Opera Solutions, LLC v. Schwan's Home Service, Inc.

Filing 152

MEMORANDUM OPINION re 128 motion for summary judgment. Signed by Judge Leonard P. Stark on 3/21/17. (ntl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE ,
OPERA SOLUTIONS, LLC,
Plaintiff,
v.

C.A. No. 15-287-LPS

SCHWAN'S HOME SERVICE, INC.
Defendant.

Daniel M. Silver, Jameson A.L. Tweedie, MCCARTER & ENGLISH, LLP, Wilmington, DE
Thomas J. Finn, Paula Cruz Cedillo, MCGARTER & ENGLISH, LLP, Hartford, CT
Attorneys for Plaintiff.
Robert~- Katzenstein, SMITH, KATZENSTEIN & JENKINS LLP, Wilmington, DE
Michael D. Hutchens, M. Gregory Simpson, MEAGHER & GEER, P .L.L.P . , Minneapolis, MN

Attorneys for Defendant.

· MEMORANDUM OPINION

March 21, 2017
Wilmington, Delaware

Pending before the Court is Defendant Schwan's Home Service Inc. 's ("Schwan's" or
"Defendant") motion for summary judgment. (D.I. 128) ("Motion") For the reasons set forth
below, the Court will grant in part and deny in part the Motion.

I.

BACKGROUND
Plaintiff Opera Solutions, LLC ("Opera" or "Plaintiff') is a technology and analytics

company that provides consulting services to help "deliver rapid profit improvement for its
clients." (D.I. 78 if 8) Defendant Schwan's is "the largest direct-to-home frozen food delivery
provider in the

Unite~, States, and markets and delivers its products t~ millions of customers

throughout the counJ via home delivery trucks." (Id.
l

if 9)

·

On January 22, 2009, Opera and Schwan's entered .into a Consulting Services Licensing
Agreement ("CSLA"). (See D.I. 129 at 2) Pursuant to the CSLA, Opera was to provide
"Production Licenses" for its sales recommendations for certain households serviced by
Schwan's, in return for an annual License Fee to be paid to Opera for each Production License.
(See id. at 2-3) The CSLA provides that Production Licenses are required for "Treated

Households," which consist of the middle seven deciles of households deemed "Active
Households" by Schwan' s, i.e., Active Households excluding the top decile and bottom two
deciles. (See D.I. 130-7 Ex. G § 3.2(d)) "Active Households," in turn, are defined in the CSLA
as households that are active customers of Schwan's, "as determined in Schwan's sole
discretion." (Id.) The CSLA further provides that "[t]he term of each Production License shall
commence on the date such Production License is granted and shall terminate upon expiration of
the Term or, if earlier, upon termination of this Agreement pursuant to Section 9." (Id. § 6.1)

1

The CSLA provides for limitations on the "redeployment" of Production Licenses.
Specifically, Section 6.4 of the CSLA provides that:
Except as set forth in this Section 6.4, each Production License or
Quarantine License shall be granted with respect to a specific
Treated Household (or other Active Household, in the case of
Quarantine Licenses) and may not be transferred, re-assigned, redeployed or otherwise applied to or used for a household other than
such original, specific Treated Household (any of the foregoing
being referred to as the "Redeployment" of a Production License,
or to "Redeploy" such Production License).

(Id. § 6.4(a))
The CSLA was the subject of the parties' discussions in May 2009, during a meeting in
San Diego ("San Diego Meeting"). (See D.I. 129 at 6) Following the meeting, the parties
sun;imarized their discussions in the "San Diego Document," which Opera sent to Schwan's on
July 2, 2009. (See id.) According to the San Diego Document, households included in Opera's
"baseline" calculations would include all spending deciles except for the bottom spending decile.

