sale of [the Public Hotel Company] or his interest in

[it].‖ Id. at *4. Hammons hoped to achieve a transaction that would cash out the Class A

stockholders and provide him with a degree of liquidity that could be used (among other

things) to develop new hotels. He did not want to incur massive capital gains taxes. To

achieve his tax goal, Hammons had to retain an interest in the surviving entity ―and

continue to have capital at risk.‖ Id.

       On October 15, 2004, Barceló Crestline Corporation (―Barceló‖) informed the

Board that it had entered into an agreement with Hammons and would be offering $13

per share for all of the outstanding shares of the Public Hotel Company‘s Class A stock.

The deal provided Hammons with a $250 million line of credit. To ensure favorable tax

treatment, Hammons‘s interests in the Public Hotel Company and the Hotel Limited

Partnership would be converted into a new class of preferred limited partner interests in

the Hotel Limited Partnership that carried a large liquidation preference. Hammons also



                                             5
would receive the Chateau on the Lake Resort, one of the Public Hotel Company‘s

premier properties.

       ―Recognizing that Hammons‘s interests in the transaction may not have been

identical to those of the unaffiliated [Public Hotel Company] stockholders, the Board

formed a special committee to evaluate and negotiate [the] proposed transaction.‖ Id.

After Barceló announced its transaction publicly, Eilian contacted the special committee

and expressed interest in an alternative transaction. The Board later expanded the special

committee‘s mandate to include responding to requests from interested parties. At least

two other parties contacted the special committee. Id. at 6.

       During the ensuing process, Eilian eventually offered to acquire all outstanding

shares of Class A common stock for $24 per share. With the special committee‘s

permission, Eilian then negotiated and reached an agreement with Hammons on other

terms for the transaction. The result was the 2005 Transaction. The Board approved it

on June 14, 2005. The Public Hotel Company stockholders approved it on September 15,

2005. The deal closed on September 16, 2005.

D.     The Terms Of The 2005 Transaction

       The 2005 Transaction was complex and had multiple parts. The framework for

the 2005 Transaction was set forth in a Second Amended and Restated Transaction

Agreement dated as of September 16, 2005 (the ―Transaction Agreement‖ or ―TA‖). At

bottom, the 2005 Transaction was designed to cash-out the public stockholders and

provide Hammons with liquidity ―without triggering the tax liability associated with an

equity or asset sale.‖ SJ Op., 2009 WL 3165613, at *7.

                                             6
      Eilian participated in the transaction through plaintiff JD Holdings, L.L.C., which

the transaction documents refer to as ―JDH‖ or the ―Sponsor.‖ At the public company

level, the Public Hotel Company merged with an acquisition subsidiary of JD Holdings

and emerged as an indirect, wholly owned subsidiary of JD Holdings. Through the

merger, each share of Class A common stock was converted into the right to receive $24

per share in cash. Through the JHQ Trust, Hammons received the merger consideration

for the 5% of the Class A shares that he owned, and he also received the cash value of his

options. See TA § 2.1(b).

      The Summary Judgment Opinion summarizes the other steps in the 2005

Transaction:

      Although each Class B share initially remained a share of common stock of
      the surviving corporation, those shares were eventually converted into a
      preferred interest in the surviving limited partnership . . . . In order to
      achieve his tax goals, Hammons had to have an ownership interest in the
      surviving LP and continue to have capital at risk. Accordingly, Hammons
      was allocated a 2% interest in the cash flow distributions and preferred
      equity of the surviving LP. Atrium GP, LLC, an Eilian company, became
      general partner of the surviving LP and received a 98% ownership interest.
      Hammons‘s preexisting limited partner interest in [the Hotel Limited
      Partnership] was converted into a capital account associated with his
      preferred interest in the surviving LP, which had a liquidation preference of
      $328 million. When combined with the preferred interest from the
      conversion of his Class B shares, Hammons‘s capital account totaled a
      liquidation preference of $335 million. The partnership agreement
      provided for events in which the capital account could be distributed during
      Hammons‘s lifetime, but because of certain tax consequences, it was
      anticipated that distribution of the capital account was to occur at
      Hammons‘s death.

SJ Op., 2009 WL 3165613, at *7. The obvious reason for keying a distribution or other

taxable event off Hammons‘s death was the step-up in basis that Hammons‘s heirs would


                                            7
receive under the Internal Revenue Code. See 26 U.S.C. § 1014. Not coincidentally,

Hammons received a right of indemnification from the surviving LP for any tax liability

incurred from the sale of any of its hotels during his lifetime. SJ Op., 2009 WL 3165613,

at *8.

         The agreements governing the 2005 Transaction established other rights and

obligations. ―Importantly, Hammons received a $25 million short-term line of credit and

a $275 million long-term line of credit.‖ Id. Eilian subsidized this financing package,

which would not have been available on the open market. Id. at *13. The loan package

provided Hammons with liquidity and enabled him to continue doing what he loved—

developing hotels.

         Hammons and Eilian agreed to reciprocal ―restrictions on the development of new

hotels that would compete with existing hotels owned by either party.‖ Id. at *8. Eilian

agreed to continue using Hammons‘s management company to manage the hotels owned

by the Hotel Limited Partnership in return for paying the management company‘s

operating expenses and reimbursing it for Hammons‘s salary and benefits. Id. Hammons

also received a distribution of the Chateau on the Lake Resort. See TA § 2.1(d).

         Just as the Public Hotel Company had received a right of first refusal when the

Board agreed to permit Hammons to use Public Hotel Company resources to develop his

own hotels, Eilian bargained for and obtained the rights provided by the ROFR

Agreement as part of the 2005 Transaction. For his part, Hammons secured a right of

first refusal to acquire any hotels that Eilian caused the Hotel Limited Partnership to sell.

TA § 2.1(k)(iii).

                                             8
       Generally speaking, the ROFR Agreement required Hammons to provide JD

Holdings with notice of any third party offer to purchase a JQH Subject Hotel, defined in

the ROFR Agreement as any interest in real or personal property ―used in the operation

of a hotel facility, or any interest in any related convention or entertainment facility, retail

facility, parking facility or gaming facility‖ owned by Hammons or an entity he

controlled. RA § 1.1. The ROFR Agreement gave JD Holdings thirty days after receipt

of the notice to elect to purchase the property. RA § 2.1(a). If JD Holdings opted to

purchase the property, then the parties would be required to ―close such sale transaction

on substantially identical economic terms,‖ except that JD Holdings would not be

required to pay certain fees, such as broker fees, mortgage transfer fees, and franchise

transfer fees, and Hammons would be required to provide JD Holdings with subordinate

seller financing equal to 22.5% of the purchase price. Id. § 2.1(b). If JD Holdings

declined to purchase the property or did not make an election within thirty days, then

Hammons would be free to proceed with the sale. Id. § 2.1(a).

