Blattman et al v. Siebel et al
MEMORANDUM OPINION re 125 Motion to Dismiss, 127 Motion for Leave to Amend the Complaint. Signed by Judge Gregory M. Sleet on 3/31/2017. (asw)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
Plaintiffs I Counterclaim-Defendants,
THOMAS M. SIEBEL, DAVID SCHMAIER, )
JOHN DOE 1, and JOHN DOE 2,
Defendants I Counterclaim-Plaintiffs.
C3, INC. d/b/a C3 IoT,
Plaintiff I Counterclaim-Defendant,
ERIC BLATTMAN, individually and as an
assignee of certain former members ofE2.0
LLC, LAMB FAMILY LLC, and DAVID
Defendants I Counterclaim-Plaintiffs.
ERIC BLATTMAN, individually and as an
assignee of certain former members ofE2.0
LLC, LAMB FAMILY LLC, and DAVID
Civ. No. 15-530-GMS
Civ. No. 16-750-GMS
Joanne P. Pinckney, Esquire and Seton C. Mangine, Esquire of Pinckney, Weidinger, Urban and
Joyce LLC, Greenville, Delaware. Counsel for Eric Blattman, Lamb Family LLC, and David
Staudinger. Of Counsel: Timothy F. Butler, Esquire, David J. McCarthy, Esquire, and Thomas
B. Noonan, Esquire of Tibbetts, Keating & Butler, LLC, New York, New York, and Stephen D.
Raber, Esquire, Jonathan M. Landy, Esquire, and John McNichols, Esquire of Williams &
Connolly LLP, Washington, D.C.
Kenneth J. Nachbar, Esquire and Lauren K. Neil, Esquire of Morris, Nichols, Arsht & Tunnell
LLP, Wilmington, Delaware. Counsel for C3, Inc. Of Counsel: Michael B. Carlinsky, Esquire,
Joseph Milowic III, Esquire, John H. Chun, Esquire, and Clinton Dockery, Esquire of Quinn
Emanuel Urquhart & Sullivan, LLP, New York, New York.
Eric Blattman, Lamb Family LLC, and David Staudinger owned interests in Efficiency 2.0
LLC ("E2.0") before its merger with C3, LLC, now C3, Inc. ("C3"). (D.I. 28
Siebel ("Siebel") and David Schmaier ("Schmaier") are the Chief Executive Officer and Chief
Operating Officer of C3, respectively. This case consolidates two actions that are essentially
mirror opposites: Civ. No. 15-530-GMS, referred to as the "Blattman Action," and Civ. No. 16750-GMS, referred to as the "C3 Action." The plaintiffs and claims in one case are essentially the
defendants and counterclaims in the other case. The only pertinent difference between the two
actions is that officers of C3 (Siebel and Schmaier) are the defendants/counterclaim-plaintiffs in
the Blattman Action, but C3 alone is the plaintiff/counterclaim-defendant in the C3 Action.
Pending before the court is a motion filed by C3 to dismiss the counterclaims in the C3
Action. (D.1. 125). Also pending before the court is a motion filed by Eric Blattman, Lamb Family
LLC, and David Staudinger to amend/correct their complaint in the Blattman Action. (D.I. 127).
The court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331 (federal
question jurisdiction), 15 U.S.C. § 78aa Gurisdiction for violations of the Exchange Act), and 28
U.S.C. § 1332 (diversity of citizenship). For the following reasons, the motion to dismiss is
granted in part and denied in part, and the motion to amend is granted.
The parties have reached this point through a tortured procedural history, which the court
reduces to the following essential facts. On October 28, 2014, Eric Blattman, Lamb Family LLC,
and David Staudinger (the "Plaintiffs") sued Siebel and Schmaier (the "Defendants") in the U.S.
District Court for the Southern District of New York for securities fraud and common law fraud
based on events related to the merger transaction in which C3 acquired E2.0 (the "Blattman
Action"). 1 (D.I. 1). C3 was not named as a party in that action. (Id.). Plaintiffs amended the
complaint on March 27, 2015 to add a breach of contract claim based on Defendants failure to
cause C3 to fund E2.0's three-year budget, thereby hindering E2.0's ability to achieve an earnout
provided for in the merger agreement. (D.I. 28
'if 158). On June 16, 2015, the New York court
granted Defendants' motion to transfer the Blattman Action to this court based on the forum
selection clause in the merger agreement. (D.I. 44). On April 12, 2016, this court granted
Defendants' motion to dismiss Plaintiffs' breach of contract claim based on an integration clause
in the merger agreement, but denied Defendants' motion to dismiss the fraud claims. (D.I. 65).
