        IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

                    IN AND FOR NEW CASTLE COUNTY

DEERE & COMPANY, a Delaware )
corporation,                   )         C.A. No. N13C-07-330 JTV
                               )
                    Plaintiff, )
                               )
       v.                      )
                               )
EXELON GENERATION              )
ACQUISITIONS, LLC, a Delaware )
limited liability company,     )
                               )
                    Defendant. )


                            Submitted: July 24, 2014
                          Decided: November 10, 2014


Peter J. Walsh, Jr., Esq., and Matthew F. Davis, Esq., Potter, Anderson & Corroon,
Wilmington, Delaware. Attorneys for Plaintiff.

Sean J. Bellew, Esq., Ballard Spahr, Wilmington, Delaware. Attorney for Defendant.



                      Upon Consideration of Plaintiff’s
                 Motion to Dismiss Defendant’s Counterclaims
                                  DENIED




VAUGHN, Judge
Deere v. Exelon
C.A. No. N13C-07-330 JTV
November 10, 2014

                                       OPINION
      The plaintiff, Deere & Co., filed a complaint against the defendant, Exelon
Generation Acquisitions, LLC, alleging breach of contract, breach of the implied
covenant of good faith and fair dealing, and unjust enrichment. The dispute arises out
of an August 30, 2010 purchase agreement (the “Agreement”). Previously in the
litigation, Exelon filed a Motion to Dismiss all three of Deere’s claims under Superior
Court Civil Rule 12(b)(6). The Court dismissed Deere’s breach of the implied
covenant of good faith and fair dealing and unjust enrichment claims, but allowed
Deere’s breach of contract claim to proceed.
      In its answer, Exelon asserted two counterclaims; recoupment and unjust
enrichment. Deere has filed a Motion to Dismiss both counterclaims under Rule
12(b)(6).
                                         FACTS
      The facts are set forth in the Court’s opinion concerning Exelon’s Motion to
Dismiss.1 In 2010, Exelon purchased Deere’s interest in specific wind generation
projects and wind generation assets owned by Deere through subsidiaries. On August
30, 2010, the parties memorialized the terms of their contract in the Agreement. The
Agreement identifies the Blissfield Wind Project as one of the wind generation
projects that Exelon would acquire. The Blissfield Wind Project was described as
“the wind project under development in Lenawee County, Michigan, by Blissfield



      1
         Deere & Co.v. Exelon Generation Acquisitions, LLC, 2014 WL 904251 (Del. Super.
Mar. 7, 2014).

                                            2
Deere v. Exelon
C.A. No. N13C-07-330 JTV
November 10, 2014

Wind Energy, LLC, with a nameplate capacity of 81 megawatts.”2 Section 2.6 of the
Agreement provided for an earn-out to be paid to Deere when the Blissfield Wind
Project “achieves Completion of Development and Commencement of Construction.”
      In connection with the Blissfield Wind Project, Deere represented that it
reasonably believed that the material permits were obtainable in the ordinary course.3
This representation is expressly qualified, however, by disclosures that Deere
included in the Seller Disclosure Schedule.4 In the Seller Disclosure Schedule, Deere

      2
          Agreement, Section 1.1.
      3
          Specifically Section 4.11(c)(iv) of the Agreement states:

      As of the date hereof [August 30, 2010], except as set forth in Section 4.11(c)(iv)
      of the Seller Disclosure Schedule, [Deere] reasonably believes that all material
      Permits necessary for the development, construction, ownership, maintenance, use
      and/or operation fo the Michigan Wind Projects (including material Permits with
      respect to applicable zoning and land use Laws) can be obtained in the ordinary
      course. [Exelon] acknowledges that not all such Permits required for the Michigan
      Wind Projects are known as of the date of this Agreement.