       Contrary to the defendants‘ current position that the ROFR Agreement is invalid,

Hammons represented in the Transaction Agreement that he and his entities had ―all

requisite power and authority to execute and deliver this Agreement . . . and all other

agreements and documents to be executed or delivered by such party . . . and to perform

its or his obligations hereunder and thereunder.‖ TA § 4.1. Hammons and his entities

further represented that each of the Transaction Agreement and all other agreements

constituted ―a valid and binding obligation‖ and was ―enforceable . . . in accordance with

its terms.‖ Id. These representations covered the ROFR Agreement. In the proxy

                                               9
statement issued in connection with the 2005 Transaction, Hammons and his associates

disclosed the existence of the ROFR Agreement and described the rights that it granted to

JD Holdings without providing any disclosures regarding its purported invalidity.

      After the 2005 Transaction, Eilian‘s entity, JD Holdings, indirectly owned 100%

of the equity of what had been the Public Hotel Company.              The Hotel Limited

Partnership survived the transaction and was renamed Atrium Hotels, L.P. Through

Atrium GP, LLC, the successor to the Public Hotel Company in its capacity as the

general partner of the Hotel Limited Partnership, JD Holdings owned 100% of the Hotel

Limited Partnership‘s general partner interest. JD Holdings also indirectly owned the

Hotel Limited Partnership‘s non-preferred limited partner interest.

      The JQH Trust emerged from the 2005 Transaction owning the preferred limited

partner interest in the Hotel Limited Partnership. The partnership agreement governing

the Hotel Limited Partnership (the ―Partnership Agreement‖ or ―PA‖) refers to the

preferred limited partner interest as the ―Preferred Equity Units.‖ The Preferred Equity

Units had a liquidation preference of $335 million, but Hammons‘s receipt of this amount

was not guaranteed. Nor could it be. To achieve his tax goals, Hammons had to continue

to have ―capital at risk.‖ SJ Op., 2009 WL 3165613, at *7.

E.    Disputes Arise.

      After the 2005 Transaction, the Hotel Limited Partnership continued to own

approximately forty-three hotels and to manage approximately fifteen others. Hammons

continued to own the hotels that he had owned outside of the Hotel Limited Partnership

before the transaction, and he continued to develop new hotels outside of the Hotel

                                            10
Limited Partnership. The defendants indicate that there are now more than thirty hotels

and other properties that Hammons owned or developed outside of the Hotel Limited

Partnership.

       During this period, Hammons acted as if the ROFR Agreement was valid and in

effect, including by providing JD Holdings with executed, notarized memoranda

confirming the rights JD Holdings held under the ROFR Agreement for particular

properties. Nevertheless, disputes arose about the extent of the obligations imposed by

the ROFR Agreement, including the degree to which the ROFR Agreement governed the

other hotels that Hammons was developing.           In December 2008, JD Holdings and

Hammons addressed some of these disputes through an amendment to the ROFR

Agreement (the ―ROFR Amendment‖). Contrary to the defendants‘ current position

regarding the invalidity of the ROFR Agreement, Hammons acknowledged that ―[e]xcept

as modified hereby, the ROFR remains unmodified and in full force and effect.‖ ROFR

Amendment ¶ 6.

       After the execution of the ROFR Amendment, Hammons continued acting as if

the ROFR Agreement was valid and in effect, including by providing JD Holdings with

additional executed, notarized memoranda confirming the rights JD Holdings held under

the ROFR Agreement for particular properties. Hammons also sought and obtained

waivers from JD Holdings of its rights under the ROFR Agreement for certain properties.

In 2012, Hammons complied with the ROFR Agreement and notified JD Holdings of an

offer to purchase a hotel on Eastgate Boulevard in Cincinnati, Ohio. JD Holdings

exercised its right of first refusal and purchased the property.

                                             11
       As to other aspects of the ROFR Agreement, however, the parties differed. In

May 2012, Eilian caused JD Holdings to sue Hammons, the JHQ Trust, the trustees of the

JHQ Trust, and the various entities through which Hammons and the JHQ Trust owned

other hotels to obtain a declaration regarding the meaning of the ROFR Agreement.

       On May 26, 2013, Hammons died. The parties disagreed about what obligations

arose under the ROFR Agreement upon Hammons‘s death, but they agreed that it

triggered a ninety-day period during which Eilian would negotiate exclusively with the

JQH Trust and Hammons‘s estate to determine whether Eilan would buy the other hotels.

During these negotiations, Eilian insisted that even if the parties did not agree on a

transaction during their exclusive negotiation period, the JQH Trust was obligated under

the ROFR Agreement to sell all of the other hotels for cash. The JQH Trust rejected this

interpretation of the ROFR Agreement.

       On January 16, 2014, JD Holdings filed an amended complaint that raised new

claims under the ROFR Agreement in light of Hammons‘s death. See Dkt. 27 (the

―Complaint‖ or ―Compl.‖). The defendants answered and asserted counterclaims and

third party claims.    See Dkt. 32 (the ―Counterclaims‖).       In the Counterclaims, the

defendants asserted for the first time that the ROFR Agreement was invalid as a violation

of the rule against perpetuities and an unreasonable restraint on alienation.

       The parties have cross-moved for judgment on the pleadings. The counts of the

Complaint at issue on the cross-motions are:

      Count I, which seeks a declaratory judgment that the rule against perpetuities does
       not apply to the ROFR Agreement.


                                             12
     Count II, which seeks a declaratory judgment as to the meaning of Section 3.2 of
      the ROFR Agreement.

     Count III, which seeks a declaratory judgment that the ROFR Agreement is not an
      unreasonable restraint on the alienation of property.

     Count X, which seeks a declaratory judgment as to the assets included within the
      definition of JQH Subject Hotels in the ROFR Agreement.

The counts of the Counterclaims at issue on the cross-motions are:

     Count I, which seeks a declaratory judgment that Section 3.2 of the ROFR
      Agreement is unenforceable because it lacks specific terms.

     Count II, which seeks a declaratory judgment that the ROFR Agreement is
      unenforceable because it violates the rule against perpetuities.

     Count III, which seeks a declaratory judgment that the ROFR Agreement is
      unenforceable because it operates as an unreasonable restraint on alienation of
      property.

