                                   COURT OF CHANCERY
                                           OF THE
                                   STATE OF DELAWARE

ANDRE G. BOUCHARD                                                Leonard L. Williams Justice Center
      CHANCELLOR                                                  500 N. King Street, Suite 11400
                                                                 Wilmington, Delaware 19801-3734


                              Date Submitted: July 25, 2017
                               Date Decided: July 31, 2017

 Michael C. Hochman, Esquire                        Daniel A. O’Brien, Esquire
 Monzack Mersky McLaughlin                          Venable LLP
  and Browder, P.A.                                 1201 N. Market Street, Suite 1400
 1201 N. Orange Street, Suite 400                   Wilmington, DE 19801
 Wilmington, DE 19801

          RE:      Windsor I, LLC v. CWCapital Asset Management LLC
                   Civil Action No. 12977-CB
 Dear Counsel:

          This letter constitutes the Court’s decision on the motion of defendant

 CWCapital Asset Management LLC (“CWCAM”) to dismiss the Complaint for

 Specific Performance, Injunctive, and Other Equitable Relief (the “Complaint”)

 filed by plaintiff Windsor I, LLC (“Windsor”). For the reasons explained below,

 the motion to dismiss is granted.

 I.       Background1

          Windsor is the owner of a commercial property located at 2201 Farrand

 Drive, Wilmington, Delaware (the “Property”). CWCAM is a special servicer that

 handles the default side of loan servicing for its affiliate, CWCapital LLC.


 1
     The facts recited herein come from the Complaint and the documents appended thereto.
Windsor I, LLC v. CWCapital Asset Management LLC
C.A. No. 12977-CB
July 31, 2017

         On or about December 27, 2006, Windsor and CWCapital entered into a

Mortgage and Security Agreement in the principal amount of $7.4 million (the

“Loan”) to refinance the existing debt on the Property. The maturity date of the

Loan was January 1, 2017.

         On July 20, 2015, Windsor sent a letter to CWCapital, requesting that the

Loan be transferred to special servicing because “Windsor is currently facing

imminent default and will be unable to support its own debt service

requirements.”2 Windsor was anticipating a default because the sole tenant for the

Property for the past twenty years, a Best Buy store, was expected to leave the

Property. On August 31, 2015, Windsor was notified that the Loan had been

transferred to CWCAM as special servicer.3

         From November 21, 2015, to February 9, 2016, Windsor and CWCAM

negotiated the terms of a pre-negotiation agreement, the final version of which is

dated February 9, 2016, and which was fully executed by March 23, 2016 (the

“Pre-Negotiation Agreement”).4 From March to November 2016, Windsor and

CWCAM engaged in a series of email exchanges, during which CWCAM

requested certain information from Windsor and Windsor made two offers to

2
    Compl. ¶ 19 & Ex. D.
3
    Compl. ¶ 23 & Ex. E.
4
    Compl. ¶¶ 26-40, 48-49 & Exs. F, H-N, T.
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purchase the Loan.5 On November 28, 2016, CWCAM rejected Windsor’s most

recent offer and made a counter-offer.6

         On December 12, 2016, Windsor filed the Complaint asserting two claims.

Count I seeks specific performance of the Pre-Negotiation Agreement. Count II

seeks injunctive relief to enjoin CWCAM from foreclosing on the Property “until

after meaningful, good faith negotiations” occur under the Pre-Negotiation

Agreement.7

         On February 3, 2017, CWCAM filed a motion to dismiss the Complaint in

its entirety under Court of Chancery Rule 12(b)(6) for failure to state a claim for

relief. Oral argument was held on July 25, 2017.

II.      Analysis

         The standards governing a motion to dismiss for failure to state a claim for

relief are well settled:

         (i) all well-pleaded factual allegations are accepted as true; (ii) even
         vague allegations are “well-pleaded” if they give the opposing party
         notice of the claim; (iii) the Court must draw all reasonable inferences
         in favor of the non-moving party; and (iv) dismissal is inappropriate



5
  Compl. ¶¶ 50-52, 55-60, 71-75, 81-83 & Exs. U, W-BB, EE, FF, GG, II-KK. Windsor
also made an offer to purchase the Loan in December 2015, before the parties finalized
the Pre-Negotiation Agreement. Compl. ¶ 31 & Ex. G.
6
    Compl. ¶¶ 84-85 & Ex. LL.
7
    Compl. ¶ 112.

