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MarkDutchCo 1 B.V. v. Zeta Interactive Corp.

United States District Court, D. Delaware

November 13, 2019

MARKDUTCHCO 1 B.V., Plaintiff,
v.
ZETA INTERACTIVE CORP., Defendant.

          William M. Lafferty, John P. DiTomo, Zi-Xiang Shen, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Stephen M. Juris, Alexandra Verdi, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP, New York, New York Counsel for Plaintiff.

          Patricia A. Winston, MORRIS JAMES LLP, Wilmington, Delaware; John Du Wors, Nathan Durrance, NEWMAN DU WORS DURRANCE LLP, Seattle, Washington Counsel for Defendant.

          MEMORANDUM OPINION

          COLM F. CONNOLLY UNITED STATES DISTRICT JUDGE.

         MarkDutchCo 1 B.V. (MarkDutchCo) has sued Zeta Interactive Corp. (Zeta) for Specific Performance (Count I), Breach of Contract (Count II), and Declaratory Judgment and Injunctive Relief (Count III). All three claims arise from Zeta's refusal to pay MarkDutchCo $3, 450, 000 MarkDutchCo alleges it is owed. Zeta has moved for dismissal of the complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of jurisdiction or, alternatively, for a stay of the case until a related case in this Court and a purported arbitration in England are resolved. D.I. 5.

         I. BACKGROUND[1]

         This case arises out of an Interest Purchase Agreement that Zeta and nonparty Markmidco S.ar.l (Markmidco) entered into as of August 28, 2015. D.I. 1, Ex. A. Pursuant to the Purchase Agreement, Zeta acquired Markmidco's interest in a customer relationship management business (the CRM business), which consisted of several companies that provided to retailers email and text message marketing, database management, and related services. Zeta agreed to pay, among other things, $23, 000, 000 in cash for the CRM Business. But the Purchase Agreement permitted Zeta to hold back at the closing of the transaction and to retain for up to 18 months and three business days $3, 450, 000 of the cash payment (the "Holdback Amount") as insurance against losses covered by the Agreement's indemnification provisions. Pursuant to § 6(b)(v) of the Agreement and a subsequent assignment of Markmidco's rights under the Agreement to MarkDutchCo, when the 18-month-and-three-business-day period expired on May 5, 2017, Zeta was obligated to pay MarkDutchCo "an amount equal to the Holdback Amount[] less the Retained Holdback Amounts." D.I. 1, Ex. A § 6(b)(v). The Agreement defined "Retained Holdback Amounts" as the amount of indemnified losses "that are finally determined." D.I. 1, Ex. A § 6(b)(v).

         Under the Purchase Agreement, there were three ways for Zeta to obtain a final determination of its indemnified losses:

(i) by "reach[ing] an agreement in writing" with the other parties to the dispute that created the losses;
(ii) by getting "a final and non-appealable order" from "a court of competent jurisdiction[;]" or
(iii) by getting "a final non-appealable determination" from "an arbitration or like panel[.]"

D.I. 1, Ex. A at § 6(b)(v).

         At no time before May 5, 2017 did Zeta obtain or seek to obtain an agreement in writing with Markmidco or MarkDutchCo; nor did it obtain or seek to obtain an order with respect to any losses from a court or arbitration-like panel. On May 1, 2017, Zeta informed MarkDutchCo that it planned on withholding the entirety of the Holdback Amount because of various losses it alleged it had incurred. Zeta has refused to this date to make any payment to MarkDutchCo. That refusal led MarkDutchCo to file this lawsuit, by which it seeks to recover the entirety of the Holdback Amount.

         II. DISCUSSION

         Zeta argues that this case is not ripe for adjudication, because there has been no final determination of the amount of losses Zeta alleges it incurred and is ...


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