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Winshall v. Viacom International, Inc.

Superior Court of Delaware

February 25, 2019

WALTER A. WINSHALL, et al. Plaintiff,
v.
VIACOM INTERNATIONAL, INC. Defendant.

          Submitted: November 26, 2018

         Upon Plaintiff Walter A. Winshall's Motion for Partial Summary Judgment DENIED

         Upon Defendant Viacom International Inc.'s Motion for Summary Judgment GRANTED IN PART

          Colin R. Hagan, Esquire, David J. Shlansky, Esquire, Shlansky Law Group, LLP, Chelsea, Massachusetts, David H. Holloway, Shlansky Law Group, LLP, Wilmington, Delaware Attorneys for Plaintiff Walter A. Winshall, et al.

          Robert A. Atkins, Esquire, Steven C. Herzog, Esquire, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York, Stephen P. Lamb, Esquire, Daniel A. Mason, Esquire, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Wilmington, Delaware Attorneys for Defendant Viacom International Inc.

          ERIC M. DAVIS, JUDGE

         I. INTRODUCTION

         This is a civil action assigned to the Complex Commercial Litigation Division of the Court. The action involves disputes over the merger of Viacom International, Inc. ("Viacom") and Harmonix Music Systems in 2006 ("Harmonix"). Walter A. Winshall is the representative of the former stockholders of Harmonix and brought this action on June 14, 2015. Mr. Winshall raises three claims for breach of a merger agreement and one claim for malicious prosecution. Viacom argues judgment should be granted in Viacom's favor because: (i) all of the claims are barred by the statute of limitations; and (ii) the claims for breach of the merger agreement are barred by res judicata. Viacom also contends that the malicious prosecution claim is not sufficiently pleaded. On June 1, 2018, the parties filed cross-motions for summary judgment (respectively, "Viacom's Motion" and "Mr. Winshall's Motion" and collectively, the "Motions"). Viacom's Motion seeks summary judgment on all counts and Mr. Winshall's Motion seeks summary judgment on two breach of contract claims. On November 26, 2018, the Court held a hearing on the Motions. At the conclusion of the hearing, the Court took the Motions under advisement.

         For the reasons set forth below, the Court GRANTS in part and DENIES in part Viacom's Motion. In addition, the Court DENIES Mr. Winshall's Motion.

         II. RELEVANT FACTS

         A. Parties, Jurisdiction and Choice of Law

         Viacom is a global entertainment company with television and film operations.[1] Viacom is a Delaware corporation with its principal place of business in New York.[2] Harmonix was a video game company that merged with Viacom on September 20, 2006 under a merger agreement (the "Merger Agreement").[3] Mr. Winshall is a former shareholder in Harmonix and is the Stockholders' Representative for former Harmonix stockholders (the "Harmonix Stockholders") pursuant to the terms of the Merger Agreement.[4]

         Under the Merger Agreement, Viacom would pay earn-out payments (the "Earn-Out Payments") for the years 2007 and 2008 to the Harmonix Stockholders.[5] The Merger Agreement provided how the Earn-Out Payments were to be determined and how disputes would be settled. Section 2.4 provided:

(a) Determination of 2007 Earn-Out Payment Amount. No later than fifteen (15) days after the preparation or receipt by the Surviving Corporation and Parent of all information necessary to calculate the 2007 Earn-Out Payment Amount, Parent shall prepare and deliver to the Stockholders' Representative a statement (the "2007 Earn-Out Statement") setting forth the calculation of the 2007 Earn-Out Payment Amount, together with information necessary to calculate the 2007 Earn-Out Payment Amount. Subject to Section 10.8(a), Parent agrees to promptly provide the Stockholders' Representative with reasonable access to all work papers and supporting documentation relating to the 2007 Earn-Out Statement and such other documentation, in each case as the Stockholders'' Representative may reasonably request in order to assess the accuracy of the 2007 Earn-Out Statement. If the Stockholders' Representative disagrees with the calculation of the 2007 Earn-Out Payment Amount, it must deliver to Parent, within twenty (20) days after the date the Stockholders' Representative received the 2007 Earn-Out Statement, a written description of each such disagreement (the "2007 Summary of Issues"). In connection with any dispute resolution regarding the 2007 Earn-Out Payment Amount, the Stockholders' Representative will not dispute any additional issues or amounts other than the 2007Summary of Issues submitted to Parent within the twenty (20) day-period described above. If no such 2007 Summary of Issues is submitted within such twenty (20) day-period, then Parent's calculation as set forth on the 2007 Earn-Out Statement shall be deemed final. If the Stockholders' Representative has determined that it agrees with the calculation prior to the expiration of the twenty (20) day-period described above, the Stockholders' Representative may provide Parent with a written statement to this effect in order to initiate the payments pursuant to Section 2.4(d) of this Agreement.
(b) Determination of 2008 Earn-Out Payment Amount. No later than fifteen (15) days after the preparation or receipt by the Surviving Corporation and Parent of all information necessary to calculate the 2008 Earn-Out Payment Amount, Parent shall prepare and deliver to the Stockholders' Representative a statement (the "2008 Earn-Out Statement") setting forth the calculation of the 2008 Earn-Out Payment Amount, together with information necessary to calculate the 2008 Earn-Out Payment Amount. Subject to Section 10.8(a), Parent agrees to promptly provide the Stockholders' Representative with reasonable access to all work papers and supporting documentation relating to the 2008 Earn-Out Statement and such other documentation, in each case as the Stockholders' Representative may reasonably request in order to assess the accuracy of the 2008 Earn-Out Statement. If the Stockholders' Representative disagrees with the calculation of the 2008 Earn-Out Payment Amount, it must deliver to Parent, within twenty (20) days after the date the Stockholders' Representative received the 2008 Earn-Out Statement, a written description of each such disagreement (the "2008 Summary of Issues"; the 2007 Summary of Issues and the 2008 Summary of Issues are each referred to herein from time to time as a "Summary of Issues"). In connection with any dispute resolution regarding the 2008 Earn-Out Payment Amount, the Stockholders'' Representative will not dispute any additional issues or amounts other than the 2008 Summary of Issues submitted to Parent within the twenty (20) day-period described above. If no such Summary of Issues is submitted within such twenty (20) day-period, then Parent's calculation as set forth on the 2008 Earn-Out Statement shall be deemed final. If the Stockholders' Representative has determined that it agrees with the calculation prior to the expiration of the twenty (20) day-period described above, the Stockholders' Representative may provide Parent with a written statement to this effect in order to initiate the payments pursuant to Section 2.4(d) of this Agreement.
(c) Resolution of Earn-Out Disputes. The Stockholders' Representative and Parent will negotiate in good faith to resolve the issues and amounts set forth in any Summary of Issues. If, after a period (the "Resolution Period") of twenty (20) days following the date on which such Summary of Issues is delivered to Parent, the Stockholders' Representative and Parent have not resolved each item in such Summary of Issues, then either the Stockholders' Representative or Parent will be entitled to submit the unresolved items in such Summary of Issues (the "Earn-Out Disagreements") to the Resolution Accountants, so long as such submitting Party provides written notice of such submission to the non-submitting party. The scope of the Resolution Accountants engagement (which shall not be an audit) shall be limited to the resolution of the Earn-Out Disagreements, and the recalculation of the 2007 Earn-Out Payment Amount or 2008 Earn-Out Payment Amount, as the case may be, in light of such resolution, and such firm shall be deemed to be acting as experts and not as arbitrators. The Resolution Accountants will resolve the Earn-Out Disagreements and render a written report on the resolved Earn-Out Disagreements within ten (10) Business Days after the date on which they are engaged or as soon thereafter as possible. The resolution of the dispute by the Resolution Accountants will be a final, binding and conclusive resolution of the parties' dispute, shall be non-appealable, and shall not be subject to further review. The costs, fees and expenses of the Resolution Accountants will be allocated by the Resolution Accountants between Parent and the Stockholders' Representative in the same proportion that the aggregate amount of such resolved disputed items so submitted to the Resolution Accountants that is unsuccessfully disputed by each such party (as finally determined by the Resolution Accountants) bears to the total amount of such resolved disputed items so submitted.
(d) Payment of Earn-Out Payment Amounts. Promptly and in any event within five (5) days following the final determination of the 2007 Earn-Out Payment Amount or the 2008 Earn-Out Payment Amount, as applicable (and if any), Parent shall cause the Surviving Corporation to pay (in each case without any interest thereon) to (i) BAS the 2007 Advisor Earn-Out Fee or the 2008 Advisor Earn-Out Fee, as applicable, (ii) the Paying Agent (or a successor reasonably satisfactory to Parent and the Stockholders' Representative) for further payment to the holders of Capital Stock and the Warrant Holders an amount sufficient to pay the aggregate portion of the 2007 Earn-Out Payment Amount or 2008 Earn-Out Payment Amount, as applicable, payable to the holders of Capital Stock (other than shares of Restricted Stock) pursuant to Section 2.1 (c) and Section 2.2(b), as applicable, and (iii) each holder of shares of Restricted Stock and each Optionholder such Person's portion of the 2007 Earn-Out Payment Amount or 2008 Earn-Out Payment Amount, as applicable, as provided in Section 2.1(c) and Section 2.2(a), as applicable. Any amounts payable pursuant to this Section 2.4(d) shall be subject to reduction as required by applicable federal and state Tax withholding Laws, rules and regulations.
(e) Final Earn-Out Payment Amount Binding on Parties. The determination of the 2007 Earn-Out Payment Amount or the 2008 Earn-Out Payment Amount, as applicable (and if any), in accordance with the foregoing provisions of this Section 2.4 shall be final and binding on all parties, and no such party shall have the right to bring any claim disputing such final determination, in the absence of fraud or manifest error.[6]