In June 2016, Defendants answered the complaint and asserted counterclaims, later
amended, for securities fraud, common law fraud, breach of contract, recoupment, and attorneys'
fees. 2 (D.I. 69, D.I. 71). Shortly thereafter, C3 moved to intervene in the Blattman Action. (D.I.
79). Nevertheless, on August 25, 2016, before the court could rule on the motion to intervene, C3
initiated its own action against Plaintiffs (the "C3 Action") asserting claims that were identical to
Defendants' counterclaims in the Blattman Action. (C3 Action D.I. 1). The court consolidated
the Blattman Action and the C3 Action. (D.I. 92).
On October 22, 2016, Plaintiffs answered C3's complaint and asserted counterclaims for
securities fraud, common law fraud, and breach of contract. (D.I. 120). The fraud counterclaims
To avoid confusion, the court will continue to refer to Eric Blattman, Lamb Family LLC,
and David Staudinger as the "Plaintiffs" and Siebel and Schmaier as the "Defendants," even when
referring to arguments, claims, and defenses raised in the C3 Action where Eric Blattman, Lamb
Family LLC, and David Staudinger are technically the defendants/counterclaim-plaintiffs.
These counterclaims are subject to a pending motion for a judgment on the pleadings which
has not been fully briefed. (D.I. 85).
against C3 are identical to the fraud claims against Defendant. (Id.). The breach of contract
counterclaims relate to the distribution of "Holdback Units" and the achievement of an eamout.
161-67). Specifically, Plaintiffs allege that C3 breached its obligations in the merger
agreement to: (1) distribute the Holdback Units by November 1, 2013; (2) not engage in any badfaith interference with an Eamout achievement, and (3) deliver Eamout Notices at the end of the
2013, 2014, and 2015 fiscal year that properly reported profit and revenue. (Id.). On March 29,
2017, C3 voluntarily dismissed its claims in the C3 Action, leaving only Plaintiffs' counterclaims
at issue in that action. (D.I. 180). This procedural development does not change the court's
analysis. (D.I. 180).
On May 1, 2012, E2.0, C3, and Thomas Scaramellino, as Securityholder Representative of
E2.0's unitholders, executed amerger agreement pursuant to which C3 acquired Plaintiffs interests
in E2.0, and E2.0 merged with a wholly owned subsidiary of C3. (D.I. 28
41). Section 1.4 of
the merger agreement provided for an eamout under which Plaintiffs could receive over the next
three years additional C3 Class C shares purportedly worth $25 million depending on the extent to
which the E2.0 subsidiary of C3 attained certain minimum revenue and maximum loss targets (an
"Eamout Event"). (Id. at
43). The same section of the merger agreement provided that, until
. March 31, 2015, C3 would not take "any action in bad faith whose purpose is to intentionally
minimize or intentionally interfere with the achievement of any Eamout Event." (D.I. 120 ~ 163).
To determine if an Eamout Event occurred, C3 was obligated to deliver within 120 days of the end
of the 2013, 2014, and 2015 fiscal year a written "Eamout Notice" specifying E2.0's revenue and
profits for that year, and whether any Eamout Units would be paid. (Id.
C3 delivered Earnout Notices for 2013 and 2014, which Plaintiffs allege misrepresented
E2.0's revenue and profit. (Id. at ,-r 166). For 2015, C3 failed to deliver any Earnout Notice at all.
(Id. at ,-r 167). In addition, Plaintiffs allege that C3 interfered in bad faith with the achievement of
an Earnout Event. (Id. at ,-r,-r 163-64). Specifically, C3 deliberately failed to support the E2.0
subsidiary, siphoned its assets for the pursuit ofC3's business, and wrongfully manipulated E2.0's
earnings. (D.I. 134 at 4-5). For example, in November 2012, C3 terminated the employees and
closed the offices of the E2.0 subsidiary. (D.I. 28 ,-r 127). C3 also "failed to honor the approved
budget for the E2.0 Business." (Id. at ,-r 164).
Under Section 1.2 of the merger agreement, C3 was permitted to retain Holdback Units
from the number of shares delivered to Plaintiffs upon closing, but C3 had to issue the Holdback
Units to Plaintiffs on a pro rata basis within 18 months of closing, as long as C3 had not given the
Securityholder Representative a Notice oflndemnification Claim (the "Indemnification Notice").