      4
          The Seller Disclosure Schedule states:

      The Riga Township Planning Commission voted on August 2, 2010 to
      recommend to the Riga Township Board a 12-month moratorium on wind energy
      projects, which is scheduled to be considered by the Riga Township Board at its
      September 13, 2010 meeting. The moratorium, as currently proposed, would
      automatically expire upon approval of a wind energy zoning ordinance. If 15% of
      the registered voters in a Michigan township sign a petition requesting a
      referendum within 30 days after a zoning ordinance is enacted in such township,
      the zoning ordinance would become subject to a referendum vote at the next
      scheduled election. Based on the level of resistance to the Blissfield Wind Project
      in Riga township there is a possibility that a zoning ordinance permitting the
      project would be put to a referendum.

                                                   3
Deere v. Exelon
C.A. No. N13C-07-330 JTV
November 10, 2014

informed Exelon of the Riga Township Planning Committee’s decision to impose a
moratorium on wind energy projects and the potential obstacle that the moratorium
could present in obtaining the necessary zoning approval. In Section 6.3 of the
Agreement, Deere promised that before closing it would cause Deere Renewables to
“conduct its business and operations in the ordinary course of business consistent
with past practices and consistent with Prudent Industry Practices.”
      Deere’s covenants and representations and warranties were subject to limiting
provisions in the Agreement. Section 7.2 of the Agreement sets forth conditions to
Exelon’s obligations to close and states that the obligations of Exelon to “effect the
Closing shall be subject to the satisfaction (or waiver, in whole or in part). . .of each
of the following conditions.” One of the conditions of the closing was that Deere
preformed or complied with all obligations under the covenants, representations and
warranties.5 Additionally, the Agreement includes a survival clause which terminates
the representations and warranties fifteen months after the closing date.6 The
transaction closed on December 9, 2010.
      Following the close of the transaction, the Riga Township Board adopted
changes to its zoning regulations that precluded the development of the Blissfield
Wind Project. Ultimately, Exelon notified Deere that it was not commercially
reasonable to continue development on the Blissfield Wind Project. Exelon acquired
a different location and developed a wind project in Gratiot County, Michigan. A


      5
          Agreement, Section 7.2.
      6
          Agreement, Section 10.4.

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Deere v. Exelon
C.A. No. N13C-07-330 JTV
November 10, 2014

power purchase agreement that was used in connection with the Blissfield Wind
Project was amended and used in connection with the wind project in Gratiot County.
       In its complaint, Deere asserted that the Blissfield Wind Project had simply
been relocated to Gratiot County, and that Exelon was required to pay the earn-out
for the Blissfield Wind Project.
       In support of its recoupment counterclaim, Exelon alleges that Deere breached
two representations, Section 4.11(c)(iv) and Section 6.3, in the Agreement and, that
as a result of the breach, Exelon should be able to reduce any recovery by Deere. In
its unjust enrichment counterclaim, Exelon claims that Deere will be unjustly
enriched if it is permitted to recover the entire earn-out amount without an offset for
substantial costs that Exelon allegedly incurred to relocate the Blissfield Wind Project
to Gratiot County.
                                STANDARD OF REVIEW
       “[T]he governing pleading standard in Delaware to survive a motion to dismiss
is reasonable ‘conceivability.’”7 The court will limit its review of the motion to
dismiss to the well-pleaded allegations in the complaint, but will draw all reasonable
factual inferences in favor of the non-moving party. 8 In considering the defendant’s
motion to dismiss, the court must deny the motion unless the plaintiff could not




       7
         Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs, LLC, 27 A.3d 531, 537
(Del. 2011).
       8
           Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005).