(See D.I. 133-14Tab 25 at 2)
On September 1, 2010, the parties modified the CSLA in writing, pursuant to the CSLA's
merger clause (see D.I. 130-7 Ex. G § 10.10). (See D.I. 130-10 Ex. J) The parties' written
modification was called Amendment No. 1 (the "Amendment") to the CSLA. The Amendment
incorporated any CSLA provisions that were not altered by the Amendment's terms, and the
Amendment expressly noted that "[ c]apitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth the in the [CSLA]." (Id.) The Amendment
also extended the CSLA's term -January 22, 2009 until December 31, 2012 ("Term")- by one
year, such that the CSLA and Amendment both were set to expire on December 31, 2013. (See

2

id. § 2.1)
The Amendment required Schwan' s to pay Opera $4,850,000 for up to 3,000,000
Production Licenses (the "Production License Threshold"), and.$0.08 for each additional
Production License above the Production License Threshold. (See id. § 6.3) The Amendment
also eliminated Section 6.4' s discussion of redeployment. (See id.) Further, it added that
Schwan' s selection of the "unique households" to which particular licenses would relate would
be undertaken "during each calendar year." (Id. § 6.2)
Section 6 of the Amendment provides:

6.1
Production Licenses.
Effective as of [September 1, 20JO], Opera grants Schwan a
limited, exclusive, terminable (in accordance with the terms
hereof) license to use and distribute the Production Phase
Deliverables provided by Opera hereunder for up to Three Million
(3,000,000) Treated Households in accordance with the terms
hereof, including all tangible and intangible media in which such
Production Phase Deliverables are expressed (each such individual
household license, a "Production License"). The terms of each
Production License shall commence on the date such Pr9duction
License is granted and shall terminate upon the expiration of the
Term or, if earlier, upon termination of this Agreement pursuant to
Section 9.
6.2
Quantity of Production Licenses.
Throughout the Production Phase during each calendar year,
Schwan shall be entitled to determine in its discretion which and
how many unique households shall be served hereunder up to the
Production License Threshold (as defined in Section 6.3below).
In no event shall Opera be required to refund any License Fee or
portion thereof at any time or for any reason.
6.3
License Fees.
(a} Schwan shall pay Opera license fees ("License Fees") equal to
Four Million Eight Hundred Fifty Thousand Dollars ($4,850,'ooo)
for Three Million (3,000,000) Production Licenses, whi_ch shall
include the cost for converting all applicable Quarantine Licenses.
3

In the event that the number of Production Licenses Schwan elects
to license exceeds Three Million (3,000,000) (the "Production
License Threshold"), for each Production License in excess of the:
Production License Threshold, Schwan shall pay Opera License
Fees equal to Eight Cents ($0.08) per month multiplied by the
number of months remaining in the Term thereof. License Fees
shall be payable in accordance with Section 7.3. Notwithstanding
anything in this Agreement to the contrary, Schwan shall pay the
License Fees in accordance with the following payment schedule:

6.4
Termination of Quarantine Licenses.
Effective as of the Amendment Effective Date, all Quarantine
Licenses shall automatically convert into Production Licenses and
shall be counted against the Production License Threshold.

(Id.)
Finally, the Amendment required the parties to "develop and implement a mutually
agreed upon and written success measures· and bonus payment schedule prior to January 31,
2011." (Id. § 5) The bonus schedule was to be based upon macro sales number impacts or "the
overall and measurable sales benefit that Schwan's experienced as a result of Opera's
performance." (D.I. 129 at 8-9; see also D.l. 130-10 Ex. J § 5) The parties, however, did not
negotiate a bonus schedule before January 31, 2011, or thereafter. (See generally D.I. 129 at 810)
Because of the parties' inability to agree to a bonus schedule, and because of Schwan's
alleged breach of Section 6 of the Amendment, Opera filed suit against Schwan's on February
26, 2013 in the Southern District ofNew York ("SDNY"). (See D.l. 1) On April 1, 2015, the ·
case was transferred to the District of Delaware, after the SDNY granted Schwan's motion to
transfer over Opera's opposition. (See D.I. 53) In its Amended Complaint, Opera asserts claims
for breach of.contract, breach of the implied covenant of good faith and fair dealing, unjust