         The Merger Agreement also contained an indemnification clause at Section 8.6, which provided:

(a) Indemnification. Subject to the limitations set forth in this Article VIII, from and after the Effective Time, each of [Viacom] and MergerCo, jointly and severally, shall indemnify, defend and hold harmless each Merger Consideration Recipient against any and all Losses actually incurred or suffered by any such Merger Consideration Recipient as a result of:
(i) the breach of any representation or warranty of Parent or MergerCo set forth in this Agreement or in any Ancillary Document; and
(ii) the breach of any covenant or agreement of Parent or MergerCo contained in this Agreement or in any Ancillary Document.
(b) Certain Limitations. Parent and MergerCo shall not be obligated to indemnify any Merger Consideration Recipient pursuant to Section 8.6(a) to the extent the aggregate amount of all indemnifiable Losses exceeds the aggregate unpaid amount of the Merger Consideration then payable.[7]

         "Losses" are defined in Section 10.7 as:

"Losses" of a Person means any and all losses, liabilities, damages, claims, awards, judgments, diminution in value, Taxes, fees, costs and expenses (including reasonable attorneys' fees and expenses, expenses of investigation, defense, prosecution and settlement of claims (including any claims under Article VIII hereof), court costs or enforcement of the provisions of this Agreement) suffered or incurred by such Person, plus any interest that may accrue on the foregoing.[8]

         On September 16, 2008, Viacom paid $149, 770, 149.00 to the Harmonix Stockholders toward the 2007 Earn-Out Payment (the "Preliminary 2007 Earn-Out Payment").[9] Viacom's CEO wrote to the Harmonix Stockholders that "Harmonix exceeded the 2007 target" so additional payments may be forthcoming.[10] When Viacom made the Preliminary 2007 Earn-Out Payment, Viacom had not given the Harmonix Stockholders a final report calculating the 2007 Earn-Out Payment (the "2007 Earn-Out Statement").[11]

         Mr. Winshall requested a copy of the final 2007 Earn-Out Statement from Viacom multiple times between September 16, 2008 and January 4, 2010.[12] Viacom told Mr. Winshall that Viacom could not yet prepare the final 2007 and 2008 Earn-Out Statements.[13] According to Viacom, Viacom was unable to prepare the final Earn-Out Statements partly due to litigation brought against Harmonix and Viacom in the Eastern District of Texas and the District of Massachusetts ("IP Litigation").[14] The IP Litigation related to certain Harmonix intellectual property acquired by Viacom in the Merger Agreement.[15] The settlement amount in the IP Litigation would be a cost incorporated into the Earn-Out Statements.

         On January 4, 2010, Viacom gave Mr. Winshall the final 2007 Earn-Out Statement with the 2007 Earn-Out Payment calculation.[16] Viacom provided the 2008 Earn-Out Statement with the 2008 Earn-Out Payment calculation on March 26, 2010.[17] Mr. Winshall disagreed with the calculations and challenged both the 2007 and 2008 Earn-Out Payments within the resolution period as set out in Section 8.6 of the Merger Agreement.[18]

         Under the Merger Agreement, Mr. Winshall could make reasonable requests of Viacom for documents that would allow for an assessment of the accuracy of the Earn-Out Statements.[19]Mr. Winshall alleges that Viacom refused to produce documents, including (i) documents Viacom had provided to its auditors (e.g., Harmonix's year-end balance sheets and trial balances), (ii) Harmonix's annual financial statements and general ledgers, (iii) Viacom's memos that addressed accounting for items in the Earn-Out Statements, and (iv) records from Viacom's distributor.[20]