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         unless the “plaintiff would not be entitled to recover under any
         reasonably conceivable set of circumstances susceptible of proof.8

The Court is not required, however, to accept mere conclusory allegations as true

or make inferences unsupported by well-pleaded factual allegations.9 The Court

also “is not required to accept every strained interpretation of the allegations

proposed by the plaintiff.”10

         The Pre-Negotiation Agreement contains a Maryland choice of law

provision.11      Accordingly, as the parties agree, Maryland law governs the

substantive aspects of the claims in this case.12

         “Maryland     courts   follow    the law of objective interpretation          of

contracts, giving effect to the clear terms of the contract regardless of what the

parties to the contract may have believed those terms to mean.”13 As the Court of

Appeals of Maryland has stated:


8
 Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (internal citations
omitted).
9
 In re Lukens Inc. S’holders Litig., 757 A.2d 720, 727 (Del. Ch. 1999), aff’d sub nom.
Walker v. Lukens, Inc., 757 A.2d 1278 (Del. 2000) (TABLE).
10
     In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006).
11
     Compl. Ex. T (Pre-Negotiation Agreement) ¶ 16.
12
  SIGA Techs., Inc. v. PharmAthene, Inc., 67 A.3d 330, 342 (Del. 2013) (law of the state
chosen by the parties governs unless “the chosen state lacks a substantial relationship to
the parties or transaction or applying the law of the chosen state will offend a
fundamental policy of a state with a material greater interest”).
13
     Towson University v. Conte, 862 A.2d 941, 946-47 (Md. 2004).

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         A court construing an agreement under [the objective theory] must
         first determine from the language of the agreement itself what a
         reasonable person in the position of the parties would have meant at
         the time it was effectuated. In addition, when the language of the
         contract is plain and unambiguous there is no room for construction,
         and a court must presume that the parties meant what they expressed.
         In these circumstances, the true test of what is meant is not what the
         parties to the contract intended it to mean, but what a reasonable
         person in the position of the parties would have thought it meant.14

         Count I fails to state a claim for relief for three separate reasons.

         First, contrary to Windsor’s contention, there is no “obligation to negotiate”

under the Pre-Negotiation Agreement, and thus no obligation for CWCAM to

specifically perform.       Windsor identifies the following provision in the Pre-

Negotiation Agreement as support for the alleged binding obligation to negotiate:

         The Parties acknowledge that they are about to commence
         negotiations (the “Negotiations”) concerning the obligations owed to
         Holder by the Borrower and that they intend to discuss various
         courses of action which will include those that they believe may be in
         their mutual interests, with a view to a compromise and settlement by
         the parties.15

The plain and unambiguous meaning of the provision quoted above does not

support the existence of a binding obligation to negotiate.



14
     Dennis v. Fire & Police Empls.’ Ret. Sys., 890 A.2d 737, 747 (Md. 2006).
15
  Compl. Ex. T (Pre-Negotiation Agreement) ¶ 1. Windsor is defined as the “Borrower."
CWCapital LLC is defined as the “Original Holder,” and the current holder of a
promissory note evidencing the Loan is defined as the “Holder.” CWCAM was acting
solely in its capacity as “Special Servicer” on behalf of Holder.

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       The parties’ intention not to create a binding obligation to negotiate is made

even more clear when the Pre-Negotiation Agreement is read in its entirety in

accordance with Maryland law.16 In particular, paragraphs 4, 6, and 8 of the Pre-

Negotiation Agreement provide, in relevant part, that:

       Borrower specifically acknowledges and agrees that Holder has
       made no promise, commitment, or representation whatsoever, nor
       has Holder any obligation to Borrower to modify the terms of the
       Loan, offer any discounted payoff of the Loan, refinance the Loan,
       grant any forbearances, extend the payment terms of the Loan or
       extend any other financial accommodation to Borrower.

       ...

       Since the Parties recognize that these Negotiations may not produce a
       mutually acceptable resolution of the overall problem, Borrower must
       be and is responsible for operating its business in a manner it deems
       appropriate. . . . Borrower acknowledges and agrees that Borrower
       may not in any way rely on, or claim reliance on, the Negotiations.

       ...

       Any party shall have the right to terminate the Negotiations at any
       time upon written notice to the other party, without obligation or
       liability by virtue of the commencement or termination of
       Negotiations hereunder or the passage of time associated therewith
       and upon such termination, the Parties’ respective obligations to one


16
    Cochran v. Norkunas, 919 A.2d 700, 710 (Md. 2007) (“A recognized rule of
construction in ascertaining the true meaning of a contract is that the contract must be
construed in its entirety and, if reasonably possible, effect must be given to each clause so
that a court will not find an interpretation which casts out or disregards a meaningful part
of the language of the writing unless no other course can be sensibly and reasonably
followed.”).