4

enrichment, promissory estoppel, and quantum meruit. (See D.I. 78) Schwan's Answer and
Counterclaim includes three breach of contract counterclaims, based on allegations that Opera
failed to supply Production Licenses, failed to issue monthly invoices, and breached the CSLA's
venue clause. (See D.I. 79)
On November 2, 2015, Opera moved to dismiss "a substantial portion" of Schwan's
counterclaim based on failure to supply Production Licenses and also moved to dismiss
Schwan's other two breach of contract counterclaims in their entirety. (See D.I. 83) The Court
denied Opera's motion to dismiss on July 1, 2016. (See D.I. 101)
Schwan's filed the pending Motion on December 22, 2016, seeking summary judgment
with respect to all of Opera's claims in the Amended Complaint. (See D.I. 128) The parties
initially completed briefing on the Motion on January 19, 2017 (see D.I. 129, 132, 138), and the
Court heard oral argument on the Motion on February 22, 2017 ("Tr."). Thereafter, pursuant to
an oral order issued by the Court (see D.I. 142), the parties submitted additional letter briefing
discussing whether the San Diego Meeting and Document modified the CSLA's provisions. (See
D.I. 143, 147, 148) The Court held a teleconference to discuss the issues raised in the parties'
letter briefs on March 17, 2017. (See D.I. 151) The final pretrial conference is scheduled for
April 7, 2017 and a jury trial is scheduled to begin on April 17, 201 7.

II.

LEGALSTANDARDS
Pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, "[t]he court shall grant

summary judgment if the movant shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law." The moving party bears the burden of
demonstrating the absence of a genuine issue of material fact. See Matsushita Elec. Indus. Co.,
5

Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-86 (1986). An assertion that a fact cannot be - or,
alternatively, is - genuinely disputed must be supported either by citing to "particular parts of
materials in the record, including depositions, documents, electronically stored information,
affidavits or declarations, stipulations (including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials," or by "showing that the materials cited do
not establish the absence or presence of a genuine dispute, or that an adverse party cannot
produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(l)(A) & (B). If the
moving party has carried its burden, the nonmovant must then "come forward with specific facts
showing that there is a genuine issue for trial." Matsushita, 475 U.S. at 587 (internal quotation
marks omitted). The Court will "draw all reasonable inferences in favor of the nonmoving party,
and it may not make credibility determinations or weigh the evidence." Reeves v. Sanderson

Plumbing Prods., Inc., 530 U.S. 133, 150 (2000).
To defeat a motion for summary judgment, the nonmoving party must "do more than
simply show that the!e is some metaphysical doubt as to the material facts." Matsushita, 4 7 5
U.S. at 586.; see also Podobnik v. U.S. Postal Serv., 409 F.3d 584, 594 (3d Cir. 2005) (stating
that party opposing summary judgment "must present more than just bare assertions, conclusory
allegations

o~

suspicions to show the existence of a genuine issue") (internal quotation marks

omitted). The "mere existence of some alleged factual dispute between the parties will not defeat
an otherwise properly supported motion for summary judgment;" a factual dispute is genuine
only where "the evidence is such that a reasonable jury could return a verdict for the nonmoving
party."_ Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). "If the evidence is merely
colorable, or is not significantly probative, summary judgment may be granted." Id. at 249-50

6

(internal citations omitted); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (stating
entry of summary judgment is mandated "against a party who fails to make a showing sufficient
to establish the existence of an efement essential to that party's case, and on which that party will
bear the burden of proof at trial"). Thus, the "mere existence of a scintilla of evidence" in
support of the nonmoving party's position is insufficient to defeat a motion for summary
judgment; there must be "evidence on which the jury could reasonably find" for the nonmoving
party. Anderson, 477 U.S. at 252.
III. - DISCUSSION
Schwan' s seeks summary judgment on Opera's production license fee overage claim and
bonus payments claims. 1 (See D.I. 129) The Court addresses each claim below.

A.

