Opinion
650735/2010.
Decided May 6, 2011.
Harold S. Shaftel and Brian J. Capitummino, Esqs. of Cadwalader, Wickersham Taft LLP., The plaintiff was represented by.
David S. Hoffner, Esq. of Dechert LLP., The defendants were represented by.
This action arises from the limited partnership agreement (the LPA) of Aslan Capital Fund I (QP) LP (Aslan or the Fund). Plaintiff, Deloitte (Cayman) Corporate Recovery Services, Ltd. (Deloitte), is the Fund's liquidator. Defendants Sandalwood Debt Fund A, LP and Sandalwood Debt Fund B, LP (collectively Sandalwood) are two of the Fund's limited partners. Deloitte asserts claims against Sandalwood for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) unjust enrichment; and (4) money had and received. Sandalwood moves to dismiss the complaint, and Deloitte opposes the motion.
I. Background
The following facts are drawn from the complaint unless otherwise stated.
Sandalwood invested a total of $25 million in the Fund between October 2006 and January 2007. Compl. ¶¶ 13-14. Toward the end of 2007, Sandalwood began redeeming its investments from the Fund. Compl. ¶ 15. In September 2007, Sandalwood redeemed a total of $2,040,000 from the Fund. Id. In October 2007, it redeemed an additional $5 million and redeemed the same amount in November 2007. Id.
Sandalwood's investment in the Fund and the amounts paid for the redemptions "were valued based upon an estimate at the time of the [Fund's] NAV [net asset value] that was known to be subject to further computations." Compl. ¶ 17. "At that time, the audit of the Fund's annual accounts for the relevant period had not been completed." Id. "As a result [Sandalwood] received [its] redemption payments, based on unaudited data, with the understanding that the NAV on which the amounts were calculated was subject to potential downward adjustment." Id.
The procedure for a limited partner's withdrawal of its investment from the Fund was governed by the LPA. Compl. ¶ 12. Section 5.5(d) of the LPA provides that "the General Partner, in its sole discretion, may affect withdrawal payments. . . ." See Hoffner Aff., Exh. B. It further provides that "distribution of withdrawal proceeds generally will be made within 30 business days after the relevant withdrawal date (subject to holdbacks and reserves). . . . See id. The General Partner had the option of applying a holdback of up to 10% to a limited partner's redemption request. See id. With respect to the 10% holdback, Section 5.5(d) provides that the Partnership "will endeavor to pay the balance (without interest thereon), no later than 30 days after the completion of the audit of the Partnership's books for the year in which such withdrawal occurred, or as soon as practicable thereafter." See id.
In January 2008, Sandalwood sought to redeem the entirety of its remaining investment in the Fund, totaling $14,862,846. Compl. ¶ 16. The Fund's Investment Manager "acted in accordance with its contractual rights . . . and exercised the Holdback — amounting to $1,445,991.82 — or approximately 10% of [Sandalwood's] January 2008 full redemption request." Compl. ¶ 18. "Accordingly, on January 7, 2008, the [Fund] paid [Sandalwood] approximately 90%" of its full redemption request, or $13,416,855, and retained the Holdback "pending the completion of the [Fund's] audit." Id.
Faced with the "serious economic concerns" following the Lehman Brothers' Chapter 11 filing and the earlier liquidity crisis at Bear Stearns and AIG, "on September 29, 2008, the Directors of the [Fund] determined it would be in the best interest of the [Fund] for it to be placed into voluntary liquidation, and for the [Fund] . . . to enter into a period of wind-down." Compl. ¶ 19. The Fund's Investment Manager notified the investors of the Fund of this decision by letter, dated September 30, 2008. Compl. ¶ 20. The letter explained the decision as necessary in light of the fact that the Fund "received withdrawal requests representing approximately 40% of the net asset value of the Funds [collectively, the Fund and an affiliated Master Fund under common management]." Id. The same letter informed the Fund's investors "that the Investment Manager had determined that it was in the best interest of the [] respective Funds and most equitable to all of the Fund's investors to suspend withdrawals from the Partnership." Id.
