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Ross v. Institutional Longevity Assets LLC

Court of Chancery of Delaware

February 26, 2019

Alan J. Ross
v.
Institutional Longevity Assets LLC et al.

          Submitted: November 13, 2018

          Mr. Alan J. Ross Anthony M. Saccullo, Esquire Thomas H. Kovach, Esquire A. M. Saccullo Legal, LLC

          TAMIKA R. MONTGOMERY-REEVES VICE CHANCELLOR

         Dear Parties:

         This letter opinion resolves defendants' motion for judgment on the pleadings and plaintiffs motion to compel and motion for default judgment. This action represents one part of a long-running legal saga between plaintiff, defendants, and their associates and predecessors in interest. At its heart, the dispute is about the commercialization of a patent covering a method for pooling insurance policies. In the case before me, plaintiff asserts claims for breach of contract and breach of fiduciary duties related to (1) defendants' business development of a patent-holding entity, and (2) defendants' alleged failure to provide certain information to plaintiff. Defendants move for judgment on the pleadings, arguing that they do not owe any of the contractual or fiduciary obligations that plaintiff seeks to enforce. For the reasons that follow, 1 grant defendants' motion for judgment on the pleadings. Because 1 grant the motion for judgment on the pleadings, plaintiffs motions are moot.

         I. BACKGROUND

         Plaintiff Alan J. Ross filed his Verified Complaint for Breach of Contract (the "Complaint") in this Court on March 10, 2017. On March 30, 2017, Ross moved to dismiss then-defendants Institutional Pooled Benefits LLC ("IPB"), Meyer-Chatfield Corp., and Balshe LLC; on March 31, 2017, I granted his motion. The remaining defendants are Institutional Longevity Assets, LLC ("ILA"), a member of non-party IPB;[1] MRB Pooled Benefits, LLC ("MRB"), a member of non-party IPB;[2] David B. Simon, the managing member of ILA;[3] and Bennett Meyer, a manager of MRB.[4] The only other member of1PB is Ross.[5] The dispute underlying the claims relates to the commercialization of United States Patent No. 5, 974, 390 (the "Patent"), which describes "[a] system and method ... for creating a predictable flow of funds .... [w]here participants pool their ownership of insurance policies so as to share in the proceeds from those policies."[6]

         On June 2, 2017, Defendants filed a motion to dismiss. On July 6, 2017, Ross filed an opposition. On August 10, 2017, Defendants informed the court that they would not file a reply. On September 28, 2017, I granted the motion to dismiss to the extent Ross pursued derivative claims, but I denied it in all other respects.

         On March 8, 2018, Ross filed his motion to compel ILA to respond to his discovery requests; ILA filed its opposition on May 9, 2018; and Ross filed his reply onAprill7, 2Ol8.

         On March 9, 2018, Defendants filed their motion for judgment on the pleadings, followed by their opening brief in support of the motion on March 13, 2018. On April 13, 2018, Ross filed his opposition. On May 1, 2018, Defendants filed their reply. On May 2, 2018, Ross filed a surreply.

         On September 7, 2018, Ross filed his motion for default judgment against Defendant David B. Simon, who filed an opposition on October 9, 2018; Ross filed his reply on October 12, 2018.

         On November 13, 2018, I held oral argument on three motions-Ross's motion to compel, Ross's motion for default judgment, and Defendants' motion for judgment on the pleadings-which are now fully briefed and before me.

         The IPB Operating Agreement (the "Operating Agreement") contains requirements for how the Company functions. Section 6(d) of the Operating Agreement ("Section 6(d)") requires that

except as otherwise provided ... the Company shall be managed by a committee consisting of a designated member of MRB and a designated member of ILA (the Executive Committee). Except as otherwise provided in this Agreement, or any written amendment hereto, all decisions regarding the management of the Company are within the purview of the Executive Committee and shall only be made by unanimous vote of the Executive Committee.[7]

         Section 7(a) of the Operating Agreement ("Section 7(a)") adds that

[t]he Executive Committee will not be liable to the Company or any other Member for (i) the performance, or omission to perform any act or duty on behalf of the Company if, in good faith, such conduct did not constitute fraud, gross negligence or reckless or intentional misconduct and (ii) the performance, or the omission to perform, on behalf of the Company, any act upon good faith reliance on advice of legal counsel, accountants or other professional advisors to the Company.[8]

         Section 10(b) of the Operating Agreement ("Section 10(b)") states that

[a]s soon as practicable after the end of each Fiscal Year, the Company (i) will cause to be prepared and sent to each Member a balance sheet and a statement of income and expenses for the Company which may, but not need, be audited by a certified public accountant, and (ii) will cause to be prepared and sent to each Member a report setting forth in sufficient detail all such information and data with respect to the Company for such Fiscal Year as shall enable each Member to prepare his income tax returns in accordance with the laws, rules and regulations then prevailing. The Company will also cause to be prepared and filed all tax returns required of the Company. All balance sheets, statements, reports and tax returns required pursuant to this Section 10(b) shall be prepared at the expense of the Company.[9]

         II. ANALYSIS

         Plaintiff asserts three claims, which he styles as (1) breach of contract; (2) breach of contract-implied covenant of good faith; and (3) continuing breach of contract-breach of fiduciary duty.[10] Defendant moves for judgment on the pleadings as to all three claims.

         "After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings."[11] "When considering a Rule 12(c) motion, the court must accept well-pled facts in the complaint as true and view those facts in the light most favorable to the nonmoving party."[12] "A motion for judgment on the pleadings will be granted if no material issue of fact exists and the moving party is entitled to judgment as a matter of law."[13] "A court may not grant the motion unless it appears beyond doubt that the claimant can prove no set of facts in support of its claims which would entitle it to relief."[14]

         A. Plaintiff's Breach of Contract Claim Fails

         Plaintiff claims breach of contract based on a failure to provide documents, arguing that

Section 10(b) of the IPB Operating Agreement requires IPB on an annual basis (1) to prepare and send to each member a balance sheet and a statement of income and expense for the Company, and (2) to prepare and send to each member a report setting forth in sufficient detail all such information and data with respect to the Company for such Fiscal years that shall enable each member to prepare his income tax returns.[15]

         Plaintiff contends that Defendants have breached this obligation each year since 2014.[16]

         An analysis of Defendants' obligations requires that this Court interpret the contract. "Under Delaware law, courts interpret contracts to mean what they objectively say. This approach is longstanding and is motivated by grave concerns of fairness and efficiency."[17]

Because Delaware adheres to the objective theory of contract interpretation, the court looks to the most objective indicia of that intent: the words found in the written instrument. As part of this initial review, the court ascribes to the words their common or ordinary meaning, and interprets them as would an objectively reasonable third-party observer.[18]

         "Standing in the shoes of an objectively reasonable third-party observer, if the court finds that the terms and language of the agreement are unmistakably clear, then the court should look only to the words of the contract to determine its meaning and the parties' intent."[19] "[W]hen we may reasonably ascribe multiple and different interpretations of a contract, we will find that the contract is ambiguous."[20] Despite that, "[t]he parties' steadfast disagreement will not, alone, render [a] contract ambiguous."[21] When the "meaning [of a contract] is unambiguous and the underlying facts necessary to its ...


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