                                                5
Deere v. Exelon
C.A. No. N13C-07-330 JTV
November 10, 2014

recover under any reasonably conceivable set of circumstances.9                          This
“conceivability” pleading standard asks whether there is any, even a remote,
possibility of recovery.10
      A complaint, or counterclaim is sufficient if it contains “a short and plain
statement of the claim showing that the pleader is entitled to relief.”11 This statement
is only required to give the defendant fair notice of a claim and is to be liberally
construed.12
                                       CONTENTIONS
      Deere contends that Exelon’s recoupment claim cannot be a stand-alone claim
and must be predicated on some legal basis; Exelon’s recoupment claim is untimely
and barred because it is brought outside the contractually agreed fifteen month
survival period; that the closing date was December 9, 2010 and thus the survival
term expired on March 9, 2012; that even if Exelon’s recoupment claim related back
to the time that Deere filed its complaint, it would still be untimely because the
fifteen-month survival period expired before then; that the two underlying alleged
breaches of the Agreement are contradicted by the underlying documents and cannot
survive in the face of the plain terms of the Agreement; that Deere expressly
disclosed to Exelon the resistence that the Blissfield Wind Project was facing; that


      9
           Cent. Mortg. Co., 27 A.3d at 536.
      10
           Id. at 537.
      11
           Superior Court Rule 8(a).
      12
           Sult v. Am. Sleep Medicine, Inc., 2011 WL 4688730, at *1 (Del. Super 2011).

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Deere v. Exelon
C.A. No. N13C-07-330 JTV
November 10, 2014

any representations in Section 4.11(c)(iv) are expressly qualified by the contents of
the Seller Disclosure Schedule; that Deere expressly carved out possible zoning
ordinance issues for the Blissfield Wind Project in the Seller Disclosure Schedule;
that Exelon has already conceded that Deere has satisfied its obligations under
Section 6.3; that Deere has satisfied all of its preclosing affirmative obligations; that
Exelon’s recoupment claim is duplicative of its affirmative defense for recoupment;
and that the Agreement is the proper measure of the parties’ rights and acts to bar any
unjust enrichment claim.
      Exelon contends that recoupment is a defense aimed at reducing the amount of
damages recoverable by the plaintiff if the plaintiff has not complied with cross
obligations arising under the same contract; that to prevail on its recoupment claim
Exelon must show that the recoupment claim arises out of the same transaction as the
plaintiff’s claim, has the same litigants and is purely a defensive set-off; that its
recoupment claim meets the necessary requirements; that a recoupment defense
survives so long as the plaintiff’s claim, which arises under the same contract,
survives; that the plaintiff’s claim is not time barred; that Exelon easily meets the
“reasonable conceivability” standard required under a motion to dismiss; that the
recoupment defense is premised on two breaches of Deere’s representations regarding
the Blissfield Wind Project; that Deere’s disclosures in the Seller Disclosure Schedule
acknowledged only the possibility of a moratorium but did not nullify its
representation that all material permits for Blissfield Wind Project could be obtained;
that Deere knew Exelon could not obtain the material permits for the Blissfield Wind
Project in Lenawee County; that it did not waive or acknowledge that Deere complied

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Deere v. Exelon
C.A. No. N13C-07-330 JTV
November 10, 2014

with Section 6.3; that recoupment is a type of defensive counterclaim; that pleading
recoupment as a counterclaim and as an affirmative defense does not require
dismissal of the counterclaim; that Deere would be unjustly enriched if it is permitted
to recover the earn-out without compensating Exelon for the money it expended in
connection with the development of the wind project in Gratiot County; and that the
Agreement does not govern Exelon’s right to recoup expenses from Deere in
developing a wind project in Gratiot County.
                                          DISCUSSION
         The doctrine of recoupment is not a precisely defined one and has been
minimally applied in Delaware and in other jurisdictions. Generally, “[r]ecoupment
is a common-law equitable doctrine that permits a defendant to assert a defensive
claim aimed at reducing the amount of damages recoverable by a plaintiff.” 13 In order
to assert a recoupment claim, the defendant must show that (1) the claim arises out
of the same transaction or occurrence as the plaintiff’s suit; (2) the claim is purely a
defensive set-off and does not seek affirmative recovery; and (3) both the primary
damage claim and the recoupment claim involve the same litigants.14 Additionally,
“to the extent that a valid recoupment claim is asserted defensively, it is not subject
to statutes of limitation,”15 and will be considered timely “so long as the main action


         13
              TIFD III-X LLC v. Fruehauf Production Co., L.L.C., 883 A.2d 854, 859 (Del. Ch.
2004).
         14
              Id.
         15
              Id. at 860.