(Id. at ,-r 161). Accordingly, C3 had until November 1, 2013 to issue the Holdback Units. Instead,
on October 4, 2013, C3 sent Plaintiffs an Indemnification Notice explaining that, due to breaches
of E2.0's representations and warranties in the merger agreement regarding its business pipeline,
software defects, and source code, C3 had incurred an indemnification claim for an amount in
excess of the Holdback Units and, therefore, would not be distributing any Holdback Units to
Plaintiffs. (D.I. 120 ,-r 162, D.I. 126-2). The breaches outlined in the Indemnification Notice form
the basis of Defendants' counterclaims and C3's claims. (D.I. 71, C3 Action D.I. 1).
STANDARD OF REVIEW
Motion to Disniiss
To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), plaintiff must plead facts
sufficient to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662,
677-78 (2009) (quoting Bell At!. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Fed. R. Civ. P.
8(a)(2) requires "only a short and plain statement of the claim showing that the pleader is entitled
to relief, in order to give the defendant fair notice of what the claim is and the grounds upon which
it rests."' Twombly, 550 U.S. at 545 (internal punctuation and quotation marks omitted). Although
"[d]etailed factual allegations" are not required, "[t]hreadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not suffice." Ashcroft, 556 U.S. at 678.
When considering a Rule 12(b)(6) motion, the court accepts "as true the factual allegations in the
complaint and all reasonable inferences that can be drawn therefrom." Trump Hotels & Casino
Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998).
Leave to Amend
Whether to grant or deny a motion for leave to amend is within the district court's
discretion. Foman v. Davis, 371U.S.178, 182 (1962). Fed. R. Civ. P. 15(a)(2) provides that leave
to amend a party's pleading should be freely given "when justice so requires." The Third Circuit
has adopted a liberal approach to the amendment of pleadings to ensure that "a particular claim
will be decided on the merits rather than on technicalities." Dole v. Arco Chem. Co., 921F.2d484,
486-87 (3d Cir. 1990). "Among the grounds that could justify a denial of leave to amend are
undue delay, bad faith, dilatory motive, prejudice, and. futility." In re Burlington Coat Factory
Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997).
In the C3 Action, Plaintiffs assert three counterclaims: (1) securities fraud, (2) common
law fraud, and (3) breach of contract based on C3's obligation to distribute the Holdback Units,
not engage in any bad-faith interference with an Eamout achievement, and deli\;er Eamout Notices
at the end of the 2013, 2014, and 2015 fiscal year. (D.I. 120 iii! 161-67). Plaintiffs have moved to
amend/correct their complaint, which would add C3 as a defendant and the breach of contract
counterclaims as claims to the Blattman Action. (D.I. 127). C3 opposes the motion to amend and
has moved to dismiss the counterclaims based on the same arguments. (D.I. 125, D.I. 135).
According to C3, all of the counterclaims (except breach of contract based on the Eamout Notices)
are untimely under the applicable statute oflimitations. (D.I. 126 at 14-17). If the court finds that
the fraud counterclaims are not untimely, C3 argues that they should still be dismissed pursuant to
a general release executed by Plaintiffs. Finally, C3 argues that the breach of contract counterclaim
based on the Eamout Notices is precluded by a binding arbitration provision in the merger
agreement. Each of these arguments are addressed in tum.
Statute of Limitations
C3 argues that all of Plaintiffs' counterclaims (except breach of contract based on the
Eamout Notices) should be dismissed as untimely. (D.I. 126). Plaintiffs filed their counterclaims
against C3 on October 22, 2016. (D.I. 120). According to C3, however, the statute oflimitations
expired in December 2014 for securities fraud, December 2015 for common law fraud, October 4,
2016 for breach of contract related to the Holdback Units, and November 2015 for breach of
contract related to bad faith interference with an Eamout Event. (D.I. 126 at 2, 16-17). Plaintiffs
argue that their counterclaims are not untimely, because they are either compulsory counterclaims
or relate back to the pleadings in the Blattman Action. (D.I. 134 at 8-9, D.I. 136 at 4-6).