     Count IV, which seeks a declaratory judgment that Section 3.2 of the ROFR
      Agreement requires the JQH entities to complete the sale of the JQH Subject
      Hotels only after the Hotel Limited Partnership fully redeems the Preferred Equity
      Units.

     Count VI, which seeks to equitably estop the plaintiffs from making certain
      arguments.

                             II.     LEGAL ANALYSIS

      After the closing of the pleadings, but within such time as not to delay trial, a party

may move for judgment on the pleadings. Ct. Ch. R. 12(c). ―In determining a motion

under Court of Chancery Rule 12(c) for judgment on the pleadings, a trial court is

required to view the facts pleaded and the inferences to be drawn from such facts in a

light most favorable to the non-moving party.‖ Desert Equities, Inc. v. Morgan Stanley

Leveraged Equity Fund, II, L.P., 624 A.2d 1199, 1205 (Del. 1993) (footnote omitted).

―The court must take the well-pleaded facts alleged in the complaint as admitted.‖ Id.
                                            13
―A motion for judgment on the pleadings may be granted only when no material issue of

fact exists and the movant is entitled to judgment as a matter of law.‖ Id.

       The three plaintiffs in this dispute are entities affiliated with Eilian, so this opinion

speaks in terms of positions taken by Eilian, unless the context demands specifying a

particular entity. This shorthand is used only for convenience and does not imply that

this decision is somehow disregarding the entities actually involved.               A similar

convention is used for the defendants, which comprise the JHQ Trust, its two human

trustees, Hammons‘s estate, and a host of entities through which Hammons beneficially

owned hotels. The current record does not shed much light on whether Hammons owned

the various hotel companies through the JHQ Trust or whether he owned them directly,

such that they passed to his estate. The record similarly does not provide insight into

whether Hammons‘s estate plan caused the hotel entities to flow into in the JHQ Trust.

There are, of course, myriad other possibilities. It does appear from the current record

and the prior litigation challenging the 2005 Transaction that Hammons intended for the

JHQ Trust to be his principal ownership vehicle. This opinion therefore refers to the

defendants‘ positions as taken by the JHQ Trust, unless the context demands a different

referent. As with Eilian, this shorthand does not imply that this decision is disregarding

the differences among the relevant entities.

A.     The Meaning Of Section 3.2 of the ROFR Agreement

       The different counts in the pleadings and the parties‘ various arguments revolve

around the meaning of Section 3.2 of the ROFR Agreement. It is therefore helpful to

begin with Count II of the Complaint, in which Eilian seeks a declaratory judgment as to

                                               14
the meaning of Section 3.2. This count corresponds to Count I of the Counterclaims, in

which the JHQ Trust seeks a declaratory judgment that Section 3.2 is unenforceable

because it lacks specific terms.        This section also addresses Count IV of the

Counterclaims, which seeks a declaratory judgment that Section 3.2 of the ROFR

Agreement requires the JQH Trust to complete the sale of the JQH Subject Hotels only

after the Hotel Limited Partnership fully redeems the Preferred Equity Units.

       1.     Principles Of Contract Interpretation

       The ROFR Agreement is a contract governed by Delaware law. See RA § 3.6.

When interpreting such a contract, ―the role of a court is to effectuate the parties' intent.‖

Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006). ―Unless

there is ambiguity, Delaware courts interpret contract terms according to their plain,

ordinary meaning.‖ Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del.

2012). ―Absent some ambiguity, Delaware courts will not destroy or twist [contract]

language under the guise of construing it.‖ Rhone-Poulenc Basic Chems. Co. v. Am.

Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992). ―If a writing is plain and clear on

its face, i.e., its language conveys an unmistakable meaning, the writing itself is the sole

source for gaining an understanding of intent.‖ City Investing Co. Liquidating Trust v.

Cont'l Cas. Co., 624 A.2d 1191, 1198 (Del. 1993). ―Contract language is not ambiguous

merely because the parties dispute what it means. To be ambiguous, a disputed contract

term must be fairly or reasonably susceptible to more than one meaning.‖ Alta Berkeley,

41 A.3d at 385 (footnotes omitted).



                                             15
       ―In upholding the intentions of the parties, a court must construe the agreement as

a whole, giving effect to all provisions therein.‖ E.I. du Pont de Nemours & Co. v. Shell

Oil Co., 498 A.2d 1108, 1113 (Del. 1985). ―Moreover, the meaning which arises from a

particular portion of an agreement cannot control the meaning of the entire agreement

where such inference runs counter to the agreement's overall scheme or plan.‖ Id. ―It is

well established that a court interpreting any contractual provision . . . must give effect to

all terms of the instrument, must read the instrument as a whole, and, if possible,

reconcile all the provisions of the instrument.‖ Elliott Assocs., L.P. v. Avatex Corp., 715

A.2d 843, 854 (Del. 1998).

       2.     Count II of the Complaint: The Plain Meaning Of Section 3.2

       As is common in contractual disputes, both sides contend that the meaning of

Section 3.2 is plain, but each espouses a different plain meaning. Having considered the

language of Section 3.2 within the ROFR Agreement as a whole, I believe that Eilian has

captured the plain meaning of the provision.        Judgment is therefore granted in the

plaintiffs‘ favor on Count II of the Complaint.

       Section 3.2 states:

       JQH, each applicable JQH Entity and the JQH Trust agree that, upon the
       death of JQH, the JQH Trust and each applicable JQH Entity will Sell for
       cash or cause the Sale for cash of all of the JQH Subject Hotels to be
       completed no later than the later to occur of (a) two (2) years after the date
       of JQH‘s demise, and (b) full redemption or other permitted disposition by
       JQH and his Affiliates of all of his and their [Preferred Equity Units].
       Subject to the provisions of Section 3.16 herein, each of [JD Holdings] and
       the JQH Trust and other applicable JQH Entity agrees, for a period expiring
       90 days after the date of JQH‘s demise, to negotiate exclusively and in
       good faith with each other to Sell the JQH Subject Hotels to [JD Holdings]
       or an Affiliate thereof for prices and upon terms mutually acceptable to the

                                             16
       JQH Trust or other applicable JQH Entity and to [JD Holdings]. Any other
       Sale of a JQH Subject Hotel shall be subject to the provisions of this
       Agreement.

ROFR Agreement § 3.2.

       The three sentences of Section 3.2 work together to create a framework for selling

the JQH Subject Hotels within a defined period of time after Hammons‘s death. The first

sentence imposes an obligation on the JQH Trust to sell ―all‖ of the JQH Subject Hotels.