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         another shall be only as set forth in the Loan Documents, except that
         the provisions of this letter agreement shall survive.17

Thus, when read as a whole, the Pre-Negotiation Agreement is a document that

simply establishes rules to govern any discussions that may take place.18 It does

not obligate any party to negotiate or forbear from exercising remedies otherwise

available.

         Windsor’s argument under the implied covenant of good faith and fair

dealing is equally unavailing. “While it is true that a contract in Maryland gives

rise to an implied duty of good faith and fair dealing,” that duty

         does not obligate a [party] to take affirmative actions that the [party]
         is clearly not required to take under [the contract]. Rather, the duty
         simply prohibits one party to a contract from acting in such a manner
         as to prevent the other party from performing his obligations under the
         contract. In short, while the implied duty of good faith and fair
         dealing recognized in Maryland requires that one party to a contract
         not frustrate the other party’s performance, it is not understood to
         interpose new obligations about which the contract is silent, even if
         inclusion of the obligation is thought to be logical and wise.19

17
     Compl. Ex. T (Pre-Negotiation Agreement) ¶¶ 4, 6, 8 (emphasis added).
18
   See, e.g., Compl. Ex. T (Pre-Negotiation Agreement) at 1 (“Holder is agreeable to
participate in such discussions provided that Holder and Borrower enter into this
Agreement to mutually acknowledge the nature of, and certain understandings with
respect to, the proposed discussions.”); ¶ 1 (agreeing that discussions during the
Negotiations shall not be admissible); ¶ 2 (agreeing that no agreement reached during the
Negotiations shall have any effect unless reduced to writing, signed and delivered by all
parties’ authorized representatives); ¶ 5 (parties designating representatives for the
Negotiation); ¶ 11 (Borrower agreeing to reimburse Holder and CWCAM for all costs
and expenses incurred in pursuit of the negotiations).
19
     Blondell v. Littlepage, 991 A.2d 80, 90-91 (Md. 2010) (internal quotations omitted).

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Because CWCAM clearly is not obligated to negotiate under the express terms of

the Pre-Negotiation Agreement, Windsor cannot seek to impose such an obligation

on CWCAM by invoking the implied covenant of good faith and fair dealing.

          Second, even assuming, for argument’s sake, that the Pre-Negotiation

Agreement created some kind of obligation on CWCAM to negotiate in good faith,

as Windsor asserts, such an obligation would be so inherently vague as to be

unenforceable.       Courts in Maryland have held that “[o]rdinarily, commercial

agreements to negotiate upon terms and conditions to be decided are

unenforceable.”20      After surveying numerous authorities, the Court of Special

Appeals of Maryland determined that the “overwhelming weight of authority holds

that courts will not enforce an agreement to negotiate a contract.”21 One of those

authorities, a decision from Southern District of New York, is particularly apt here:

          While the power of the Court to fashion in appropriate cases an
          equitable remedy is great, it does not encompass the right to make an
          agreement for the parties. To decree . . . as plaintiff requests, would
          require the Court to enter into the realm of the conjectural. An
          agreement to negotiate in good faith is even more vague than an
          agreement to agree. An agreement to negotiate is amorphous and
          nebulous, since it implicates so many factors that are themselves



20
  First Nat’l Bank of Maryland v. Burton, Parsons & Co., Inc., 470 A.2d 822, 828 (Md.
Ct. Spec. App. 1984).
21
     Id. at 829.

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         indefinite and uncertain that the intent of the parties can only be
         fathomed by conjecture and surmise.22

         Although Maryland courts have acknowledged that in some “limited

situations, an agreement to negotiate in good faith may be upheld,” such as where

“the provision for good faith negotiations is part of an otherwise enforceable

contract which itself provides terms or a frame of reference by which the duty to

negotiate may be evaluated,”23 this is not one of them.             The Pre-Negotiation

Agreement does not contain any agreed-upon terms or even a frame of reference

for negotiations. To the contrary, it specifically states that “Borrower specifically

acknowledges and agrees that Holder has made no promise, commitment, or

representation whatsoever.”24 Therefore, even if one were to assume that the Pre-