Plaintiffs counterclaimed that C3 breached the merger agreement when it failed to issue
the Holdback Units within 18 months of closing. (D .I. 120 ifil 161-62). According to Defendants,
this counterclaim is subj'ect to a three-year statute of limitations that began to accrue on October
4, 2013, when C3 sent Plaintiffs an Indemnification Notice stating that it would not be distributing
any Holdback Units. (D.I. 126 at 15). If correct, then Plaintiffs' counterclaim filed on October
22, 2016 was late unless a tolling doctrine applied. (Id.). Plaintiffs argue that the counterclaim is
a compulsory counterclaim and, therefore, the limitations period was tolled upon the filing of C3 's
complaint on August 25, 2016. (D.1. 134 at 8).
"The majority view in federal court is that 'the institution of plaintiff's suit tolls or suspends
the running of the statute of limitations governing a compulsory counterclaim.'" Kiclflip, Inc. v.
Facebook, Inc., 2015 WL 1517237, at *5 (D. Del. Mar. 31, 2015) (quoting Giordano v. Claudio,
714 F. Supp. 2d 508, 523 (E.D. Pa. 2010). The Federal Rules of Civil Procedure define a
compulsory counterclaim as one which "arises out of the transaction or occurrence that is the
subject matter of the opposing party's claim." Fed. R. Civ. P. 13(a)(l)(A). "[W]hen one party to
a contract puts provisions of it at issue ... all actions taken pursuant to that contractual relationship
become part of the relevant transaction or occurrence." Matrix Grp., Jnr.:. v. Ford Motor Credit,
2004 WL 2742835, at *3. (E.D. Pa. Nov. 29, 2004).
In its complaint, C3 Claims that Plaintiffs breached the representations and warranties in
the merger agreement regarding E2.0's business pipeline, software defects, and source code. (C3
82-87). The same breaches formed the basis of the indemnification claim
that C3 said in its Indemnification Notice exceeded the value of the Holdback Units. (D.I. 120 ~
162, D.I. 126-2). If the court finds that Plaintiffs did not breach the representations and warranties
in the merger agreement, then C3 did not incur an indemnification claim that exceeded the value
of the Holdback Units,
C3 breached the merger agreement by not issuing the Holdback Units
to Plaintiffs. Accordinglt, Plaintiffs breach of contract counterclaim based on the Holdback Units
is a compulsory counter?laim that arises out of the same transaction or occurrence that is the
subject matter of C3 's br~ach of contract claim, making Plaintiffs' counterclaim timely as it relates
back to the filing of C3 's complaint. C3 's motion to dismiss the breach of contract counterclaim
based on the Holdback Units as time barred is denied.
The court finds that the remaining counterclaims subject to C3's statute of limitations
defense (fraud and breach of contract based on bad faith interference) are not untimely, because
they relate back to the claims in the Blattman Action. As an initial matter, C3 relies on US. ex
rel. Malloy v. Telephonies Corp. for the proposition that Rule 15(c) "does not permit a complaint
filed in one civil action to relate back to a complaint filed in a separate civil action." 68 F. App'x
270, 273 (3d Cir. 2003). Malloy, however, is distinguishable. Plaintiff in that case tried to avoid
a statute of limitations defense by relating two separate qui tam actions he initiated against the
same defendant using the same complaint. Id. at 272. Here, Plaintiffs did not initiate two separate
civil actions. Instead, they are plaintiffs in the Blattman Action and defendants/counterclaimplaintiffs in the C3 Action. Moreover, if permitted to amend their complaint, Plaintiffs' claims
would relate back to a pleading in the same civil action. Given the unusual procedural context of
this case, the court finds that Malloy does not apply.
Under Fed. R. Civ. P. 15(c)(l)(A), "[a]n amendment to a pleading dates back to the date
of the original pleading when ... the law that provides the applicable statute of limitations allows
relation back." The purpose of this provision is to permit a party to avail itself of any relationback principle allowed by state law. DeRienzo v. Harvard Indus., Inc., 357 F.3d 348, 353 n. 8 (3d
Cir. 2004) ("Whatever may be the controlling body of limitations law, if that law affords a more
forgiving principle ofrelation back than the one provided in [Rule 15(c)(l)], it should be available
to save the claim." (quoting Fed. R. Civ. P. 15 advisory committee's note to 1991 amendment).
Under Delaware law, a court may grant leave to amend a complaint that adds a new party and
allow those claims to relate back to the date of the original filing if: (1) the claims asserted in the
amended pleading arises from the conduct, transaction, or occurrence advanced in the original
pleading; (2) the new party in the amended pleading received adequate notice of the action so as
not to be prejudiced in maintaining a defense on the merits; (3) the new party knew or should have
known that the action would have been brought against it but for a mistake; and (4) the notice and
knowledge factors were satisfied within the period prescribed for service of process. Wilson v.
