                            FIRST DIVISION
                            BARNES, P. J.,
          GOBEIL, J., and SENIOR APPELLATE JUDGE PHIPPS

                   NOTICE: Motions for reconsideration must be
                   physically received in our clerk’s office within ten
                   days of the date of decision to be deemed timely filed.
                               http://www.gaappeals.us/rules


                                                                      April 6, 2020




In the Court of Appeals of Georgia
 A20A1093. THE RAINMAKER GROUP VENTURES, LLC v.
     BELLACK.

      BARNES, Presiding Judge.

      Following the grant of its application for interlocutory appeal, the Rainmaker

Group Ventures, LLC (“Rainmaker”) appeals the trial court’s order denying its

motion for summary judgment on Lawrence J. Bellack’s claim for breach of the

implied covenant of good faith and fair dealing under Delaware law. For the reasons

discussed below, we conclude that, as a matter of Delaware law, the implied covenant

of good faith and fair dealing does not supply a viable theory of recovery because the

written contract between the parties expressly addressed the conduct at issue.

Accordingly, we reverse the trial court’s order denying Rainmaker’s motion for

summary judgment on Bellack’s implied covenant claim.
      Summary judgment is proper “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and that the moving party is entitled

to a judgment as a matter of law.” OCGA § 9-11-56 (c). “Summary judgments enjoy

no presumption of correctness on appeal, and an appellate court must satisfy itself de

novo that the requirements of OCGA § 9-11-56 (c) have been met.” Cowart v.

Widener, 287 Ga. 622, 624 (1) (a) (697 SE2d 779) (2010). On appeal from the denial

of summary judgment, we construe the evidence and all inferences therefrom in the

light most favorable to the nonmoving party. (Punctuation and footnote omitted.)

McLemore v. Genuine Parts Co., 313 Ga. App. 641, 641 (722 SE2d 366) (2012).

Guided by these principles, we turn to the record in the present case.

      Factual Background. Rainmaker was a Delaware limited liability company that

provided revenue optimization software to companies in several industries. Bellack

served as a vice president at Rainmaker from March 2010 until his termination on

December 1, 2015.

      While working for Rainmaker, Bellack received shares of common stock

governed by an Amended and First Restated Limited Liability Company Agreement

dated October 18, 2012 (“LLC Agreement”). The LLC Agreement stated that “[t]his

                                           2
  LLC Agreement, the rights of the parties hereunder, and any disputes between the

  parties, shall be governed by, construed, and enforced in accordance with the laws of

  the State of Delaware, without regard to its conflicts of laws rules.”1

          After Bellack was terminated in 2015, Rainmaker retained a right to repurchase

  his vested shares of stock under the LLC Agreement. The LLC Agreement provided

  that if Rainmaker chose to repurchase the shares of a former employee, its Board of

  Managers (“Board”) would “determine[ ] in good faith” the “Fair Value” of the shares

  (“Fair Value Provision”).2 In valuing the shares, the Board was required to “assume

  that the enterprise value of [Rainmaker] [was] equal to the amount which would be

  paid in cash for [Rainmaker], as a going concern, by an unaffiliated third party buyer”

  and to take into account the economic characteristics of each class of company shares,

  but the Board also had discretion to consider additional factors, and its ultimate

  determination of fair value was “final, binding, and nonappealable.”




      1
        The parties do not dispute on appeal that the substantive legal issues raised in this
case are governed by Delaware law.
      2
        If an employee was terminated for “cause” or voluntarily resigned after less than
two years of employment, his or her shares were automatically forfeited under the LLC
Agreement without any further action by Rainmaker. Neither of those circumstances
applied here.

                                             3
      In addition to the Fair Value Provision, the LLC Agreement contained a

“clawback” provision that afforded protection to a former employee if Rainmaker

were to “effect” a “transaction” that resulted in a higher price per share within three

months of the closing date when the employee’s shares were repurchased (the

“Clawback Provision”). The Clawback Provision stated:

      If the Company elects to exercise its right to purchase Subject Shares of
      a Subject Shareholder pursuant to [the Fair Value Provision], or
      pursuant to an Other Agreement, and within three (3) months after the
      date of the closing of such purchase Subject Shares, the Company
      effects a Transaction or Public Offering which results in a consideration
      per Share which is greater than the per Share consideration received by
      the Subject Shareholder in respect of the FV Shares, the Company will,
      at the closing of such Public Offering or Transaction, pay the Subject
      Shareholder, in the same form of consideration received in such
      transaction, or in cash in the case of a Public Offering, an amount
      sufficient to equalize, on a pre-tax basis, the difference between the Call
      Price and the amount that would have been received by the Subject
      Shareholder in respect of the FV Shares in the Transaction or the per
      Share price to the Company in the Public Offering.