Opera's Production License Fee Overage Claim

Schwan's seeks summary judgment that Opera's production license fee overage claim
fails as a matter oflaw, as Schwan's "three million license threshold was not exceeded." (D.I.
129 at 18) (internal punctuation omitted) Schwan's position rests on three premises: that the San
Diego Document did not modify the CSLA's provision that Schwan's would pay Production
License fees for only the middle seven deciles of Active Households (see id. at 15; see generally
D.I. 147); that the count of Production Licenses restarts on January 1 of each calendar year (see
D.I. 129 at 16); and that the Amendment allowed Schwan's to redeploy Production Licenses
from Inactive Households to Active Households (see id. at 17). The Court addresses each of

1

Schwan's motion for summary judgment on Opera's production license fee overage .
claim corresponds to Count 1 of the Amended Complaint (see D.I. 78 ,-r,-r 48-51), while Schwan's
motion for summary judgment on Opera's bonus payments claims corresponds to Counts 2
through 5 of the Amended Complaint (see id. ,-r,-r 53, 58, 63, 69).
7

Schwan's contentions in turn.

1.

Effect of the San Diego Document and Subsequent Amendment

Schwan' s first argues that neither the San Diego Meeting nor the San Diego Document
modified the parties' understanding that "[Production] [L]icenses are only required for ... the
middle seven deciles of 'Active Households."' (D.I. 129 at 15; see also D.l. 130-7 Ex. G

§ 3.2(d) (CSLA provision setting out which Active Households required Production Licenses))
While Schwan's admits that it agreed that more.than seven deciles of Active Households would
be treated (see D.I. 143 at 1 n.1; Tr. at 65),_Schwan's disputes that it agreed to pay Production
License fees for Treated Households outside of the originally agreed-upon middle seven deciles.

(See D.I. 147 at 3; Tr. at 6) Schwan's further argues that, in any event, even ifthe San Diego
Meeting or San Diego Document orally modified the CSLA, the Amendment ·subsequently
"restored the [CSLA's] original definitions" of Treated Households, which had the effect of
. resetting Schwan's obligation to pay only for Treated Households in the middle seve.n deciles.
(D.I. 147 at 3) (internal punctuation omitted)
Opera responds by pointing to record evidence, which, in Opera's view, "confirms that
Schwan's understood its obligation to pay additional License Fees as a result of the decile
change." (D.I. 143 at 3) For example, Schwan's former vice president, Bob Beckwith, admitted
that "if a household was being treated, there was a licensing fee per household~" (D .I. 144-1 Ex.
5 at 69; see also D.l. 133 Tab 26 (Schwan's internal document including nine deciles in
Schwan's bonus payment methodology)) Opera also points to evidence that Schwan's requested
that Opera treat more than the middle seven d~ciles of Active Households, even after the
Amendment was executed. (See D.I. 133 Tab 26; id. Tab 27) Thus, in Opera's view, Schwan's

8

agreed in the San Diego Document not only that more than the middle seven deciles would be
Treated Households, but also agreed to pay for all Treated Households - and this did not change
after the Amendment became effective.
The record demonstrates genuine disputes of material fact with respect to whether
Schwan's agreed to pay License Fees for additional Treated Households in the San Diego
Document or during the San Diego Meeting and, if so, whether the parties restored th~ original
understanding of Schwan's payment obligation (i.e., that Schwan's would not pay for Treated
Households outside the middle seven deciles) by executing the Amendment. A reasonable jury
could find, as Schwan' s asserts, that no provision of the CSLA, San Diego Document, or the
Amendment- and no other document or testimony in the record-proves that Schwan's agreed
to pay for Treated Households that were not within the middle seven deciles. (See, e.g., D.I. 147
at 2-3) Alternatively, a reasonable jury could find t~at Schwan's alternative contention-that
even if the San Diego Document obligated Schwan' s to pay for all Treated Households,
including those in the top and bottom two deciles, the Amendment eliminated Schwan' s payment
obligation other than for the middle seven deciles - accurately characterizes what actually
occurred between the parties. More importantly, a reasonable jury could instead find that Opera
is correct: that Schwan's "instruct[ed]" Opera to treat more than the middle seven deciles of
Active Households and further agreed to pay License Fees for all such households. (D .I. 148 at
2) There is sufficient evidence in the record from which a reasonable jury could find for either
Schwan's or Opera on these points. (See, e.g., DJ. 130-7 Ex. G § 3.2(d); D.I. 131 Ex. A at 41;

9

D.I. 133 Tap 26) 2
Accordingly, Schwan's has failed to persuade the Court that summary judgment is
warranted.