Negotiation Agreement created an obligation to negotiate, which I conclude is not

the case, such an obligation would be unenforceable under Maryland law because

of vagueness.25

22
  Id. at 828 (quoting Candid Prods., Inc. v. Int’l Skating Union, 530 F. Supp. 1330,
1336-37 (S.D.N.Y. 1982) (emphasis added)).
23
     Helferstay v. Creamer, 473 A.2d 47, 52-53 (Md. Ct. Spec. App. 1984)
24
     Compl. Ex. T (Pre-Negotiation Agreement) ¶ 4.
25
   Indeed, as I read Windsor’s brief and as was explained during oral argument,
Windsor’s real grievance is not that the parties did not negotiate, but that the parties did
not reach an agreement that Windsor desired. The Complaint itself alleges that the
parties engaged in some negotiations, specifically that Windsor made at least two
proposals, which CWCAM rejected, and that CWCAM made a counter-proposal right
before Windsor filed this action. See Compl. ¶¶ 31, 44, 81-85.

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         Third, under Maryland law, specific performance is not available to enforce

a contractual obligation terminable at will:

         It is well settled that a court of equity will not decree specific
         performance of any contract which one of the parties may rescind at
         will. The Court will not interfere in a case where, if it were to do so,
         one of the parties might nullify its action by exercising a discretion
         given him by the terms of the contract. It would manifestly be
         improper to impose upon the Court the task of investigating a
         controversy when the facts are such as to preclude any decree it may
         render from being conclusive.26

Paragraph 8 of the Pre-Negotiation Agreement unambiguously provides that “Any

party shall have the right to terminate the Negotiations at any time upon written

notice to the other party, without obligation or liability by virtue of the

commencement or termination of Negotiations hereunder or the passage of time

associated therewith.”27 Therefore, even if the Court were to order CWCAM to

specifically perform the purported obligation to negotiate under the Pre-

Negotiation Agreement, CWCAM still could terminate the negotiation at any time




26
  Kahn v. Janowski, 60 A.2d 519, 521 (Md. 1948). See also S. Exp. Co. v. W. N.C.R.
Co., 99 U.S. 191, 200 (U.S. 1878) (“A court of equity never interferes where the power
of revocation exists.”); Restatement (Second) of Contracts § 368(1) (1981) (“Specific
performance or an injunction will not be granted against a party who can substantially
nullify the effect of the order by exercising a power of termination or avoidance.”); 25
Williston on Contracts § 67:50 (4th ed.) (“Equity will not enforce a contract specifically
which, by its terms or by operation of law, the defendant may terminate immediately.”).
27
     Compl. Ex. T (Pre-Negotiation Agreement) ¶ 8.

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consistent with the terms of the agreement, rendering the Court’s order a nullity.

Under these circumstances, specific performance is not an available remedy.28

       Count II of the Complaint, which seeks an injunction enjoining CWCAM

from foreclosing on the Property, is premised upon the existence of an enforceable

obligation to negotiate. Because no such enforceable obligation exists, Count II

fails to state a claim for relief.




28
   I am unpersuaded by Windsor’s attempt to invoke the exception described in Kahn v.
Janowski that “conditions and clauses of nullity are not to be executed according to the
rigor of their terms so as to cause forfeitures.” Janowski, 60 A.2d at 522. In Janowski,
the Court of Appeals affirmed the trial court’s refusal to order specific performance of a
contract for the sale of real property that the seller had the contractual right to rescind
within a specified period but remanded for the trial court to determine if the buyer—who
had resided at the property for six years and made numerous improvements in reliance on
the contract—was entitled to other relief. Id. at 520. No comparable injustice is alleged
in this case. Windsor is a sophisticated commercial entity that negotiated a Pre-
Negotiation Agreement with the assistance of counsel and, to repeat, the Pre-Negotiation
Agreement unambiguously provides that Windsor “may not in any way rely on, or claim
reliance on, the Negotiations.” Compl. Ex. T (Pre-Negotiation Agreement) ¶ 6.

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       For the foregoing reasons, the Complaint is dismissed with prejudice.29 An

implementing order accompanies this decision.

                                          Sincerely,

                                          /s/ Andre G. Bouchard

                                          Chancellor
AGB/gm




29
   In its prayer for relief, Windsor also sought the “return” of $74,562.74, with interest,
which CWCAM allegedly “wrongfully withheld.” Compl. at 23 (Prayer for Relief ¶ d).
Windsor did not plead any cause of action in the Complaint, however, relevant to
awarding such relief. For the avoidance of doubt, dismissal of the Complaint is without
prejudice to Windsor’s ability to file a claim for damages to recover that sum in the future
in a court of proper jurisdiction.

                                            12