"[O]n or around November 13, 2008, Sandalwood obtained the funds previously allocated as the Holdback" in the amount of $1,445,991.82. Compl. ¶ 22. "[T]he Investment Manager revalued the Fund's assets, and in April 2009, instructed the Fund's administrator to restate the NAV for the period of January 2007 to November 2008." Id. "As a result of that evaluation and restatement, the Funds experienced a NAV write-down of approximately 18%. The restated NAV was sent to all current and former investors, including Sandalwood." Id.
Deloitte was appointed Liquidator for the Fund on May 25, 2009, pursuant to Section 6.2(a) of the LPA. Compl. ¶ 23; see also Hoffner Aff., Exh. B. It determined that Sandalwood "had obtained gross overpayments through the redemptions of their investments in January 2007 through November 2008 period." Compl. ¶ 23. More specifically, it determined that Sandalwood had been overpaid a total of $1,633,614.66. Id. If the Holdback ($1,445,991.82) had not been released, the overpayment would have been $187,622.84. Id.
"On January 20, 2010, the Liquidator wrote to Sandalwood concerning the overpayment and improper release of the Holdback . . . and demanding the return of those funds." Compl. ¶ 25. "The Defendants were not responsive." Id. "On February 9, 2010, the Liquidator transmitted a follow-up communication, again demanding the return of those funds, which was likewise rebuffed." Id. In June 2010, the liquidator commenced this action asserting claims for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) unjust enrichment; and (4) money had and received.
II. Discussion
On a motion to dismiss pursuant to CPLR 3211, the court must accept the facts as alleged in the complaint as true and accord plaintiff the benefit of every possible favorable inference. Morone v Morone, 50 NY2d 481, 484 (1980); Rovello v Orofino Realty Co., 40 NY2d 633, 634 (1976).
All four causes of action in the complaint are governed by Delaware law. Section 8.5 of the LPA contains a choice-of-law provision that states:
This agreement and the rights of the Partners hereunder are governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws rules thereof.
See Hoffner Aff. Exh. B. "The scope of [a choice of law provision] is a matter of contract construction and interpretation . . . which would in turn be governed by the law selected in the choice-of-law provision." [citations omitted] Weil v Morgan Stanley DW Inc., 877 A2d 1024, 1032, fn. 16 (Del Ch 2005). Hence, the scope of the choice-of-law provision in this case is also governed by Delaware law.
Under Delaware law, "the court's analysis of a choice of law issue should not . . . create a commercially senseless bifurcation between pure contract claims and other claims that arise solely because of the nature of the relations between the parties created by contract.'" AT T Wireless Services v Federal Insurance Co., 2007 LEXIS 182 *19-20 (Del Super June 25, 2007), citing ABRY Partners V, LP v F W Acquisition LLC, 891 A2d 1032, 1047 (Del Ch 2006) (applying choice-of-law provision to fraud claim). As the Delaware Chancery Court explained in ABRY with regard to tort claims, [t]o hold that [the parties'] choice is only effective as to the determination of contract claims, but not as to tort claims seeking to rescind the contract on grounds of misrepresentation, would create uncertainty of precisely the kind that the parties' choice of law provision sought to avoid. In this regard, it is also notable that the relationship between contract and tort law regarding the avoidance of contracts on grounds of misrepresentation is an exceedingly complex and unwieldy one, even within the law of single jurisdictions. To layer the tort law of one state on the contract law of another state compounds that complexity and makes the outcome of disputes less predictable, the type of eventuality that a sound commercial law should not seek to promote.
ABRY, 891 A2d at 1048.
The claim for breach of the implied covenant of good faith and fair dealing — like the claim for breach of contract — is a contract claim and, thus, clearly governed by Delaware law under the LPA's choice-of-law provision. See Breakaway Solutions, Inc. v Morgan Stanley Co. Inc., 2004 LEXIS 125 *8, fn. 3, *47-50 (Del Ch August 27, 2004) (applying New York choice-of-law contract provision to claim for breach of the covenant of good faith and fair dealing). The state law selected in the choice-of-law provision also applies to an unjust enrichment claim pleaded in the alternative to a breach of contract claim. See Id. at 54-56 (applying New York choice-of-law contract provision to unjust enrichment claim). Under the ABRY logic, the same result is warranted with respect to a claim for money had and received, which is the legal equivalent of an equitable action for unjust enrichment. See Stone v White, 301 US 532, 534-35 (1937); see also United States v Jefferson Electric Manufacturing Co., 291 US 386, 402-403 (1934) (explaining that action for money had and received "aims at the abstract justice of the case, and looks solely to the inquiry, whether the defendant holds money, which ex aequo et bono belongs to the plaintiff").