2.

Production Licenses Count

Schwan's contends that the CSLA and Amendment allowed for an "annual reset" of
Schwan's Production License Threshold on each January 1. (D.I. 129 at 18) In support of its
argument, Schwan' s cites to the San Diego Meeting, which, in Schwan' s view, "reflect[ed] the
parties' pre-existing understanding that [the] attrition of inactive ·customers was determined at the
beginning of each calendar year." (Id. at 17 (internal quotation marks omitted); see also D.I.
133-14 Tab 25 at 4)
Opera's response to Schwan's argument is twofold. First, Opera argues that Schwan's
motion for summary judgment on Opera's license fee overage claim is "foreclosed" by the

2

With the mo.st recent round of letter briefing, Opera sought to supplement the record by
introducing, for the first time, certain invoices Schwan's had sent to Opera during the course of
their business relationship. (See D.I.143 at 3) These invoices, according to Opera, show
Schwan's being billed for Active Households outside of the middle seven deciles, and thus, in
Opera's view, support a finding that Schwan' s agreed to pay for Treated Households that were
not within the middle seven deciles of Active Households. (See id.) Schwan' s disputes the
import of these invoices, at least some of which predate the Amendment. (See D.I.·147 at 2-3)
Schwan's objects to the Court even considering these invoices as they were not produced in
discovery and were only first cited by Opera after the summary judgment record had long been
closed. (See id. at 2)
For purposes of deciding Schwan's motion for summary judgment, the Court does not
consider Opera's invoices, given the timing of their production. In any event, considering the
invoices would not a_lter the Court's conclusions on Schwan's Motion; to the contrary, the
invoices further confirm the existence of genuine disputes of material fact. The Court does not
decide at this time whether Opera'.s invoices will be admissible at trial. To the extent the parties
dispute admissibility, they may present that issue as a motion in limine in their forthcoming
pretrial order.
10

Court's Memorandum Opinion on Opera's motion to dismiss (D.I. 101). (D.I. 132 at 10)
Specifically, Opera notes that the Court found the Amendment's provisions on the Production
License count to be "ambiguous" and Opera's position to be "reasonable." (Id.; Tr. at 31) In
Opera's view, the Court's previous determination at the motion to dismiss stage is sufficient to
"preclude[] summary judgment." (D.I. 132 at 10) (internal punctuation omitted)
The Court disagrees. In deciding Opera's motion to dismiss, the Court considered only
the pleadings, the CSLA, and the Amendment. (See D.I. 101 at 4-5) In deciding Schwan's
motion for summary judgment, however, the Court may examine any evidence in the record to
determine if there is a genuine dispute of material fact. Given the totality of evidence that the
Court may consider during summary judgment, the Court's conclusions in the Memorandum
Opinion on Opera's motion to dismiss do not automatically preclude an award ofsummary
judgment.
Opera's second response is more persuasive. Opera observes that § 6.1 of the
Amendment provides that Production Licenses "terminate upon the expiration of the Term" and
contains "no mention of an annual reset on January 1st of each year." (D.I. 132 at 15 (internal
quotation marks omitted); see also D.I. 130-10 Ex. J § 6.1) In Opera's view, it would "make
[no] sense for the [Amendment] to contemplate [an annual] reset" because the CSLA provides
that the License Period for each Production License is for the particular twelve-month period
when "each Treated Household [is] assigned a Production License." (D.I. 132 at 13-15
("Production Licenses were paid for in [twelve-month] '[l]icense [p]eriod[s].' ... The License
Period for each Production License began when each Treated Household was assigned a
Production License."); see also D.I. 130-7 Ex. G §§ 6.1, 6.3) Opera notes that§ 6.3 ofthe