         The Merger Agreement further provides that, if Viacom and Harmonix disagreed on the calculations, Viacom and Harmonix could select neutral accountants (the "Resolution Accountants") to determine the 2007 and 2008 Earn-Out Payment amounts.[21] The Merger Agreement pre-selected a firm, but that firm declined to serve as the Resolution Accountants on April 6, 2010.[22] Viacom and Harmonix had to agree on the use of another firm.[23]

         Mr. Winshall alleges that Viacom delayed the selection and engagement of the Resolution Accountants.[24] Mr. Winshall contends that Viacom first selected a firm that could not serve as Resolution Accountants because it was the auditor of Viacom's controlling shareholder.[25] After that, Viacom and Mr. Winshall interviewed two other firms in May 2010.[26]At that time, Mr. Winshall told Viacom that Viacom could select either one, but that Viacom selected a firm on June 29, 2010 after weeks of negotiations and then changed its mind on June 30, 2010.[27] Finally, after numerous subsequent requests from Mr. Winshall, Viacom agreed to use one of the firms on September 15, 2010.[28] Mr. Winshall alleges that to further delay the resolution of the Earn-Out Payments, Viacom then refused to sign an engagement letter with the firm and tried to insert terms into the engagement letter that would change the terms of the Earn-Out Payments in the Merger Agreement.[29]

         On December 2, 2010, Mr. Winshall filed a complaint in the Delaware Court of Chancery to compel the retention of the Resolution Accountants. After that suit had been filed, on December 8, 2010, Viacom agreed to retain the Resolution Accountants.[30] Viacom and Mr. Winshall decided that the Resolution Accountants would only decide certain disputed issues.[31]Mr. Winshall thereafter filed a separate action, Case 6074, [32] in the Court of Chancery to resolve the rest of the issues.[33]

         The Resolution Accountants issued their written determination (the "Determination of the Resolution Accountants") on December 19, 2011.[34] The Resolution Accountants found that the 2007 Earn-Out Payment was $234, 130, 148.00.[35] This amount was $84, 360, 048.00 more than the Preliminary 2007 Earn-Out Payment.[36] The Resolution Accountants also found that the 2008 Earn-Out Payment was $298, 813, 095.00.[37]

         Mr. Winshall alleges that Viacom tried to bully the Harmonix Stockholders and to obstruct the Resolution Accountants.[38] After Viacom filed Chancery Court Case 6874, Viacom told Mr. Winshall that Viacom would instruct former Harmonix Stockholders to set aside funds to repay the Preliminary 2007 Earn-Out Payment.[39] Mr. Winshall alleges that Viacom did this to pressure Mr. Winshall into settling.[40] Mr. Winshall also alleges that Viacom tried to pressure Mr. Winshall into settling by telling him that there would be adverse tax consequences for the Harmonix Stockholders if the 2008 Earn-Out Payments were delayed.[41] As for the Resolution Accountants, Viacom requested a declaratory judgment, in Case 7149, that the Determination of the Resolution Accountants was unenforceable.[42]

         B. Chancery Court Cases

         There were three lawsuits (the "Chancery Court Actions") in the Court of Chancery among Viacom, Harmonix, Mr. Winshall, and the Harmonix Shareholders: Case 6074, Case 6874, and Case 7149.

         The Harmonix Stockholders filed Case 6074 on December 15, 2010 against Viacom and Harmonix.[43] Case 6074 involved three claims for relief.[44] First, the Harmonix Stockholders alleged that Viacom breached the implied covenant of good faith and fair dealing for Viacom's renegotiation of distribution fees with Electronic Arts, Inc. ("6074 Count 1").[45] The Harmonix Stockholders also requested a declaratory judgment that Viacom has no claim for indemnification for four patent infringement lawsuits involving Harmonix ("6074 Count 2").[46]Finally, the Harmonix Stockholders claimed Viacom breached the Merger Agreement by refusing to release escrow funds set up by the Merger Agreement on the basis of the pending patent suits ("6074 Count 3").[47] The Chancery Court dismissed 6074 Count 1 and granted summary judgment for 6074 Count 2 and 6074 Count 3.[48]