Id. The obligation is mandatory (―will Sell‖) and is triggered by Hammons‘s death

(―upon the death of JQH‖). The provision requires that the JQH Subject Hotels be sold

―for cash.‖ Id. Otherwise, the provision does not seek to impose particular terms on the

JQH Trust. The JQH Trust can sell for as much or as little as it wants, and it can take

whatever steps it wants to comply with its contractual obligation to sell ―all‖ of the JQH

Subject Hotels ―for cash.‖

       The first sentence of Section 3.2 also imposes a deadline. All of the JQH Subject

Hotels must be sold by an outside date: ―no later than the later to occur of (a) two (2)

years after the date of JQH‘s demise, and (b) full redemption or other permitted

disposition by JQH and his Affiliates of all of his and their [Preferred Equity Units].‖ Id.

(emphasis added). By framing the deadline as the ―later to occur of‖ these two events,

Section 3.2 gives the JQH Trust at least two years after Hammons‘s death to sell ―all‖ of

the JQH Subject Hotels. The deadline could be extended if ―a full redemption or other

permitted disposition‖ is not accomplished until after the two year mark, giving the JQH

Trust more time to sell the JQH Subject Hotels. If all of the JHQ Subject Hotels are not

sold by the outside date, then the JQH Trust will find itself in breach of Section 3.2.

                                             17
       The second sentence of Section 3.2 speaks to what happens during a subset of the

minimum two year sale period, defined as the first ninety days after Hammons‘s death.

During that ninety-day period, Eilian and the JQH Trust have an obligation ―to negotiate

exclusively and in good faith with each other to Sell the JQH Subject Hotels‖ to Eilian.

Id. The first two sentences of Section 3.2 thus divide the minimum two-year sale period

into two phases. During the first phase, which lasts ninety days, Eilian has an exclusive

negotiation right. During the second phase, which comprises the balance of the sale

period, the JQH Trust is not required to negotiate exclusively with Eilian and can explore

a sale with anyone it wants.

       The third sentence of the ROFR Agreement protects Eilian‘s rights during the

second phase of the sale period, after exclusivity has lapsed, when the JQH Trust can

explore a sale with anyone it wants. The third sentence states ―[a]ny other Sale of a JQH

Subject Hotel shall be subject to the provisions of this Agreement.‖ Id. Coming directly

on the heels of the sentence describing the exclusive negotiation period, this sentence

makes plain that if Eilian and the JQH Trust do not reach agreement on a sale during the

exclusivity period, ―[a]ny other Sale‖ is subject to the terms of the ROFR Agreement,

which gives Eilian a right of first refusal. The JQH Trust can comply with its obligation

to sell ―all‖ of the JQH Subject Hotels by reaching an agreement with anyone it wants on

whatever terms it wants (so long as the sale is for cash), subject to Eilian‘s ability to

exercise the right of first refusal and other rights set forth in ―this Agreement.‖

       The plain meaning of Section 3.2 thus imposes on the JQH Trust a current and on-

going obligation to sell all of the JQH Subject Hotels for cash. Because the initial ninety-

                                              18
day exclusive negotiation period that followed Hammons‘s death passed without a deal

being reached, the JQH Trust can sell to anyone on any terms it wishes, as long as it sells

for cash. If the JQH Trust reaches agreement on the terms of a sale with a buyer other

than Eilian, then Eilian has a right of first refusal to acquire the property on the agreed-

upon terms. The JQH Trust will find itself in breach of the ROFR Agreement if it does

not complete the process of selling all of the JQH Subject Hotels by the later of (i) May

26, 2015, which is two years after Hammons‘s death, or (ii) a full redemption or other

permitted disposition by Hammons or his affiliates of all of his Preferred Equity Units.

       Judgment is therefore granted in favor of the plaintiffs and against the defendants

on Count II of the Complaint as to the meaning of Section 3.2 of the ROFR Agreement.

Judgment is likewise granted in favor of the plaintiffs and against the defendants on

Count IV of the Counterclaims.

       3.     Count I of the Counterclaims: The ROFR Agreement Does Not Fail
              For Lack Of Specific Terms

       In response to the foregoing interpretation of Section 3.2, the JQH Trust advances

its own interpretation in which the provision cannot impose any obligation to sell because

it lacks definitive terms. The provision is therefore at most only an agreement to agree.

In support of its reading, the JQH Trust contends that it would be implausible for

Hammons to agree to sell the hotel business he loved. Count I of the Counterclaims

seeks a declaratory judgment establishing these points. In light of the plain meaning and

operation of Section 3.2, judgment is entered against the defendants and in favor of the

plaintiffs on Count I of the Counterclaims.


                                              19
       The JQH Trust argues strenuously that Hammons would never have agreed to sell

his hotel business, making it inconceivable that the language of Section 3.2 should be

read to compel that result. But the idea that Hammons would agree to sell in the manner

he did is not only conceivable, but consistent with his goals at the time of the 2005

Transaction (as found by the Post-Trial Opinion), and it fits with the overall structure of

the 2005 Transaction and the terms of the ROFR Agreement. For Hammons to obtain

liquidity in 2005 primarily through loans secured by the Preferred Equity Units and

thereby defer any actual or deemed sales until after his death made eminent sense,

because his heirs could benefit from a step-up in basis. The deferral of the sales until

after his death also meant that Hammons could continue managing and developing hotels

for the balance of his life. The JQH Trust has not identified anything in the ROFR

Agreement or the 2005 Transaction that suggests Hammons was attempting to pass on his

business, intact, to his heirs, or to secure for them the opportunity for self-actualization

that Hammons found in managing and developing hotels.

       Taking a different stab at the inconceivability argument, the JQH Trust argues that

the Hotel Limited Partnership is now heavily indebted such that it is unlikely that the

JQH Trust will receive the full value of its $335 million liquidation preference. The JQH

Trust suggests that if the plain meaning of Section 3.2 is enforced, the Hotel Limited

Partnership dissolved, and the JHQ Trust is forced to divest its hotels, then Hammons

would have sold his hotel business in 2005 for virtually nothing. That is facially wrong.

Hammons received the $24 per share merger consideration for the 5% of the Class A

shares held by the JHQ Trust as well as the cash value of his options. More importantly,

                                            20
Hammons received $300 million in loan proceeds. Hammons effectively achieved a

meaningful degree of liquidity through 2005 Transaction, but because of his tax needs,

the bulk of it was provided through loans rather than an outright sale. Hammons‘s capital

account in the Hotel Limited Partnership was valued initially at $328 million, so he had

the potential for additional value when his Preferred Equity Units were liquidated or

redeemed, as well as upside if the Hotel Limited Partnership increased in value.