A “transaction” was defined in part as a “sale or transfer . . . of a majority of the

assets of [Rainmaker].” The LLC Agreement did not define the word “effects.”

      Following Bellack’s termination, in a letter dated October 7, 2016, Rainmaker

notified Bellack that pursuant to the Fair Value Provision, it planned to repurchase

his shares for $1,565,904 based on the Board’s valuation of those shares. On


                                          4
November 7, 2016, Rainmaker issued a promissory note to Bellack to repurchase his

shares in the aforementioned amount plus interest.

      In December 2016 and January 2017, Rainmaker and one if its competitors,

RealPage, Inc., exchanged correspondence regarding RealPage acquiring Rainmaker.

The parties dispute whether Rainmaker and RealPage formed a binding agreement in

January 2017 based on their correspondence. On February 27, 2017, Rainmaker and

RealPage executed an Asset Purchase Agreement (“APA”) under which Rainmaker

agreed to sell a majority of its assets, including certain optimization software, to

RealPage for $300 million. However, the RealPage deal was subject to review by the

United States Department of Justice (“DOJ”), and the DOJ review was one of the

conditions of closing on the deal.

      In March 2017, after Bellack contacted Rainmaker inquiring whether the

Clawback Provision would apply to the RealPage deal and would result in the

readjustment of the price of his repurchased shares, Rainmaker informed him by letter

that the closing with RealPage had not yet occurred. Rainmaker further asserted in its

letter that the Clawback Provision applied only if a transaction was “consummated”

within three months of the repurchase of shares, and that, as a consequence, the

Clawback Provision did not apply to the RealPage deal because it had not been

                                          5
  consummated within three months of when the promissory note was issued to

  Bellack.

          On December 4, 2017, Rainmaker and RealPage closed on their deal shortly

  after obtaining DOJ approval. Rainmaker paid off Bellack’s promissory note the next

  day. In light of its conclusion that the Clawback Provision did not apply, Rainmaker

  did not adjust the price per share owed to Bellack based on the RealPage deal.

          Procedural Background. In September 2017, before the RealPage deal closed,

  Bellack filed this action against Rainmaker in the Superior Court of Fulton County,

  and in his complaint, as amended, he alleged that Rainmaker’s Board had failed to

  determine the fair value of his repurchased shares accurately and in good faith in

  accordance with the LLC Agreement.3 Bellack asserted claims for breach of contract,

  breach of the implied covenant of good faith and fair dealing, promissory estoppel,

  unjust enrichment, and attorney fees and expenses.

          Rainmaker filed a motion to dismiss the complaint or, alternatively, for

  judgment on the pleadings. Applying Delaware law, the trial court granted


      3
        Bellack previously filed a complaint in federal court against Rainmaker, asserting
several claims that were similar to the claims raised in this case. The federal action
ultimately was dismissed for lack of diversity jurisdiction.


                                            6
Rainmaker’s motion to dismiss Bellack’s claims for breach of contract, promissory

estoppel, and unjust enrichment.4 The trial court, however, denied Rainmaker’s

motion to dismiss Bellack’s claim for breach of the implied covenant of good faith

and fair dealing to the extent that it was predicated on alleged “contractual gaps” in

the Clawback Provision of the LLC Agreement. The trial court reasoned:

        Bellack has alleged that contractual gaps exist in the LLC Agreement.
        For example, the Clawback Provision is a clause in the LLC Agreement
        that protects the shareholder from the Board assigning a lowball value
        in anticipation of some transaction that will increase the value of
        Rainmaker’s shares. According to the Provision, if a transaction is
        “effected” within ninety days of the closing of the repurchase, Bellack
        would be entitled to any increased value per share realized in the
        transaction. Bellack alleges that the phrase “effects a transaction” is
        ambiguous. If a transaction were “effected’ [in January 2017], the deal
        would fall within the Clawback period, but if it was only “effected” after
        the APA was signed [on February 27, 2017], the transaction falls outside
        of the Clawback period. Depending on the interpretation of the phrase
        and the duties implied therein, [Bellack] may be entitled to damages
        commensurate with breach of the implied covenant of good faith and
        fair dealing [under Delaware law].




   4
       The dismissal of those claims is not before us.

                                             7
                Because the LLC Agreement is unclear, the Court must make a
          determination and fill in the gaps. According to Bellack, the Clawback
          Provision is evidence of the intent of the parties to provide the
          shareholder with protection from this type of action by Rainmaker.
          Construing the pleadings in . . . Bellack’s favor and taking the contract
          to be ambiguous in some of its terms, it is possible for [Bellack] to
          introduce evidence to support this claim. As such, . . . Rainmaker[‘]s
          Motion to Dismiss is DENIED as to the claim for breach of implied
          covenant of good faith and fair dealing.