11

Amendment specifies that "Schwan's shall owe $0.08 per month for the remaining Term of the

[A]greement for any Production Licenses in excess of the Production License Threshold." (D.I.
132 at 15-16 (emphasis in original); see also Tr. at 40; D.I. 130-10 Ex. J § 6.3) As Opera sees it,
"[i]f the Production License count reset every January 1st, then the excess license fees due to
· Opera would be determined by reference to the number of months remaining in the calendar year,

not the number of months remaining in the Term." (D.I. 132 at 16) (emphasis in original)
A reasonable finder of fact could - but, on the current record, need not - agree with
Opera. That is, there is a genuine dispute of material fact as to whether the parties agreed to
restart the Production Licenses count each January 1. Schwan' s may be able to prove that the
San Diego Document memorialized the parties' understanding that attrition rates would be
..

calculated at the beginning of each calendar year. (See D.I. 133-14 Tab 25 at 4) But Opera's
. conflicting interpretation of the evidence - essentially, that the parties agreed to a cumulative,
rather than an annual, count of Production Licenses - may alternatively persuade a reasonable
Jury. (See D.I. 132 at 15-16)
Accordingly, Schwan's has failed to persuade the Court that summary judgment is
warranted.

3.

Redeployment of Production Licenses

Schwan's Motion is further premised on its contention that the Amendment removed the
CSLA's restrictions on redeployment of Production Licenses from Inactive Households to Active
Households. (See D.I. 129 at 17) Schwan's contends that § 6.2 of the Amendment is in
substance a redeployment clause, as it allows Schwan' s to determine "which unique households
would be served during each calendar year." (D.I. 138 at 5-6) (internal quotation marks omitted)

12

Schwan's explains that its positiqn is consistent with "the intent underlying" the Amendment,"
which was "to reduce Schwan' s expenses related to the contract" and "reduce customer
attrition." (D.I. 129 at 17) (emphasis omitted) Restrictions on redeployment would, instead,
have increased Schwan's costs and incentivized Opera to maximize customer attrition,
provisions to which Schwan' s would not have agreed, particularly given the strong voices within
Schwan's that preferred to end the business relationship with Opera altogether. (See id. at 6-7)
As additional evidence that the Amendment permits redeployment, Schwan's points out
that Opera's contrary interpretation would mean that Schwan's would have exceeded the
· Production License Threshold within approximately five to seven months after execution of the
Amendment. Schwan' s ·bases this argument on its view of the record that at the time the
Amendment was executed, Opera treated approximately 2. 7 million cus~omers and had a "chum
rate" (i.e., the .rate at which current customers stopped buying from Schwan's and were replaced
by new customers) of approximately 20% annually, which is equal to around 45,000 customers
per month. Doing the appropriate math, Schwan' s would have had available to it only about
300,000 Production Licenses, and would use about 45,000 of those each month, meaning it
would exceed the Production License Threshold just about a half of a year after executing the
Amendment. 3 Schwan's asks the common sense point: why would it agree to do such a thing?
Schwan's answer, of course, is that it would do nothing of the kind, and that what occurred

3

The evidence supporting Schwan's calculation is found and/or discussed in, among other
places, Tr. at 17 (chum rate); D.I. 133-3 Tab 12 at 150 (number of customers). Schwan's
calculation, and Opera's competing calculations - based on a base of just 2.2 or 2.5 ni.illion
customers at the execution of the Amendment, implying that it was knowable at that date that the
Production License Threshold would not be· exceeded for approximately two years - were also
discussed at length during the March 17, 2017 teleconference. (See also Tr. at 46; D.I. 143 at 1
n.2; D.I. 130-31 Ex. EE at 6)
13