Hammons also secured a trophy property—the Chateau on the Lake Resort—and the

right to continue managing the Hotel Limited Partnership‘s hotels. Nor is the JQH Trust

currently being forced to give away the other hotels. The JQH Trust can sell the hotels to

the highest bidder or combination of bidders. It is true that Eilian can exercise his right

of first refusal, match the terms, and buy the property, but the JQH Trust gets the cash

regardless. Far from representing an inconceivable business deal, the structure and terms

of the 2005 Transaction has the hallmarks of the type of smart, forward-looking deal that

a successful businessman like Hammons would structure.

       Based on its theory that Hammons would never have agreed to exit the hotel

business, the JQH Trust reads Section 3.2 wishfully as an agreement to agree. According

to the JQH Trust, the first sentence of Section 3.2 does not impose any obligation on the

JQH Trust to sell the JQH Subject Hotels.         Rather, the JQH Trust claims that the

language requiring that a sale ―be completed no later than the later to occur of (a) two (2)

years after the date of JQH‘s demise, and (b) full redemption or other permitted

disposition by JQH and his Affiliates of‖ their Preferred Equity Units is actually the

trigger for any obligation to sell. See Dkt. 49 (―DOB‖) at 9 (contending that Section 3.2

                                            21
―establishes two conditions precedent to Defendants‘ sale of the JQH Subject Hotels‖);

id. at 17-23 (same). This reading is flatly contrary to the first sentence of Section 3.2,

which states that ―upon the death of JQH,‖ the JQH Trust ―will Sell for cash or cause the

Sale for cash of all of the JQH Subject Hotels.‖          The obligation to sell arises on

Hammons‘s death. The sale process must be completed by the deadline. If the deadline

arrives and the JQH Trust has not taken any steps to effectuate a sale, then the JHQ Trust

will find itself in breach.

       The JQH Trust also tries to turn the simplicity of the sale obligation into

contractual defect, arguing that Section 3.2 ―contains no specific terms or guidelines for

the sale of the JQH Subject Hotels.‖ Counterclaims ¶ 31; accord id. ¶ 33; see also DOB

at 9, 14-16.   In reality, Section 3.2 does contain specific terms. It requires that ―all‖ of

the JQH Subject Hotels be sold. It requires that all sales be ―for cash.‖ It imposes a

deadline for the completion of the sale process. And it establishes an initial ninety-day

exclusivity period for Eilian. Otherwise, the JQH Trust is free to sell the JQH Subject

Hotels for as much or as little as it wishes, on whatever terms it wishes. The JQH Trust

has the contractual flexibility to maximize the value it will receive from the JQH Subject

Hotels, either from a third party buyer or from Eilian.

       In lieu of accepting that the ROFR Agreement grants contractual freedom to the

JQH Trust to act in its own self-interest to maximize the value it will receive, the JQH

Trust argues that sale obligation fails for lack of material terms, such as the price. In

support of this argument, the JQH Trust cites cases which hold that an agreement to buy

or sell is not enforceable as between the parties unless it contains the material terms for

                                             22
the transaction.1 Absent material terms, Delaware courts interpret such a right as an

agreement to agree. The JQH Trust argues that these cases doom the sale obligation.

       Section 3.2 is not a call option in favor of Eilian. It does not require the JQH Trust

to sell the JQH Subject Hotels to him. If it did, then the cases that the JQH Trust cites

might apply. Instead, Section 3.2 requires that the JQH Trust sell the JQH Subject

Hotels. It did create an initial ninety-day exclusivity period, but after that, the JQH Trust

could (and now can) sell the hotels to anyone, on any terms, as long as the sale is for

cash. If the JQH Trust reaches agreement on terms with a third-party buyer, then the

necessity for definitive terms will have been satisfied. At that point, Eilian can choose

whether to exercise his right of first refusal and purchase the hotel on those terms. The

parties have already proceeded in this fashion on at least one occasion. The JQH Trust‘s

effort to analogize Section 3.2 to an indefinite call option or other right to purchase fails

to account for how Section 3.2 operates.

       The JQH Trust has not advanced a reasonable interpretation of the ROFR

Agreement. Declaratory judgment is granted in favor of the plaintiffs and against the

defendants on Count I of the Counterclaims.




       1
        See Heritage Homes of De La Warr, Inc. v. Alexander, 2005 WL 2173992, at *3
(Del. Ch. Sept. 1, 2005) (―It is a well-settled principle of Delaware law that an agreement
to agree in the future without any reasonably objective controlling standards is
unenforceable.‖) (internal quotation marks omitted); Liquor Exch., Inc. v. Tsaganos, 2004
WL 5383907 (Del. Ch. Nov. 16, 2004) (holding that provision giving tenant first
opportunity to rent space ―provided the Landlord and Tenant agree upon all terms‖ was
an agreement to agree).

                                             23
B.     Count I of the Complaint and Count II of the Counterclaims: The Rule
       Against Perpetuities

       The parties next join issue over whether Section 3.2 of the ROFR Agreement

violates the rule against perpetuities. Count I of the Complaint seeks a declaration that it

does not. Count II of the Counterclaims seeks a declaration that it does. In light of the

plain meaning of the provision, it does not.

       1.     The Substance Of The Rule Against Perpetuities

       Under the common law rule against perpetuities, an interest in property is good if

―it vests, if at all, not later than twenty-one years after some life in being at the creation of

the interest.‖ Stuart Kingston, Inc. v. Robinson, 596 A.2d 1378, 1383 (Del. 1991). A

future interest must vest within the limitations period and ―[i]f there is any possibility that

the interest will vest beyond the period of the rule, then it is void ab initio.‖             Id.

Delaware law calls on courts to interpret contract provisions to avoid violating the rule

against perpetuities. Id. at 1384. ―If the construction of a grant or of a contract is

doubtful, and one construction of the language would result in an interest that would not

offend the Rule, that construction should be adopted.‖ McInerney v. Slights, 1988 WL

34528, at *5 (Del. Ch. Apr. 13, 1988) (Allen, C.); accord Smith v. Smith ex rel. Clarke,

747 A.2d 85, 90 (Del. Ch. 1999) (―Common law has established the principle that where

language creating a future interest is susceptible to two interpretations, one in compliance

and one in violation of the rule against perpetuities, the former shall be chosen.‖). Under

Delaware law, the rule against perpetuities ―applies equally to rights of first refusal, also




                                               24
known as preemptive rights, to acquire interests in land.‖ Stuart Kingston., 596 A.2d at

1384.