         Viacom filed Case 6874 against the Harmonix Stockholders on September 16, 2011.[49]Viacom sought the immediate return of the Preliminary 2007 Earn-Out Payment Amount.[50] The Harmonix Stockholders asserted counterclaims, including a counterclaim that Viacom breached the Merger Agreement by failing to pay the amount of the 2007 Earn-Out Payments.[51] The Chancery Court dismissed Viacom's claim with prejudice. In addition, the Chancery Court dismissed the counterclaims without prejudice because the Harmonix Stockholders had already raised the same claims in another Chancery Court Action, Case 7149.[52]

         Viacom filed Case 7149 against the Harmonix Shareholders on August 23, 2012.[53]Viacom claimed that the Harmonix Stockholders breached the Merger Agreement.[54] Viacom also requested a declaratory judgment that the Determination of the Resolution Accountants is void and unenforceable due to the Resolution Accountants' fraud or manifest error.[55] The Harmonix Stockholders counterclaimed, contending that Viacom breached the Merger Agreement by failing to pay the amount of the 2007 Earn-Out Payments as set out in the Determination of the Resolution Accountants.[56] The Chancery Court entered judgment for the Harmonix Shareholders and ordered Viacom to pay $298, 813, 095.00 with interest as 2008 Earn-Out Payments.[57] Viacom appealed this decision to the Delaware Supreme Court.[58] The Supreme Court affirmed the decision on July 16, 2013.[59]

         C. Procedural History

         Mr. Winshall filed this action on June 14, 2015 (the "Complaint"). The Complaint has four counts.[60] In Count I, Mr. Winshall claims that Mr. Winshall is entitled to indemnification under Section 8.6 of the Merger Agreement because Viacom breached the representations, warranties, covenants and agreements of Merger Agreement. Specifically, Mr. Winshall claims that Viacom breached the Merger Agreement by (i) not preparing the 2007 and 2008 Earn-Out Statements within fifteen days of Viacom having all of the information it needed to complete the Statements per Section 2.4(a) and Section 2.4(b), (ii) appealing the Determination of the Resolution Accountants in violation of Section 2.4(c), and (iii) filing Case 7149 challenging the determination of the Resolution Accountants, for improper purposes of delay, in violation of Section 2.4(e).[61] Mr. Winshall seeks indemnification for the losses Mr. Winshall incurred, including attorney's fees and court costs. [62]

         In Count II, Mr. Winshall claims that Viacom breached Section 2.4 of the Merger Agreement by delaying the 2007 and 2008 Earn-Out Statements, which caused Mr. Winshall and the Harmonix Stockholders damages from the tax consequences and lost interest payments of the delay.[63] Mr. Winshall also asserts that Viacom did not provide Mr. Winshall with the additional information that he requested about the Earn-Out Payments in another violation of Section 2.4.[64]Mr. Winshall contends that Viacom fraudulently concealed that it had the information necessary to calculate the Earn-Out Statements because Viacom filed its 10-Q with the SEC in which it provided the concealed information.[65]

         In Count III, Mr. Winshall asserts that Viacom breached the implied covenant of good faith and fair dealing by failing to act in good faith with regard to the determination and payment of the Earn-Out Payments, which prevented Mr. Winshall and the Harmonix Stockholders from receiving the benefits they bargained for under the Merger Agreement.[66]

         In Count IV, Mr. Winshall claims that Viacom maliciously prosecuted Mr. Winshall when Viacom filed Case 6874 because its intent was to delay the Earn-Out Payments and to pressure Mr. Winshall to settle. Mr. Winshall seeks damages including the costs and expenses from Case 6874 and damages from the delay of the 2008 Earn-Out Payment.[67]

         On February 29, 2016, the Court denied Viacom's motion to dismiss (the "MTD Opinion").[68] On June 1, 2018 Viacom filed its Opening Brief in Support of Defendant Viacom International Inc.'s Motion for Summary Judgment ("Viacom's Motion"). Then, on July 18, 2018, Mr. Winshall filed Plaintiff's Opposition to Viacom International, Inc.'s Motion for Summary Judgment ("Mr. Winshall's Opposition"). On August 17, 2018, Viacom filed Defendant Viacom International Inc.'s Reply Brief in Further Support of its Motion for Summary Judgment ("Viacom's Reply").