Consumers Life Ins. Co., 2000 WL 1211169, at *2 (Del. Super. Aug. 1, 2000); Dobson v McKinley,
2009 WL 891056, at *3 (Del. Super. Mar. 31, 2009).
C3 argues that there can be no mistake that satisfies the third prong, because Plaintiffs
knew C3 's identity since the beginning and undertook a deliberate litigation strategy of suing only
C3's officers and not C3. 3 (D.I. 135 at 15). Delaware courts have permitted relation back under
these circumstances where "the party to be added is no stranger to the litigation, is actively
involved in defending a third-party complaint, and is thus already a party in the case." Dobson,
2009 WL 891056, at *4. The courts have reasoned that permitting the amendment and relation
back "will actually simplify the case for trial, make the presentation to the jury more sensible, help
prevent a verdict based on hyper-technical form grounds, and give a genuine focus to the substance
of the dispute." Wilson, 2000 WL 1211169, at *3.
Here, C3 is not defending a third-party complaint, but it is certainly no stranger to the
Blattman Action. Instead, C3 's officers are the named defendants, C3 sought to intervene, C3 has
According to C3, Plaintiffs named only Siebel and Schmaier as defendants in the Blattman
Action, because only C3 was a signatory to the merger agreement and, therefore, Siebel and
Schmaier could not claini its protections and benefits. (D .I. 13 5 at 13 ). The court notes, however,
that Siebel and Schmaier have successfully invoked the provisions of the merger agreement to
have the Blattman Action transferred to this court and have the breach of contract claim dismissed.
(D.1. 44, D.I. 65)
asserted claims against Plaintiffs that are identical to the counterclaims Defendants asserted against
Plaintiffs, and Plaintiffs have asserted fraud counterclaims against C3 that are identical to the fraud
counterclaims against Defendants.
Although Plaintiffs may have tried to gain a litigation
advantage by not naming C3 a defendant in their initial complaint, C3 has engaged in similar
behavior by avoiding the court's decision on the motion to intervene and instead filing a mirror
opposite civil action. By granting Plaintiffs leave to amend and finding that the claims against C3
relate back to claims against Defendants, the court can address the substance of the claims and
avoid a verdict based on hyper-technical form grounds.
Finally, the court finds C3's reliance on Garvin v. City of Philadelphia and its progeny
misplaced. (See D.I. 135 at 15). C3 relies on language in Garvin where the Third Circuit stated,
"Of course, an amended complaint will not relate back if the plaintiff had been aware of the identity
of the newly named parties when she filed her original complaint and simply chose not to sue them
at that time." 354 F.3d 215, 221-22 (3d. Cir. 2003). In Garvin, a plaintiff sought to amend her
pleading to substitute the John Doe placeholder defendants with the names of four police officers.
Id. at 218. Here, Plaintiffs are not trying to substitute John Doe placeholders but add an entity as
defendant to a complaint that already names its officers as defendants.
Under Third Circuit precedent, a complaint that names as defendants only officers in their
official capacity is treated as also having named the entity as a defendant. See Johnson v. Doe,
2014 WL 1681988, at *5 (E.D. Pa. Apr. 29, 2014) ("The 'practical effect' of charging 'official
defendants with liability in their official capacity' is to charge the entity with liability."' (quoting
Giuffre v. Bissell, 31F.3d1241, 1247 n. 6 (3d Cir. 1994)). Thus, in Ferencz v. Medlock, another
case on which C3 inaptly relies, the court held that the plaintiff did, in fact, name the entity as a
defendant in her original complaint when she sued only the individual defendants in their official
capacities. 905 F. Supp. 2d 656, 668 (W.D. Pa. 2012). These cases show that Garvin is not
applicable here. Accordingly, Plaintiffs counterclaims against C3 for fraud and breach of contract
based on bad faith interference are not untimely, because they relate back to the date of the original
filing in the Blattman Action, which was before the statute of limitations expired. C3 's motion to
dismiss these counterclaims on statute of limitations grounds is denied.
C3 argues that even if the fraud claims are not time-barred, they should still be dismissed
because Plaintiffs executed a Unitholder Joinder, Release and Lock-up Agreement (the "Release
Agreement") a few days before the merger agreement that expressly released those claims. (D.I.
126 at 13). As a general rule, the court may not consider on a motion to dismiss matters extraneous
to the pleadings. W Penn Allegheny Health Sys. v. UPMC, 627 F.3d 85, 97 n. 6 (3d Cir. 2010).
