Submitted: December 11, 2013
Francis G.X. Pileggi, Esquire and Christopher C. Popper, Esquire, Eckert Seamans Cherin & Mellott, LLC, 222 Delaware Avenue, 7th Floor, Wilmington, DE 19801. Attorneys for Plaintiff.
Richard L. Renck, Esquire, Ashby & Geddes, 500 Delaware Avenue, 8th Floor, Wilmington, DE 19899. Attorney for Defendants.
William C. Carpenter, Jr. Judge
Before this Court is Defendants' joint Motion to Dismiss the Complaint. Defendants' Motion argues that Plaintiff's claims fail as a matter of law because under the plain meaning and reasonable interpretation of the contract, Plaintiff was required to plead additional facts to trigger Defendants' liability under the contract. Defendants also argue that the undisputed facts of the case do not support the conversion and unjust enrichment claims. The Court finds that Plaintiff's proposed interpretation of the contract is against its plain meaning and the facts alleged do not support a breach of contract claim. However, Plaintiff has proffered sufficient factual pretext, on a motion to dismiss, for the remaining claims of conversion and unjust enrichment. Accordingly, the Motion to Dismiss is GRANTED IN PART as to the breach of contract claim, and DENIED IN PART as to the conversion and unjust enrichment claims.
Plaintiff's Complaint and Defendants' Motion arise from an Asset Purchase Agreement (the "Agreement") entered into by the parties on October 25, 2012 and the rights and obligations arising from the Agreement. The Agreement provided for Defendants to sell Plaintiff certain assets in exchange for Plaintiff's payment of twenty-one million dollars. The Agreement also obligated Defendants to provide Plaintiff with net working capital in the amount of thirty-five million dollars (the "Final Net Working Capital").
Pursuant to Section 1.6(b) of the Agreement, the parties were to exchange their calculations of net working capital which, depending on whether it exceeded or fell below the thirty-five million required under the Agreement, would modify the purchase price. The exchange occurred but a dispute arose as to what was to be included in those calculations. Plaintiff wanted Defendants to include money Defendants had obtained for advanced ticket sales and sponsor grants relating to upcoming events scheduled at locations Plaintiff purchased through the Agreement. Importantly, one of Plaintiff's requests was for the inclusion of $487, 006.15 relating to the Gulf Port Music Festival. Defendants remained unwilling to include this amount in the Final Net Working Capital calculation arguing they had specifically excluded this amount as deferred revenue under the Agreement.
As a result, pursuant to Section 1.6(d) of the Agreement, the parties engaged an independent accountant, Bradley J. Preber of Grant Thornton, LLP, to serve as arbitrator (the "Arbitrator"). The Agreement provided that the Arbitrator's decision would be final and binding upon the parties. After receiving information from both parties and fully considering the arguments of each, the Arbitrator, via letter to the parties on September 20, 2013,  found in favor of Defendants on the $487, 006.15 amount and stated that such should be excluded from the Final Net Working Capital. In holding so, the Arbitrator stated that the Agreement was clear and unambiguous and, since the $487, 006.15 amount was in an account entitled "Deferred Revenue, " and "Deferred Revenue" was listed on Schedule 1.6(f) of the Agreement as "excluded, " the $487, 006.15 should rightfully be excluded. Thus, the Final Net Working Capital Defendants provided to Plaintiff did not include the $487, 006.15 amount. Plaintiff, barred from challenging the Arbitrator's decision "(absent fraud or manifest error by the [Arbitrator]), " is pursuing a different mechanism for payment of this amount—indemnification.
The Agreement provides certain liabilities retained by Defendants are subject to indemnification (the "Retained Liabilities"). For the purposes of this Motion, the Court will consider it undisputed that the $487, 006.15 excluded from the Final Net Working Capital is a Retained Liability under the Agreement. Plaintiff advised Defendants by letter dated May 13, 2013, that Plaintiff would seek contractual indemnification for the $487, 006.15 amount as a Retained Liability. On May 14, 2013, Defendants denied Plaintiff's request for indemnification and stated that the Agreement did not require indemnification of the Retained Liability absent a loss or liability arising out of such. To date, Defendants have not indemnified or transferred the Retained Liability to Plaintiff and it is this failure that Plaintiff alleges is a breach of the Agreement.
Plaintiff also alleges that Defendants converted Plaintiff's funds. On September 26, 2013, Defendants sent a financial spreadsheet to Plaintiff wherein Plaintiff found information indicating Defendants obtained $33, 775.36 of Plaintiff's funds from a "lock box not closed, " $250.00 from an "[a]uto payment received post closing, " and $14, 574.25 in accounts receivable that were "supposed to be adjusted at closing. . . ." Plaintiff alleges such funds rightfully belonged to Plaintiff and were unlawfully converted by Defendants. Further, Plaintiff alleges that Defendants received $48, 599.61 in accounts receivable after closing, which rightfully belonged to Plaintiff.
The Complaint, setting forth the above factual pretext, was filed on October 2, 2013. The Complaint alleges three counts: (I) breach of contract for failure to indemnify; (II) conversion for Defendants' possession of the lock box funds, auto payment, and accounts receivable funds which were not adjusted at closing; and (III) unjust enrichment for the accounts receivable funds received after closing.
STANDARD OF REVIEW
Under Delaware Superior Court Civil Rule 12(b)(6), the Court may dismiss a plaintiff's claim for "failure to state a claim upon which relief can be granted."Under Rule 12(b)(6), "[t]he legal issue to be decided is, whether a plaintiff may recover under any reasonably conceivable set of circumstances susceptible of proof under the complaint." In doing so, the Court "must assume all well-pleaded facts in the complaint to be true"and draw "all reasonable inferences in favor of the non-movant." A well-pleaded complaint "need only give general notice of the claim asserted." The Court should "decline, however, to accept conclusory ...