        Delaware law applies the rule against perpetuities differently to commercial

transactions. Pathmark Stores, Inc. v. 3821 Assocs., L.P., 663 A.2d 1189, 1193 (Del. Ch.

1995). In lieu of strictly tying the perpetuities period to a life in being plus twenty-one

years, ―Delaware courts allow parties to a commercial real estate transaction to negotiate

a mutually acceptable time period within which rights under the agreement must be

exercised.‖ Cornell Glasgow, LLC v. LaGrange Props., LLC, 2012 WL 3157124, at *3

(Del. Super. Aug. 1, 2012).

        2.    Section 3.2 Does Not Violate the Rule Against Perpetuities

        Section 3.2 sets an outside date for the sale of the JQH Subject Hotels, ―no later

than the later to occur of (a) two (2) years after the date of JQH‘s demise, and (b) full

redemption or other permitted disposition by JQH and his Affiliates of‖ the Preferred

Equity Units. RA § 3.2. The ROFR Agreement is a commercial transaction, and this

provision establishes a reasonable time in which the ROFR Agreement will be exercised

or expire.

        Determining how soon the outside date will arrive depends on when a ―full

redemption or other permitted disposition‖ will occur. JD Holdings contends that the

term ―other permitted disposition‖ includes the liquidation of the Hotel Limited

Partnership. Extensive case law supports the position that a liquidation constitutes a




                                            25
permitted disposition.2 Indeed, the JQH Trust does not dispute this point. Rather, the

JQH Trust argues that the disposition must be ―by [Hammons] or his Affiliates,‖

requiring a voluntary act on their part.         Courts have consistently rejected this

interpretation and have held that the preposition ―by‖ does not require a voluntary act by

the transferor.3   More importantly, Article 11 of the Partnership Agreement, which

describes the few permitted transfers that Hammons could make, demonstrates that the

parties viewed an involuntary transfer as a disposition. Under Section 11.3(e), if the

lender who funded Hammons‘s $275 million loan executed on the Preferred Equity Units

as a remedy for default, the transfer would be permitted under the Partnership Agreement




       2
        See, e.g., Schumann v. Comm’r, 857 F.2d 808, 810 (D.C. Cir. 1988) (holding that
the liquidation and partial distribution of proceeds to stockholders constituted a
―disposition‖ within the meaning of Section 424 of the Tax Code); Kast v. Comm’r, 78
T.C. 1154, 1163 (1982) (same); accord Spector v. Comm’r, 641 F.2d 376, 380 (5th Cir.
Unit A 1981) (holding that partners may effect a disposition of their interests either
through sale or liquidation); Schiff v. Dir., Div. of Taxation, 15 N.J. Tax 370, 385-86
(N.J. Tax. Ct. 1995) (holding that dissolution and liquidation of a partnership constituted
a disposition); see also Wilmington Trust Co. v. Tropicana Entm’t, LLC, 2008 WL
555914, at *8 (Del. Ch. Feb. 29, 2008) (defining disposition broadly ―to encompass
changes in title or ownership‖). See generally Black‘s Law Dictionary 539 (9th ed. 2009)
(defining ―disposition‖ to include ―the relinquishing or property‖ or any ―final settlement
or determination‖).
       3
          See Schumann, 857 F.2d at 812 (―Schumann's acceptance of the liquidating
distributions made pursuant to a duly adopted liquidation plan constitutes a ‗disposition
... made by him‘ whether or not he originally voted for adoption of the liquidation plan.‖)
(emphasis added); In re Pouncey, 59 B.R. 615, 617 (Bankr. M.D. Ala. 1986) (holding
that forced sale by an execution levy constituted a conveyance ―by‖ the owner‖); In re
Smith, 45 B.R. 100, 106 (Bankr. E.D. Va. 1984) (treating involuntary garnishment as a
transfer ―by the debtor‖); Wilmington Trust, 2008 WL 555914, at *8 (holding that
involuntary disposition through appointment of conservator was a disposition ―by‖ the
company).

                                            26
and therefore constitute a permitted disposition by Hammons.            PA § 11.3(a).      A

liquidation similarly falls within the scope of ―other permitted disposition‖ for purposes

of determining the outside date, notwithstanding the lack of a voluntary act ―by‖

Hammons‘s successors.

       Section 15.1(b) of the Partnership Agreement provides that if the Preferred Equity

Units have not been redeemed before Hammons‘s death, then the Hotel Limited

Partnership must begin liquidating its assets on or before a date that is eighteen months

after the ―Liquidation Notice Date.‖ That term is defined as the first business day after

the earlier to occur of (i) Hammons‘s death or (ii) October 16, 2018.4 The liquidation

process therefore must begin no later either eighteen months after Hammons‘s death or

April 17, 2020, which is eighteen months after the first business day after October 16,

2018. The liquidation process must be completed within one year after the Liquidation

Notice Date or by October 16, 2018, whichever is later. At the time of contracting, the

latest that the liquidation process could be completed was the earlier of thirty months

after Hammons‘s death or April 17, 2021. A permitted disposition by Hammons or his

affiliates would occur by that date, meaning that the right of first refusal would be

exercised or lapse within the earlier of thirty months after the principal seller died or, if

the principal seller remained alive, fifteen years and eight months after it was granted.


       4
           PA, art. I at 13. The Partnership Agreement does not actually specify October
16, 2018. It rather defines the ―Calendar Liquidation Notice Date‖ as ―one month after
the seventh anniversary of the Effective Date if a Liquidation Notice has been received,‖
with the date being automatically extended for up to six successive one-year periods. PA,
art. I at 3. The effective date was September 16, 2005.

                                             27
For a complex sale of a business involving extensive real estate holdings and deferred tax

implications, that is a commercially reasonable period.

       In an effort to create uncertainty about the outside date, the JQH Trust cites

Section 13.2(b) of the Partnership Agreement, which permits the liquidator ―in its Sole

and Absolute Discretion [to] defer for a reasonable time the liquidation of any assets‖ to

the extent that an immediate sale would be impractical or would cause undue loss. PA §

13.2. The JHQ Trust claims that this provision would permit indefinite deferrals that

would violate the rule against perpetuities. It does not. It only permits reasonable

deferrals, and in a commercial transaction, a right will not violate the rule against

perpetuities if it will be exercised or lapse within a reasonable time.5   By definition,

Section 13.2 does not permit an unreasonable extension that would violate the rule.