A. Breach of Contract
Under Delaware law, "[t]he correct construction of any contract . . . is a question of law." Aetna Casualty and Surety Co. v Kenner, 570 A2d 1172, 1174 (Del 1990). "Limited partnership agreements are contracts the courts will construe like any other contract." Schuss v Penfield Partners, LP, 2008 LEXIS 73 *18 (Del Ch June 13, 2008). "If the contractual language is plain and unambiguous, the Court should give binding effect to its evident meaning." Id. citing Rhone-Poulenc Basic Chemicals Co. v American Motorists Insurance Co., 616 A2d 1192, 1195 (Del 1992). "A contract is not rendered ambiguous simply because the parties do not agree upon its proper construction. Rather, a contract is ambiguous only when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings." [citations omitted] Id. at 1196. "The true test is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant." [citations omitted] Id. "A court must interpret contractual provisions in a way that gives effect to every term of the instrument, and that, if possible, reconciles all of the provisions of the instrument when read as a whole." Council of the Dorset Condominium Apartments v Gordon, 801 A2d 1,7 (Del 2002).
Sandalwood first argues that Deloitte's breach of contract claim should be dismissed because "the Complaint fails to cite to a single provision of the LPA that Deloitte claims was breached by the Sandalwood Fund's receipt and retention of the Holdback." See Defendants' MOL, at 7. The court disagrees. On a motion to dismiss for failure to state a cause of action "a claim should not be dismissed when a cause of action may be discerned no matter how poorly stated . . . [and] any fact that can be fairly implied from the pleadings will be deemed alleged." L. Magarian Co., Ins. v Timberland Co., 245 AD2d 69 (1st Dept 1997).
Section 3.8 of the LPA requires former partners to pay certain amounts to the Fund "on demand." More specifically, Section 3.8(a) contemplates that:
Appropriate reserves may be accrued and charged . . . proportionately against the Capital Accounts of the Partners for contingent liabilities, such reserves to be in the amounts that the General Partner in its sole discretion, deems necessary or appropriate. . . . At the sole discretion of the General Partner, the amount of any such reserve (or any increase or decrease therein) may be charged or credited, as appropriate, to the Capital Accounts of those parties who are Partners at the time when such reserve is created, increased, or decreased, as the case may be, or alternatively may be charged or credited to those parties who were Partners at the time of the act or omission giving rise to the contingent liability for which the reserve was established. [emphasis supplied]
Section 3.8(b) further provides:
If the General Partner in its sole discretion determines that it is equitable to treat an amount to be paid or received as being applicable to one or more prior periods, then such amount may be proportionately charged or credited, as appropriate to those parties who were Partners during such prior period or periods. [emphasis supplied]
Section 3.8(c) finally states that:
In the case of a charge, the former Partner is obligated to pay the amount of the charge plus interest as provided above on demand; provided that (I) in no event is a former Partner obligated to make a payment exceeding the amount of its Capital Account at the time to which the charge relates, and (ii) no such demand may be made if the applicable limitation period under the Act, if any, has expired. [emphasis supplied]
Here, the complaint alleges that [o]n January 20, 2010, the Liquidator wrote to Sandalwood concerning the overpayment and improper release of the Holdback . . . and demanding the return of those funds. The Defendants were not responsive. On February 9, 2010, the Liquidator transmitted a follow-up communication, again demanding the return of those funds, which was likewise rebuffed. [emphasis supplied] Compl. ¶ 25. Further, the complaint alleges that "[a]s a direct result of Defendants' . . . failure to return the overpayment to which they are not entitled, the defendants breached their contractual duties and obligations." Compl. ¶ 28.
If the "overpayment" and/or "Holdback" amounts could be "charged" to Sandalwood under Sections 3.8(a) and 3.8(b), then the complaint alleges that Sandalwood breached Section 3.8(c) by failing to pay these amounts on demand. In the context of a motion to dismiss, the court must accord plaintiff the benefit of this favorable inference, unless Sandalwood shows that the inference would be flawed as a matter of law. See Morone, at 484; Rovello, at 634; Cochard-Robinson v Concepcion ,60 AD3d 800, 802 (2d Dept 2009) (dismissing complaint where documentary evidence conclusively establishes defense as matter of law).