          Rainmaker later filed a motion for summary judgment, arguing, among other

  things, that the implied covenant of good faith and fair dealing did not provide a

  viable theory of recovery under the circumstances because the express terms of the

  Clawback Provision covered the parties’ dispute. The trial court disagreed,

  concluding that”[t]here still remains a level of ambiguity with regards to the meaning

  of disputed contract terminology and construction,” such that Bellack could proceed

  forward on his implied covenant claim.5 The trial court, however, certified the issue




      5
         The trial court also struck an expert affidavit submitted by Rainmaker in support
of its summary judgment motion. Rainmaker does not enumerate that ruling as error on
appeal.

                                             8
for immediate review, and Rainmaker filed a timely application for interlocutory

appeal, which we granted. This appeal followed.

      Rainmaker contends that the trial court erred in denying its motion for

summary judgment on Bellack’s claim for breach of the implied covenant of good

faith and fair dealing under Delaware law because the implied covenant is

inapplicable in this case. We conclude that, as a matter of law, the implied covenant

does not apply in the circumstance that Bellack seeks to invoke it here and that the

trial court’s summary judgment ruling thus was erroneous.

      “The implied covenant of good faith and fair dealing inheres in every contract

governed by Delaware law and requires a party in a contractual relationship to refrain

from arbitrary or unreasonable conduct which has the effect of preventing the other

party to the contract from receiving the fruits of the bargain.” (Citation and

punctuation omitted.) Airborne Health v. Squid Soap, 984 A2d 126, 145-146 (II) (D)

(Del. Ch. 2009). See Miller v. FiberLight, 343 Ga. App. 593, 607 (4) (808 SE2d 75)

(2017) (applying Delaware law). “The implied covenant of good faith and fair dealing

involves inferring contractual terms to handle developments or contractual gaps that

neither party anticipated.” (Punctuation and footnote omitted.) Nationwide Emerging

Managers v. Northpointe Holdings, 112 A3d 878, 896 (IV) (E) (Del. 2015). But “the

                                          9
covenant is a limited and extraordinary legal remedy.” (Punctuation and footnote

omitted.) Oxbow Carbon & Minerals Holdings v. Crestview-Oxbow Acquisition, 202

A3d 482, 507 (IV) (B) (Del. 2019). And “it is not an exception to the rule that courts

will not alter the terms of a bargain sophisticated parties entered into willingly

because a party now regrets the deal.” Alliance Data Sys. Corp. v. Blackstone Capital

Partners V, 963 A2d 746, 770 (III) (D) (Del. Ch. 2009). Hence, “[t]he implied

covenant does not apply when the subject at issue is expressly covered by the

contract.” (Citation and punctuation omitted.) Airborne Health, 984 A2d at 146 (II)

(D). See Oxbow Carbon & Minerals Holdings, 202 A3d at 507 (IV) (B) (pointing out

that “the implied covenant does not apply when the contract addresses the conduct

at issue, but only when the contract is truly silent concerning the matter at hand”)

(punctuation and footnote omitted); Alliance Data Sys. Corp., 963 A2d at 770 (III)

(D) (noting that “the implied covenant only applies where a contract lacks specific

language governing an issue and the obligation the court is asked to imply advances,

and does not contradict, the purpose reflected in the express language of the

contract”).

      In the present case, the parties’ dispute over whether the price of Bellack’s

repurchased shares should be upwardly adjusted in light of the RealPage deal is

                                         10
  clearly governed by the terms of the Clawback Provision in the LLC Agreement.

  Hence, the subject at issue is expressly covered by the parties’ contract, and the

  implied covenant is inapplicable under Delaware law. See Oxbow Carbon & Minerals

  Holdings, 202 A3d at 507 (IV) (B); Airborne Health, 984 A2d at 146 (II) (D);

  Alliance Data Sys. Corp., 963 A2d at 770 (III) (D). Bellack’s “implied covenant claim

  is premised on the failure of [Rainmaker] to pay money due under the contract, [and,

  therefore,] the claim must fail because the express terms of the contract will control

  such a claim. Again, the implied covenant cannot be invoked to override express

  provisions of a contract.”6 Kuroda v. SPJS Holdings, 971 A2d 872, 888 (II) (E) (Del.

  Ch. 2009). Thus, Rainmaker’s “refusal to pay was either a breach of the [Clawback]

  Provision or not a breach at all.” Nationwide Emerging Managers, 112 A3d at 896

  (IV) (E). Accordingly, to the extent that Bellack had a viable cause of action, it was


      6
        Bellack does not claim that Rainmaker manipulated the timing of its deal with
RealPage unreasonably, arbitrarily, and in bad faith so as to technically comply with the
express terms of the Clawback Provision but deprive Bellack of his legitimate expectations
of higher payment under that Provision. Compare Keating v. Applus+ Technologies, No.
CIV. A. 08-3320, 2009 WL 261091, at *4, 2009 U.S. Dist. LEXIS 8028, at *12-13 (E.D.
Pa. Feb. 4, 2009) (holding that implied covenant claim was viable under Delaware law
where the plaintiffs alleged that the defendant company, “acting in bad faith, arbitrarily and
unreasonably, . . . engaged in a concerted effort to delay the bidding process” so that a new
contract would not be entered into during the time period when the plaintiffs would have
been contractually entitled to a share of the revenue from that contract).