Section 13.7 confirms that only that ―a reasonable time shall be allowed for the orderly

winding-up of the business and affairs of the [Hotel Limited] Partnership and the

liquidation of its assets.‖ PA § 13.7.



       5
         See Wong v. DiGrazia, 386 P.2d 817, 825 (Cal. 1963) (―Courts and scholars
almost unanimously agree that provisions which make vesting contingent upon
performance within a reasonable time, or some equivalent phrase, do not violate the rule
[against perpetuities] if, in light of the surrounding circumstances, as a matter of
construction, a reasonable time is necessarily less than twenty-one years‖ (internal
quotations omitted)); Rodin v. Merritt, 268 S.E.2d 539, 543 (N.C. Ct. App. 1980)
(upholding restriction where ―[s]urely the conditions contained in the contract between
the parties here would be accomplished, if at all, within a reasonable time [and] a
reasonable time would not extend beyond 21 years‖); see also Pathmark Stores, 663 A.2d
at 1193 (―Allowing defendants to escape the terms of the contract because Pathmark
might exercise the option in an unreasonably remote way defies the contract‘s terms,
logic, common sense, public policy and principles of equity.‖).

                                            28
       As its final riposte, the JQH Trust reprises its contention that Eilian‘s

interpretation of the ROFR Agreement is inconceivable because Hammons never would

have agreed to sell his hotels unless his Preferred Equity Units had been redeemed for no

less than $335 million in cash. DOB 18-19. This assertion conflicts with the terms,

structure, and purpose of the 2005 Transaction. Hammons received significant benefits

from the 2005 Transaction, including cash for his Class A units and options, the Chateau

on the Lake property, a continuing right to manage hotels, and $300 million in liquidity

through subsidized loans secured by the Preferred Equity Units. Hammons received his

consideration in this form and converted his equity into the Preferred Equity Units

because he wanted to avoid paying capital gains taxes by deferring any actual or deemed

sales until after his death. To achieve that result, Hammons had to have ―capital at risk.‖

SJ Op., 2009 WL 3165613, at *7. Put differently, the 2005 Transaction could not

guarantee Hammons the redemption of his units for $335 million in cash, as the JQH

Trust now argues. Moreover, the multiple provisions in the transaction documents that

are keyed off Hammons‘s death demonstrate that the parties anticipated that, upon

Hammons‘s demise, the complex business structure between Hammons and Eilian could

be dismantled through dissolution at Eilian‘s option, and Hammons‘s successors would

sell off his properties, thereby engaging in sale transactions at a time when his heirs could

benefit from a step-up in basis. This result is logical and conceivable. It reinforces,

rather than undercuts, the enforceability of the ROFR Agreement.

       Read together, the ROFR Agreement and the Partnership Agreement establish a

―mutually acceptable time period‖ in which the right of first refusal would be exercised

                                             29
or lapse. Cornell Glasgow, 2012 WL 3157124, at *3; accord Pathmark, 663 A.2d at

1193 (―when two commercial entities explicitly create an option for a particular time

period, the entities are obviously focusing on the reasonable time period necessary for the

commercial development of the property.‖). Where, as here, ―[t]he parties contemplated

an end to their relationship,‖ the agreement will not violate the rule against perpetuities.

See Cornell Glasgow, 2012 WL 3157124, at *4. Judgment is granted in favor of the

plaintiffs and against the defendants on Count I of the Complaint and Count II of the

Counterclaims.

C.     Count III of the Complaint and Counterclaims: Unreasonable Restraint on
       Alienation

       The next dispute is whether Section 3.2 of the ROFR Agreement constitutes an

unreasonable restraint on alienation. Count III of the Complaint seeks a declaration that

it does not. Count III of the Counterclaims seeks a declaration that it does. It does not.

       The law does not prohibit all restraints on alienation, ―only unreasonable restraints

are prohibited.‖ McInerney, 1988 WL 34528, at *6 (internal quotation marks omitted).

Delaware courts use ―a fact-intensive approach‖ to evaluate claims that ―a restraint on the

alienation of an interest in land is contrary to public policy.‖ Libeau v. Fox, 880 A.2d

1049, 1059-1060 (Del. Ch. 2005) (Strine, V.C.). Several factors tend to show that a

restraint on property is unreasonable: ―(1) the restraint is capricious; (2) the restraint is

imposed for spite or malice; (3) the one imposing the restraint has no interest in land that

is benefited by enforcement of the restraint; (4) the restraint is unlimited in duration;

[and] (5) the number of persons to whom alienation is prohibited is large.‖ Id. at 1060


                                             30
(quoting McInerney, 1988 WL 34528, at *7). ―If there was a legitimate, non-invidious

reason for the restraint in the first instance, the selling party's desire to avoid the restraint

is of no moment.‖ Libeau, 880 A.2d at 1059.

       With one exception, all of the factors point to the reasonableness of Section 3.2.

First, it is not capricious.    The parties to the 2005 Transaction crafted the ROFR

Agreement to provide Eilian with the right to acquire other hotels that Hammons had

developed or would develop. The ROFR Agreement gives Eilan the opportunity to

acquire Hammons‘s entire hotel business, but only at a time of Hammons‘s choosing (if

he decides to sell) or within two years after his death (when the JQH Trust must sell). A

provision intended to achieve a logical and readily apparent commercial purpose is not

capricious.

       Second, and for similar reasons, the restraint was not imposed for spite or malice.

The parties agreed to it voluntarily as part of a complex, multi-part transaction.

       The third factor—whether the party imposing the restraint has an interest in land

that is benefited by enforcement of the restraint—is the only factor that does not point

clearly in favor of the reasonableness of Section 3.2. Nothing in the record suggests that

Eilian has an interest in land that is benefited by the ROFR Agreement, so technically this

factor is not satisfied. At the same time, this factor is also not terribly relevant to the

current case. While it would have relevance to a local dispute involving a neighborhood

or adjoining properties, this case involves the sale of a diverse hotel empire comprising

many different hotel properties that was structured to occur in phases over time to

achieve the seller‘s tax goals. Rather than holding property that is benefited by the

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ROFR Agreement, Eilian owns a business that is benefitted by it. Through the 2005

Transaction, he bargained for the opportunity to own all of Hammons‘s hotels, first

through the acquisition of the Hotel Limited Partnership and later through the exercise of

the ROFR Agreement. The business rationale for the ROFR Agreement counsels in favor

of its reasonableness, but to be conservative, this decision treats this factor as neutral.

       Fourth, as discussed in the previous section, the ROFR Agreement is limited in

duration.