Sandalwood argues that these amounts could not be "charged" to Sandalwood under Sections 3.8(a) and 3.8(b). Sandalwood's first argument focuses on the meaning of "reserves", since only "reserves" may be charged to former partners under Section 3.8(a). Sandalwood argues that "reserve' is defined as money or its equivalent kept in hand or set apart usually to meet liabilities.'" [emphasis in the original] Defendants' MOL, at 9, citing Merriam-webster.com, http:/www.merriam-webster.com/dictionary/reserve (last visited Oct. 25, 2010). According to Sandalwood, since "[a]n adjustment in valuation . . . is not a liability' but a reassessment of an existing NAV [net asset value]," a "reserve" would not be established for an adjustment in valuation. The court disagrees.
First, even if an "adjustment in valuation" is not a liability, as defendant contends, reserves are usually, but not always, established to meet a liability — even under the dictionary definition that Sandalwood provides. See supra. Second, under Delaware law "if technical words are used, they are to be taken in a technical sense, unless a contrary intention clearly appears in either case from the context." Neary v Philadelphia, W. B. R. Co., 9 A. 405, 407 (Del 1887).
Sandalwood's second argument suggests that the word "reserve" is a technical word in the investment fund industry. See Defendants' MOL, at 10.
Sandalwood argues that an investment fund would not create a "reserve" to account for the possibility that it might later conclude that the valuation it ascribed to a particular asset was wrong. In such a situation, a hedge fund might employ a "side pocket" to segregate a difficult to value asset or simply advise that the value of a particular asset is not presently quantifiable. It would not accrue a "reserve" for the possibility of a future adjustment to current market value. Id.
Whether a hedge fund would employ a "side pocket" rather than accrue a "reserve" for the possibility of a future valuation adjustment is a question of fact concerning the practice in the hedge fund industry. A fortiori, the meaning of "reserve" in the LPA, in so far as it depends on this practice, is also an issue of custom and usage in the hedge fund industry that cannot be properly determined by the court in the context of a motion to dismiss and in the absence of expert testimony. See Hill v Hotel Pierre Corp., 28 AD2d 1104, 1106 (1st Dept 1967) ("Proof of custom and usage is clearly within the scope of expert testimony.").
Sandalwood next argues that plaintiff's breach of contract claim is barred by Section 2.8 of the LPA. Section 2.8(b) of the LPA states:
In no event will any Limited Partner (or Former Limited Partner) be obligated to make any contribution to the Partnership in addition to its agreed capital commitment ( or other payments provided for herein) or have any liability for the repayment or discharge of the debts and obligations of the Partnership except to the extent provided herein, or as required by the Act or by such other law.
According to Sandalwood, plaintiff "is essentially claiming that, as a result of Sandalwood Fund's redemption, the Fund does not have sufficient assets to comply with its obligation to the remaining limited partners to redeem their interests based on the Fund's revised valuation." Defendants' MOL, at 9. Consequently — the defendant concludes — plaintiff, in contravention of Section 2.8(b), is attempting to impose liability on Sandalwood as a former partner for "repayment" of a "debt or obligation of the Partnership." See Id.
Section 2.8 does not bar Sandalwood's liability under Section 3.8 for two reasons. First, Section 2.8 limits a former partner's obligations to make contributions " in addition to . . . other payments provided herein" that is, payments provided for in the LPA. An obligation to make a payment under Section 3.8 is an obligation to make a payment under the LPA and, therefore, not limited by Section 2.8. Second, Section 2.8 limits a former partner's liability "for the repayment or discharge of debts and obligations of the Partnership except to the extent provided herein." Ergo, even if plaintiff is attempting to impose liability on Sandalwood for "repayment" of a "debt or obligation of the Partnership" — as Sandalwood contends — if such liability exists under Section 3.8, it is a liability "provided" in the LPA and, thus, not within the scope of Section 2.8(b). As discussed, whether Sandalwood is liable under Section 3.8 remains an issue of fact.As a result, whether Section 2.8 bars liability in this case is also an issue of fact.