                                             11
a breach-of-contract claim for breach of the Clawback Provision, which Bellack

failed to pursue, rather than an implied covenant claim.

      In ruling that Bellack could proceed with an implied covenant claim, the trial

court concluded that the phrase “effects a Transaction” in the Clawback Provision

was ambiguous and that, as a result of the parties’ failure to include a definition of

that phrase in the LLC Agreement, there was a contractual gap that authorized an

implied covenant claim. However, whether there is an ambiguity in the meaning of

an undefined term of a contract is a separate question from whether a contract has a

gap that needs to be filled by an implied term.

      When presented with a claim under the implied covenant, the first step
      in the analysis is to determine whether there is a gap that needs to be
      filled. Scholars refer to this step as the process of contract construction,
      which is distinct from the process of contract interpretation.
      Interpretation is the process by which a court resolves ambiguity in the
      express terms of a contract. By contrast, construction is the process by
      which a court determines the scope and legal effect of those terms.
      Through the process of contract construction, a court determines
      whether the language of the contract expressly covers a particular issue,
      in which case the implied covenant will not apply, or whether the
      contract is silent on the subject, revealing a gap that the implied
      covenant might fill.



                                          12
  (Citations, punctuation, and footnote omitted.) In re El Paso Pipeline Partners, L.P.

  Derivative Litigation, No. CIV.A. 7141-VCL, 2014 WL 2768782, at *17, 2014 Del.

  Ch. LEXIS 101, at *57-58 (Del. Ch. June 12, 2014).

          Here, the LLC Agreement was not silent on the subject of whether a former

  employee whose shares had been repurchased was entitled to have the price adjusted

  in light of a subsequent transaction between Rainmaker and a third party entity

  reflecting a higher share price; rather, that situation was expressly covered by the

  Clawback Provision, and thus there was no contractual gap for the implied covenant

  to fill. And to the extent that any of the express terms in the Clawback Provision were

  undefined, thereby creating an ambiguity as to whether a transaction fell within the

  three-month clawback period, the standard rules of contract interpretation would

  apply to address the matter rather than the implied covenant.7 See, e.g., Sunline

  Commercial Carriers v. Citgo Petroleum Corp., 206 A3d 836, 846 (III) (A) (Del.

  2019); Twin City Fire Ins. Co. v. Delaware Racing Assn., 840 A2d 624, 628 (1) (Del.

  2003). To sustain an implied covenant claim, “the plaintiff must allege a specific


      7
       Additionally, if Rainmaker took a litigation position regarding the application of
the Clawback Provision that was itself frivolous and in bad faith, that would be addressed
through a request for attorney fees, not by means of the implied covenant. See Nationwide
Emerging Managers, 112 A3d at 897 (IV) (E). See generally OCGA § 9-15-14.

                                            13
implied contractual obligation and allege how the violation of that obligation denied

the plaintiff the fruits of the contract,” Kuroda, 971 A2d at 888 (II) (E) (emphasis

supplied), not simply that the parties’ contract has an undefined, ambiguous term. If

that were not the case, then implied covenant claims would be applicable in every

contract with an ambiguous term and would not be the limited, extraordinary remedy

that Delaware courts repeatedly have expressed great hesitancy about applying. See

generally Nemec v. Shrader, 991 A2d 1120, 1126, 1128 (Del. 2010) (describing the

implied covenant as a “cautious enterprise” and a “limited and extraordinary legal

remedy”) (punctuation and footnote omitted); Dunlap v. State Farm Fire & Cas. Co.,

878 A2d 434, 442 (C) (Del. 2005) (application of implied covenant should be “rare”

exercise) (punctuation and footnote omitted); Kuroda, 971 A2d at 888 (II) (E)

(“Consistent with its narrow purpose, the implied covenant is only rarely invoked

successfully.”); Cincinnati SMSA L. P. v. Cincinnati Bell Cellular Sys. Co., 708 A2d

989, 992 (Del. 1998) (describing “narrow context” giving rise to “occasional

necessity of implying . . . terms”).

      For these reasons, the trial court erred in concluding that Bellack could proceed

on his claim for breach of the implied covenant of good faith and fair dealing.



                                         14
Accordingly, we reverse the denial of Rainmaker’s motion for summary judgment on

the implied covenant claim.

      Judgment reversed. Gobeil, J., and Senior Appellate Judge Herbert E. Phipps

concur.




                                       15