       Finally, the ROFR Agreement does not exclude a large number of potential

buyers. After an initial exclusive negotiation period, the ROFR Agreement permits the

JQH Trust to sell a Subject Hotel Property to anyone, subject only to Eilian‘s right of first

refusal.

       The ROFR Agreement is not an unreasonable restraint on alienation. Judgment is

granted in favor of the plaintiffs and against the defendants on Count III of the Complaint

and Count III of the Counterclaims.

D.     Count VI of the Counterclaims: Equitable Estoppel

       In Count VI of the Counterclaims, the JQH Trust contends that Eilian should be

estopped from advancing his current positions about the plain language of the ROFR

Agreement.     ―An estoppel may arise when a party by his conduct intentionally or

unintentionally leads another, in reliance upon that conduct, to change position to his

detriment.‖    Wilson v. Am. Ins. Co., 209 A.2d 902, 903-904 (Del. 1965).                     The

Counterclaims do not point to any affirmative act or representation by Eilian on which

the JQH Trust relied. Eilian was and is entitled to rely on and now seek to enforce the

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plain language of the ROFR Agreement. Judgment is entered in favor of the plaintiffs

and against the defendants on Count VI of the Counterclaims.

E.     Count X of the Complaint: The Scope of the JQH Subject Hotels

       In Count X of the Complaint, Eilian seeks a determination that Section 3.2 of the

ROFR Agreement extends to the JQH Trust‘s interests in Winegardner & Hammons,

Inc., W&H Realty, Inc. (―W&H Realty‖), and Des Plaines Development L.P. (―Des

Plaines‖). It is not possible to make such a determination at this stage.

       By its plain terms, Section 3.2 of ROFR Agreement requires that the JQH Trust

―Sell for cash or cause the Sale for cash of all of the JQH Subject Hotels.‖ RA § 3.2.

The ROFR Agreement defines the term ―JQH Subject Hotels‖ as

       those Hotel Properties set forth on Exhibit A hereto, and any Hotel
       Properties or any direct or indirect interests in Hotel Properties now or
       hereafter acquired by JQH or any JHQ Entity or any of either of their
       affiliates, including any properties under construction or being developed or
       intended to be developed as Hotel Properties. . . .

Id. § 1.1. The ROFR Agreement defines the term ―Hotel Properties‖ as

       interests in real property and personal property, tangible or intangible (other
       than any rights to any tradename using the name ―John Q. Hammons‖ or
       ―Hammons‖), used in the operation of a hotel facility, or any interests in
       any related convention or entertainment facility, retail facility, parking
       facility or gaming facility, including, without limitation, fee interests,
       leasehold interests, interests in ground leases, easements and rights of way,
       air rights, surface rights, subsurface rights, debt or equity interests in
       corporations, limited liability companies, joint ventures, partnerships or
       other entities holding title to, or a leasehold interest in, any of the
       foregoing, interests in mortgages or other security interests in any of the
       foregoing, contractual management interests, and debt instruments as the
       Person who holds title to, or a leasehold interest in, such property may hold
       from time to time (each, a ―Hotel Property‖).



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Id. A JQH Subject Hotel is thus any Hotel Property owned by a JQH Entity. The ROFR

Agreement defines ―JQH Entity‖ as those entities that were parties to the ROFR

Agreement, including Hammons himself and the JQH Trust, and ―any other entity

directly or indirectly controlled by [Hammons] which owns a Hotel Property.‖ Id. at 1.

       As a threshold matter, the JQH Trust argues in response that the JQH Subject

Hotels are only those properties listed in Exhibit A of the ROFR Agreement. The JQH

Trust also argues that the JQH Subject Hotels are only those Hotel Properties owned by

entities listed on Schedule 1 of the ROFR Amendment. Both positions are plainly wrong.

The definition of JQH Subject Hotels includes other Hotel Properties or any direct or

indirect interests in Hotel Properties that Hammons might own or later acquire. The

definition of JQH Subject Hotels also extends to Hotel Properties owned directly or

indirectly by Hammons or any JQH Entity.

       In a similarly misguided argument, the defendants argue that the ROFR

Agreement only extends to Hotel Properties where a JQH Entity owns a majority or

controlling interest in the Hotel Property. Whether Hammons or another JQH Entity

owns a majority or controlling interest in another entity determines whether or not the

entity is a JQH Entity. The concept of control is not relevant to whether or not the

property interest owned by the JQH Entity is a Hotel Property and therefore a JQH

Subject Hotel. If a JQH Entity owns a Hotel Property, even if the interest is only a

minority interest, the Hotel Property is a JQH Subject Hotel and the ROFR Agreement

applies.



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       The Complaint alleges that the JQH Trust owns interests in Winegardner &

Hammons, which owns interests in two hotels. The Complaint also alleges that the JQH

Trust owns interests in W&H Realty, which owns interests in over a dozen hotels. The

interests in the hotels are ―interests in . . . personal property . . . used in the operation of a

hotel facility‖ and therefore fall within the definition of Hotel Properties, but a Hotel

Property is only a JQH Subject Hotel if the Hotel Property is owned by a JQH Entity.

For Winegardner & Hammons and W&H Realty to qualify as JQH Entities, they must

have been controlled, directly or indirectly, by Hammons.              The pleadings are not

sufficient for the court to determine whether Winegardner & Hammons and W&H Realty

qualify as JQH Entities.

       The Complaint alleges that the JQH Trust indirectly owns a 20% interest in Des

Plaines, which owns an indirect interest in a Harrah‘s gaming facility. The ownership

interest in the Harrah‘s gaming facility is an interest ―in . . . any gaming facility,‖

bringing it within the definition of Hotel Properties. Once again, however, a Hotel

Property is only a Subject Hotel Property if it is owned by a JQH Entity. The pleadings

are not sufficient for the court to determine whether Des Plaines is a JQH Entity.

       It is not possible to determine at the current procedural stage whether Winegardner

& Hammons, W&H Realty, and Des Plaines are JQH Entities such that the interests in

hotel and gaming properties owned by those entities are JQH Subject Hotels and subject

to the ROFR Agreement. The plaintiffs‘ motion for judgment on the pleadings is denied

as to Count X of the Complaint.



                                               35
                               III.     CONCLUSION

       The plain language of the ROFR Agreement controls. Except as to Count X of the

Complaint, judgment is granted in favor of the plaintiffs and against the defendants on all

of the counts at issue. Count X requires further factual development before the ROFR

Agreement can be applied, so the plaintiffs‘ motion for judgment on the pleadings is

denied. The parties shall submit an order, agreed as to form, implementing this decision

and specifying the disposition of each count.




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