An exception exists for documents "integral to or explicitly relied upon in the complaint." Id. The
Release Agreement does not fall within any exception. Accordingly, the court cannot address this
argument at this stage of the proceedings. C3 's motion to dismiss the fraud claims based on the
Release Agreement is denied.
C3 argues that the breach of contract counterclaim based on the Eamout Notices must be
dismissed, because the merger agreement compels arbitration of that dispute. (D.I. 126 at 17-18).
Specifically, the merger agreement requires Plaintiffs' Securityholder Representative to object to
the Eamout Notice within twenty days of receipt. (See D.I. 35-1, at§ 1.4(a)(iii)). The objection
"shall specify those items.or amounts as to which the Securityholder Representative disagrees, and
the Securityholder Representative shall be deemed to have agreed with all other items and amounts
contained in the applicable Eamout Notice, including the computation of any Eamout Payment."
(Id.). "If the parties are unable to resolve their differences ... , the matter shall be promptly
referred to a mutually satisfactory independent accounting firm (such selected firm being the
'Earnout Independent Expert')."
Any "resolution of disputed items by the Eamout
Independent Expert shall be final and binding on [C3], the Securityholder Representative and the
Unitholders and the determination of the Earnout Independent Expert shall constitute an arbitral
award that is final, binding and non-appealable and upon which a judgment may be entered by a
court having jurisdiction thereover." (Id.).
The court finds that the breach of contract counterclaim based on the Eamout Notices is
subject to the arbitration provision. Plaintiffs alleged that, for 2013 and 2014, C3 delivered an
Earnout Notice "that intentionally and knowingly did not properly report the Company Business
Unit Revenue and Company Business Unit Profit for fiscal year 2013 and 2014." (D.I. 120 ~ 166).
The Delaware Supreme Court has stated, "If the subject matter to be arbitrated is the calculation
of an earn-out, or the amount of working capital, or the company's net worth at closing, all issues
as to what financial or other information should be considered in performing the calculation are
decided by the arbitrator."
Viacom Intern., Inc. v. Winshall, 72 A.3d 78, 83 (Del. 2013).
Accordingly, the arbitrator can decide whether C3 properly included or excluded certain amounts
in its calculation of Company Business Unit Revenue and Company Business Unit Profit for fiscal
year 2013 and 2014. Plaintiffs have not provided any authority supporting their argument that the
arbitration provis_ion does not apply because C3 may have "intentionally" calculated the Eamout
Notices incorrectly. (D.I. 134 at 9-10). To the extent Plaintiffs are arguing that the Eamout
Notices were incorrect because C3 intentionally degraded E2.0's business, Plaintiffs have already
asserted that claim by alleging breach of contract based on bad-faith interference with an Earnout
achievement. (D.I. 136 at 9).
The breach of contract claim based on the 2015 Earnout Notice is in a somewhat different
position, because C3 never delivered a 2015 Eamout Notice to Plaintiffs. (D.I. 120 ~ 167). Thus, an argument can be made that the arbitration provision in the merger agreement was never
triggered. However, allowing the breach of contract claim based on the 2015 Earnout Notice to
remain a part of this litigation would further exacerbate the parties' tortured procedural history.
Moreover, the Delaware Supreme Court stated in Viacom that the arbitrator-and not the courtcan decide whether a late closing statement could be taken into consideration. Viacom, 72 A.3d
at 83. This language suggests that the arbitrator can decide whether a belated 2015 Earnout
Notice-which the court assumes C3 will now deliver-can be taken into account in rendering a
decision. 4 Accordingly, the court grants C3's motion to dismiss the breach of contract claim based
on the Earnout Notices.
For the foregoing reasons, C3's motion to dismiss is granted in part and denied in part.
(D.1. 125). The motion is granted as to the breach of contract counterclaim based on the Earnout
Notices and denied as to all other counterclaims. C3 moved to dismiss Plaintiffs counterclaims
and opposed Plaintiffs' motion to amend on the same grounds. Accordingly, Plaintiffs' motion
for leave to amend the complaint is granted to the extent the claims were not dismissed. (D.1. 127).
An appropriate order will be entered.
Plaintiffs have not requested specific performance ordering C3 to deliver the 2015 Earnout
Notice. (See D.I. 120 ~~ 165-68 & Prayer for Relief). If that were the case, there may be an
argument-which the parties did not raise-that equitable relief is an issue for the court and not
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