         Also on June 1, 2018, Mr. Winshall filed Plaintiff's Opening Brief in Support of Motion for Partial Summary Judgment ("Mr. Winshall's Motion"). Then, on July 18, 2018, Viacom filed Defendant Viacom International Inc.'s Brief in Opposition to Plaintiff Walter A. Winshall's Motion for Partial Summary Judgment ("Viacom's Opposition"). Finally, on August 17, 2018, Mr. Winshall filed its Reply Brief in Support of Plaintiff's Motion for Partial Summary Judgment ("Mr. Winshall's Reply").

         III. PARTIES' CONTENTIONS

         A. Viacom's Motion

         In Viacom's Motion, Viacom requests that the Court grant summary judgment on: (i) Counts I, II and III because they are barred by res judicata; (ii) all counts because they are barred by the statute of limitations; and (iii) Count IV because Mr. Winshall has not sufficiently pleaded a valid claim for malicious prosecution.

         B. Mr. Winshall's Motion

         Mr. Winshall asks that the Court grant summary judgment on Counts I and II because no there are no genuine issues of fact and he is entitled to judgment as a matter of law. Mr. Winshall also argues that (i) res judicata does not bar Counts I, II and III because these claims were not ripe when the Chancery Court Actions were filed, (ii) the Court should toll the statute of limitations because Viacom fraudulently concealed information that Mr. Winshall needed to assert Counts I, II and III, (iii) a three-year statute of limitations applies to claims for malicious prosecution so Count IV is not barred by the statute of limitations, and (iv) Mr. Winshall has sufficiently pleaded Count IV.

         IV. STANDARD OF REVIEW

         The standard of review on a motion for summary judgment is well-settled. The Court's principal function when considering a motion for summary judgment is to examine the record to determine whether genuine issues of material fact exist, "but not to decide such issues."[69]Summary judgment will be granted if, after viewing the record in a light most favorable to a nonmoving party, no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law.[70] If, however, the record reveals that material facts are in dispute, or if the factual record has not been developed thoroughly enough to allow the Court to apply the law to the factual record, then summary judgment will not be granted.[71] The moving party bears the initial burden of demonstrating that the undisputed facts support his claims or defenses.[72] If the motion is properly supported, then the burden shifts to the non-moving party to demonstrate that there are material issues of fact for the resolution by the ultimate fact-finder.[73]

         Where, as here, the parties have filed cross motions for summary judgment and have not argued that there are genuine issues of material fact, "the Court shall deem the motions to be the equivalent of a stipulation for decision on the merits based on the record submitted with the motions."[74] Neither party's motion will be granted unless no genuine issue of material fact exists and one of the parties is entitled to judgment as a matter of law.[75]

         V. DISCUSSION

         A. Counts I-III, except as to Fees and Costs, are Barred by Res Judicata

         The doctrine of res judicata "prevent[s] a multiplicity of needless litigation of issues by limiting parties to one fair trial of an issue or cause of action which has been raised or should have been raised in a court of competent jurisdiction."[76] The Supreme Court set out the doctrine of res judicata's elements in Kossol v. Ashton Condominium Association:

First, the same transaction must form the basis for the prior and subsequent suits. Second, the plaintiff must have neglected or failed to assert claims which in fairness should have been asserted in the first action . . . . Upon such a showing, the plaintiff, to prevent dismissal, must then show that there was some impediment to the presentation of the entire claim for relief in the prior forum.[77]

         In Kossol, the Supreme Court explained that the doctrine of res judicata bars litigation between the same parties when the claims in the later litigation arise from the same transaction that was the basis of the original litigation.[78] Therefore, even if the theory in the later action is different, the claim is still barred if it comes from the same transaction.[79] But, "res judicata does not operate to bar claims based on facts that were not, and could not have been, known to the plaintiff in the second action at the time of the first action."[80] In the MTD Opinion, the Court found that the Kossol test applies to the facts of this case.[81]

         In RBC Capital Markets, LLC v. Education Loan Trust IV, [82] the Supreme Court held that it is not "invariably true" that two claims involving the same contract come from the same transaction. "A subsequent breach of contract claim will not be treated as identical to an earlier contract claim (and therefore res judicata will not operate as a bar) where the facts underlying the later claim were either unknown or incapable of being known at the time of the earlier action."[83]

         In the MTD Opinion, the Court found that the Chancery Court Actions and the claims in the Complaint arose from the 2007 and 2008 Earn-Out Payments under the Merger Agreement.[84]The Court instructed Viacom to develop a factual record that provided why Mr. Winshall should have included Counts I-III in the Chancery Court Actions in order to prevail at the summary judgement stage.[85] The Court also instructed Mr. Winshall to demonstrate what impeded him from bringing the claims in the earlier actions in order to prevail at the summary judgment stage.[86]

         1. Count I

         Mr. Winshall argues that Count I is not barred by res judicata. Specifically, Mr. Winshall argues that his claim for indemnification did not accrue until July 16, 2013, when the Delaware Supreme Court made a final determination in the Chancery Court Actions. Mr. Winshall cites LaPoint for the proposition that an indemnification claim conditioned on a breach of contract does not accrue until there is a final determination on the underlying breach of contract claim.