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Deere v. Exelon
C.A. No. N13C-07-330 JTV
November 10, 2014

itself is timely.”16
       Exelon’s recoupment claim and Deere’s suit arise out of the same Agreement
and the same circumstances, i.e., the termination or relocation of the Blissfield Wind
Project, involve the same parties and seek only a defensive set-off. Based on the
minimal “conceivability” pleading standard, I conclude that Exelon sufficiently
alleges a recoupment counterclaim.
       Deere contends that Exelon’s recoupment claim is time barred by the survival
clause in the Agreement. The survival clause limitation in the Agreement may bar
Exelon from affirmatively seeking damages. However, it does not bar Exelon from
asserting a counterclaim for recoupment. The law in Delaware clearly states that
recoupment is not barred or affected by a limitations period so long as the main action
itself is timely.17
       Deere also contends that Exelon cannot raise recoupment as both an affirmative
defense and a counterclaim. I find nothing in the case law which forbids Exelon from
raising recoupment as both a counterclaim and a defense. Delaware cases have
recognized recoupment in both regards, but never has a court dismissed the
counterclaim because the same theory was asserted as an affirmative defense.18
Exelon has sufficiently satisfied the pleading requirements for the recoupment claim


       16
            PNC Bank, Delaware v. Turner, 659 A.2d 222 (Del. Super. 1995).
       17
            Id.
       18
          See TIFD III-X LLC, 883 A.2d 854 (describing the doctrine of recoupment as either a
counterclaim or affirmative defense).

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Deere v. Exelon
C.A. No. N13C-07-330 JTV
November 10, 2014

to survive a motion to dismiss.
      Deere also moves to dismiss Exelon’s claim for unjust enrichment. Deere
contends that Exelon’s claim for unjust enrichment is barred because the Agreement
governs the parties’ relationship and the matter in dispute. Unjust enrichment is “the
unjust retention of a benefit to the loss of another, or the retention of money or
property of another against the fundamental principles of justice or equity and good
conscience.”19          When an express, enforceable contract controls the parties’
relationship, a claim for unjust enrichment is not available because the contract itself
is the measure of the parties’ rights.20
      Deere relies upon Deere v. Exelon, this Court’s March 7, 2014 opinion
dismissing Deere’s unjust enrichment claim because the Agreement governed the
parties’ relationship and the matter, the payment of the earn-out, in dispute.21
Exelon’s claim for unjust enrichment is substantially different from Deere’s.          In
Deere, the matter in dispute was payment of the earn-out for completion of the
Blissfield Wind Project.22 Payment of the earn-out is expressly addressed by the
parties in Section 2.6(a)(iii) in the Agreement.23 Here, the matter in dispute, the offset
of any recovery by the expense Exelon allegedly incurred to complete the wind

      19
           Kuroda, 971 A.2d at 891.
      20
           Id.
      21
           Deere, 2014 WL 904251, at *5.
      22
           Id.
      23
           Id. at *1.

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Deere v. Exelon
C.A. No. N13C-07-330 JTV
November 10, 2014

project in Gratiot County, is not addressed in the Agreement. The Agreement does
not contain a provision addressing the parties’ obligations in the event that the
Blissfield Wind Project could not be developed in Lenawee County. I find that
Exelon’s unjust enrichment claim has sufficient merit to survive a motion to dismiss.
                                 CONCLUSION
      For the foregoing reasons, Deere’s Motion to Dismiss is denied.


      IT IS SO ORDERED.


                                     /s/   James T. Vaughn, Jr

cc:   Prothonotary
      Order Distribution
      File




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