instead is that the parties agreed and understood that the Amendment permitted redeployment, so
any "chum" would only move Schwan' s closer to the Production License Threshold to the extent
that new Treated Households gained exceeded the loss of old Treated Households.
While Schwan's tells a persuasive story, it is not the Court's task at summary judgment to
weigh the evidence. For there is, contrary to Schwan's view, competing evidence, from which a
reasonable jury might find that Opera's contrasting view of what occurred is actually correct. In
Opera's view, the absence of any redeployment provisions in the Amendment "demonstrate[s]
[the] parties' intent" to remove those provisions from the Amendment. 4 (D.I. 132 at 15) For
example, Opera points outthat "[n]ot a single Schwan's witness" could provide an example of
redeployment under the Amendment or "explain how Schwan's would have gone about
requesting redeployment." (Id. at 16) (emphasis omitted) In particular, Opera cites testimony of
Schwan' s former vice president, Bob Beckwith, who stated that "the absence of a redeployment
provision meant that there was no right ofredeployment." 5 (Tr. at 43, 59-60)
Genuine disputes of material fact preclude granting Schwan' s summary judgment with
·respect to whether the Amendment allowed redeployment.

4

0pera again insists that the Court's Memorandum Opinion on Opera's motion to dismiss
(D.I. 101), stating the CSLA's provisions on redeployment were "ambiguous" and describing
Opera's position as "reasonable" (id. at 9), "preclude[] summary judgment" (D.I. 132 at
10) (internal punctuation omitted) For the reasons already exphiined, the Court disagrees with
Opera.
The parties h.ave a disagr~ement as to whether Beckwith had adequate knowledge to
testify reliably about the Amendment. Opera contends that Beckwith was "heavily involved" in
negotiating the Amendment (Tr. at 43; see also id. at 68), but Schwan's insists that Beckwith was
"booted out of the negotiations on the Amendment" (id. at 60). A factfinder will have to
determine how much, if any, weight to give to Beckwith's testimony (assuming he is called to
testify at trial).
5

14

***
As the record reveals genuine disputes of material fact with respect to each of the three
premises on which Schwan's motion for summary judgment on Opera's Production Licenses
claim is based, the Court will deny Schwan' s Motion as to this claim.

B.

Opera's Bonus Payments Claims

Schwan's seeks summary judgment that Opera's bonus payments claims fail as a matter
oflaw. In Schwan's view, Schwan's acted in good faith by attempting to negotiate the
Amendment's bonus schedule prior to January 31, 2011, the deadline set by the Amendment.
(See D.I. 129 at 19-20) Schwan's further contends that its lack of bad faith is sufficient to

dismiss Opera's equity-based claims: unjust enrichment, promissory estoppel, and quantum
meruit. (See D.I. 138 at 9) ·Finally, Schwan's contends that "Opera is unable to establish any
damages flowing from the [parties'] failure ... to reach [an] agreement on a new bonus term."
(D.I. 129 at 20)
The Court addresses each of these arguments below.

1. ·

Good Faith Negotiations

Schwan' s argues that it "attempt[ed] to negotiate a bonus term [in good faith]" prior to
January 31, 2011 (D.I. 129 at 20), citing evidence that it took steps to negotiate the bonus term
"from September 1, 2010 (the effective date of the Amendment) to January 31, 2011" (D.I. 138
at 8 (emphasis omitted); see also D.l. 129 at 19-20) Opera responds that Schwan's made "[the]
resolution of the 2011-2013 bonus provision by January 31st impossible" by moving the meeting
to discuss the bonus term from January 28, 2011 to February 3, 2011. (D.I. 132 at 18)
The implied covenant of good faith and fair dealing "requires a party in a contractual
15

relationship to refrain from arbitrary. or unreasonable conduct [that] has the effect of preventing
the other party to the contract from receiving the fruits of the bargain." Dunlap v. State Farm
Fire & Cas. Co., 878 A.2d 434, 442 (Del. 2005) (internal quotation marks omitted). "A finding

of bad faith is necessarily a fact-intensive inquiry.·" RGC Int 'l Inv 'rs, LDC v. Greka Energy
Corp., 2001WL984689, at *11 (Del. Ch. Aug. 22, 2001) (internal quotation marks omitted).