         In response, Viacom argues that the LaPoint case only found that a plaintiff was entitled to indemnification for attorneys' fees. Viacom notes that Mr. Winshall has brought claims in Count I for damages based on a breach of contract that preceded the Chancery Court Actions. As such, Viacom contends these contract claims were ripe for a decision in the Chancery Court Actions.[87]

         Specifically, Viacom argues that in Case 6074, Mr. Winshall alleged that Viacom caused "more than 18 months of delays" before delivering the 2007 Earn-Out Statement and created "another extended period of delays" before agreeing to the Resolution Accountants.[88] Also, in Case 7149, Mr. Winshall brought a counterclaim for "breach of contract for failure to pay the balance of the 2007 Earn-Out Payment, and failure to pay the entire 2008 Earn-Out Payment."[89] Viacom contends that Mr. Winshall's claim relating to Viacom's failure to release the escrowed funds was the subject of Case 6074, filed in December 2010. In addition, Viacom contends that Mr. Winshall submitted a proposed complaint in December 2010 to the Court of Chancery in which Mr. Winshall alleged that "Viacom unjustifiably delayed turning over its calculations of the earn-out amounts" and that "Viacom unjustifiably delayed the selection of a Resolution Accountant who could determine the amount."[90] Viacom cites the Complaint, in which Mr. Winshall makes similar allegations:

Plaintiff brings claims for indemnification under the Merger Agreement and breach of contract . . . in connection with Viacom's calculated and improper delay for years in providing the 2007 and 2008 Earn-Out Statements necessary to calculate the respective Earn- Out Payments and appoint the Resolution Accountants.[91]

         In LaPoint v. Amerisource Bergen Corp., [92] the Court of Chancery held that, under the terms of the parties' merger agreement, a claim for indemnification for attorneys' fees became ripe only after a court issued a final determination that plaintiff was entitled to indemnification for the defendant's breach of contract and the defendant failed to indemnify the plaintiff. The Court of Chancery allowed plaintiff to recover on a separate action for attorneys' fees and costs because all events necessary to support plaintiff's indemnification claim had not occurred until after a final determination on the contract claim.

         In this case, Merger Agreement Section 8.6 requires Viacom to indemnify Mr. Winshall and the other Harmonix stockholders for Losses that the stockholders sustain as a result of Viacom's breaches of representations, warranties and covenants:

[Viacom] . . . shall indemnify . . . [the Harmonix stockholders] against any and all Losses actually incurred or suffered by any such Merger Consideration Recipient as a result of: (i) the breach of any representation or warranty of Parent or MergerCo set forth in this [Merger] Agreement . . . and (ii) the breach of any covenant or agreement of Parent or MergerCo contained in this [Merger] Agreement . . . . [93]

         The definition of "Losses" includes attorneys' fees and costs. Under Section 8.6, therefore, Viacom is required to indemnify Mr. Winshall for attorneys' fees and costs incurred in litigation for breaches of the representations, warranties, and covenants of the Merger Agreement.

         Viacom refused to indemnify Mr. Winshall for Mr. Winshall's attorneys' fees and costs after the Chancery Court Actions. This was a breach of Viacom's obligation to indemnify Mr. Winshall. That obligation was not ripe until there was a final adjudication of Viacom's breach of the representations, warranties and covenants of the Merger Agreement. This final adjudication and Viacom's subsequent refusal to indemnify Mr. Winshall are the new substantive bases upon which Mr. Winshall brings its claim for indemnification for attorneys' fees.

         Other than the claims for attorneys' fees and costs, Mr. Winshall brought many of the same allegations in Count I in the Chancery Court Actions. Mr. Winshall already recovered losses in some of those actions. All of the allegations were ripe at the time of the Chancery Court Actions and so are barred by res judicata.

         The record reflects that Mr. Winshall did not raise the indemnification claim in the Chancery Court Actions. Mr. Winshall could not have raised its claim for attorneys' fees in the Chancery Court Actions. The Court holds that Count I is barred by res judicata, except as Court I relates to attorneys' fees and costs.