"[The] term 'bad faith' is not simply bad judg[]ment or negligence, but rather it implies the
conscious doing of a wrong because of dishonest purpose or moral obliquity; it is different from
the negative idea of negligence in that it contemplates a state of mind affirmatively operating
with furtive design or ill will." Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund,
IL L.P., 624 A.2d 1199, 1208 n.11 (Del. 1994) (internal quotation marks omitted; first alteration

· in original).
Under this standard, and viewing the evidence in the light most favorable to Opera, the
evidence fails to raise a genuine dispute of material fact. Opera does not dispute the evidence
Schwan's points to that Schwan's attempted to negotiate a bonus term "from September 1, 2010
(the effective date of the Amendment) to January 31, 2011." (D.I. 138 at 8 (emphasis omitted);
see also generally D.I. 132 at 18) Nor does Opera contend that Schwan's acted in procedural bad

faith by failing to engage with Opera in negotiating the bonus term. (See D.I. 138 at 8) Finally,
although Opera emphasizes that Schwan's rescheduled the parties' January 28 meeting to
February 3, thus "making resolution of the 2011-2013 bonus provision by January 31st
impossible," Opera does not argue -nor cite record evidence from which a reasonable jury could
find - that Schwan' s actions were motivated by "dishonest purpose" or "ill will" or were ,
"unreasonable" or "arbitrary." (D.I. 132 at 18; see also Dunlap, 878 A.2d at 442; Desert
16

Equities, 624 A.2d at 1208 n.11)

Accordingly, the Court will grant summary judgmentto Schwan's on Opera's implied
covenant of good faith and fair dealing claim.

2.

Equity-Based Claims

Schwan' s next argues that "Opera's claims for ... unjust enrichment ... , promissory
estoppel ... , and quantum meruit ... should be dismissed because Opera has not come forward
with facts showing procedural bad faith." (D .I. 13 8 at 9) Opera counters that procedural bad
faith is not required "per se as an element" of any of its equity-based claims. (Tr. at 54; see also
D.I. 132 at 19) The Court agrees with Opera. Thus, the lack of evidence from which a
reasonable jury could find that Schwan's acted with procedural bad faith does not defeat Opera's
equity-based claims. Therefore, Schwan's is not entitled to ·summary judgment on these claims.

3.

Damages.

Finally, Schwan's contends that "Opera's equity-based claims for a bonus fail as a matter
of law" because "Opera is unable to establish any damages flowing from the [parties'] failure ...
to reach [an] agreement on a new bonus terni." (D.I. 129 at 20) Schwan's points to evidence
that its sales did not increase from 2011to2013, "which means that Opera would not have
received a bonus under any bonus term based on macro sales number impacts," even ifthe
parties had agreed to a bonus provision. (Id.) (emphasis in original)
Opera responds that it need not prove damages to succeed on its equity-based claims.
(See D.I. 132 at 18-19) Opera further contends that "genuine issues of material fact preclude ...

an assumption" that Opera would not have received a bonus, for reasons including that macro
sales number impacts could include metrics other than an increase in Schwan' s net sales. (Id. at
17

20)
The Court agrees with Opera. Damages are not part of Opera's prima facie case on any of
its remaining equity-based claims: unjust enrichment, promissory estoppel, and quantum meruit.
(See D.I. 132 at 19) (citing cases) To the extent damages are part of the relief Opera is seeking
(see D.I. 78 at 14-15), Opera points to record evidence from which a reasonable jury may

conclude that some metric other than Schwan's net sales would have been the metric the parties
may have agreed to as the basis for determining a bonus under the Amendment (see D.l. 132 at
20; D.I. 138 at 9)
Accordingly, the Court will deny Schwan's motion for summary judgment that Opera's
remaining equity-based claims fail as a matter oflaw.

IV.

CONCLUSION
For the foregoing reasons, the Court will grant in part and deny in part Schwan's Motion.

An appropriate Order follows.

18