         2. Count II

         Count II is a claim for damages, including tax consequences and lost interest, caused by the delay in obtaining the 2007 and 2008 Earn-Out Statements. These damages allegedly arose because Viacom did not use estimates of the IP Litigation to issue the Earn-Out Statements.

         Viacom argues that Mr. Winshall could have asserted the claims in Count II in the Chancery Court Actions. In fact, Viacom contends that Mr. Winshall did assert many of the claims in the Chancery Court Actions. Specifically, Viacom notes that in Case 6074, Mr. Winshall alleged that Viacom caused "more than 18 months of delays" before delivering the 2007 Earn-Out Statement and created "another extended period of delays" before agreeing to the Resolution Accountants. Viacom also points out that in Case 7149, Mr. Winshall brought a counterclaim for "breach of contract for failure to pay the balance of the 2007 Earn-Out Payment, and failure to pay the entire 2008 Earn-Out Payment."

         Mr. Winshall does not demonstrate any impediment to bringing these allegations in the earlier Chancery Court Actions. Instead, Mr. Winshall argues that his claims were not ripe during the Chancery Court Actions because he seeks damages for Viacom's delay.

         The Court finds that Mr. Winshall has already brought claims for Viacom's delay in issuing the Earn-Out Statements in the Chancery Court Actions. Claims for damages are not reserved solely for this Court. As part of the "clean-up doctrine," Mr. Winshall could have brought the damages claims in Count II in the Chancery Court Actions.[94] This is true as the claims accrued before 2011 when Viacom paid the Earn-Out Payments in full. Moreover, Mr. Winshall did not need to know the precise amount of damages as discovery in the Chancery Court Actions would have provided a liquidated amount. Therefore, Count II is barred by the doctrine of res judicata.

         3. Count III

         Count III is a claim for damages, including tax consequences and lost interest, caused by Viacom's purported breach of the implied covenant of good faith and fair dealing regarding the Earn-Out Statements and the determination of the Earn-Out Payments. As in Count II, Mr. Winshall argues that it was not pragmatic to bring the allegations in Count III during the Chancery Court Actions because he seeks damages for Viacom's delay.

         The Court finds that Mr. Winshall could have brought the allegations in Count III in the Chancery Court Actions. This is clear because, as with Count II, these claims accrued before 2011 when Viacom paid the Earn-Out Payments in full. The allegations also arose out of the same misconduct at issue in the Chancery Court Actions. Mr. Winshall has also not demonstrated any impediment which prevented him from asserting the claims earlier. Therefore, Count III is barred by the doctrine of res judicata.

         C. the Statute of Limitations, except as to Fees and Costs, Bars Counts I-III

         Courts apply a three-step test to determine whether a claim is barred by the statute of limitations.[95] First, courts must determine when a cause of action accrues. In contract cases, the cause of action accrues at the time of the breach. [96] Second, courts must determine whether the statute of limitations may be tolled or extended.[97] A statute of limitations may be tolled for reasons such as inherently unknowable injuries, [98] fraudulent concealment, [99] and equitable tolling.[100] Plaintiffs must plead reasons to toll the statute of limitations with specificity.[101]Third, if a tolling exception applies, courts must determine when plaintiff receives inquiry notice of the breach to determine when the limitations period starts running.[102] Inquiry notice exists when plaintiff becomes aware of "facts sufficient to put a person of ordinary intelligence and prudence on inquiry which, if pursued, would lead to the discovery [of injury]."[103]

         There is a three-year statute of limitations for contract claims.[104] Mr. Winshall argues that his claims accrued as of July 16, 2013 when the Delaware Supreme Court affirmed Case No. 7149 and as of October 8, 2013 when the Delaware Supreme Court affirmed Case No. 6074. As such, Mr. Winshall contends that Counts I, II, and III are not barred by the three-year statute of limitations because this civil action was filed on June 14, 2015.

         1. Count I is Barred in Part by the Statute of Limitations

         a. Attorneys' Fees

         Count I for indemnification for attorneys' fees is not time-barred. In LaPoint, the parties agreed to an indemnification provision in their merger agreement, which stated that

[The acquiring company] shall . . . indemnify, defend and hold harmless the Company Stockholders . . . from and against any and all Damages incurred in connection with, arising out of, resulting from or incident to any breach of any covenant, representation, warranty or ...

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