Finally, Sandalwood argues that since the valuation of the NAV used to calculate the redemption of Sandalwood's partnership interest is "conclusive and binding" on the Fund under Section 7.2(b), any claim arising from a miscalculation of the NAV is foreclosed as a matter of law. The court disagrees. Section 7.2(b) provides that "[i]n the absence of bad faith or manifest error, the General Partner's net asset valuations are conclusive and binding on all Partners." A determination of bad faith "generally present[s] [a] factual question inappropriate for resolution on a motion to dismiss." See e.g. CAMOFI Master LDC v College Partnership, 452 FSupp 2d 462, 478 (SDNY 2006) [citations omitted]. The same is true of whether the valuation resulted from a "manifest error." In sum, Sandalwood's motion to dismiss plaintiff's breach of contract claim is denied.
B. Breach of the Implied Covenant of Good Faith and Fair Dealing
Under Delaware law, [t]he implied covenant is only breached when the defendant engaged in " arbitrary or unreasonable conduct which has the effect of preventing the other party to the contract from receiving the fruits of the contract." When, as is the case here, the relevant contracts expressly grant the plaintiffs certain rights in the event of particular transactions (such as mergers and, if they had exercised their warrants, certain changes of control), the court cannot read the contracts as also including an implied covenant to grant the plaintiff additional unspecified rights in the event that other transactions are undertaken. To do so would be to grant the plaintiffs, by judicial fiat, contractual protections that they failed to secure for themselves at the bargaining table. [citations omitted] [emphasis supplied]
Aspen Advisors LLC v United Artists Theatre Co., 843 A2d 697, 707 (Del Ch 2004). Further, "[w]here the subject at issue is expressly covered by the contract . . . the implied duty to perform in good faith does not come into play." Dave Greytak Enterprises, Inc. v Mazda Motors of America, Inc., 522 A2d 14, 23 (Del Ch 1992). "A party does not act in bad faith by relying on contract provisions for which that party bargained where doing so simply limits advantages to another party." Nemec v Shrader, 991 A2d 1120, 1128 (Del 2010).
Defendant's motion to dismiss plaintiff's claim for breach of the implied covenant of good faith and fair dealing, is granted. First, the contention that Sandalwood breached the covenant by inducing the General Partner to release the Holdback in violation of Section 5.5(d) of the LPA is unavailing. Section 5.5(d) only provides that the "Partnership will endeavor to pay [the Holdback] no later than 30 days after the completion of the audit of the Partnership's books for the year in which such withdrawal occurred or as soon as practicable ." [emphasis supplied] Section 5.5(d) does not provide that the Partnership may not pay the Holdback earlier. In fact, Section 5.5(d) contemplates that the Partnership may pay one-hundred percent of the "withdrawal proceeds" to a partner before the audit. Thus, even if Sandalwood induced the General Partner to release the Holdback before the audit, it was relying on Section 5.5(d) of the LPA. The fact that such reliance might limit advantages to other partners does not constitute a breach of the implied covenant of good faith and fair dealing. See Nemec, at 1128.
Section 5.5(d) provides that if a Limited Partner requests to withdraw 90% or more of its Capital Account balance (computed on the basis of unaudited data), an amount equal to not less than 90% of the estimated value (computed on the basis of unaudited data) of the withdrawal proceeds payable to such Limited Partner generally will be paid in cash and/or marketable securities ( in the discretion of the General Partner) within 30 business days after such withdrawal date. . . . [emphasis supplied]
Further, Sandalwood's refusal to return the alleged overpayment and/or Holdback amounts on demand does not constitute a breach of the implied covenant. The subject of and circumstances under which a former partner like Sandalwood is obligated to pay back certain amounts to the Fund, is expressly covered by Section 3.8 of the LPA. Accordingly, "the implied duty to perform in good faith does not come into play." See Dave Greytak, at 23. In addition, the court's determination that an issue of fact remains about whether such payment is due under Section 3.8 supports the conclusion that Sandalwood's refusal to pay back the alleged overpayment and/or Holdback was not "arbitrary or unreasonable." See Aspen Advisors, at 707.
C. Unjust Enrichment
The Delaware Supreme Court recently explained that:
Unjust enrichment is "the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience." The elements of unjust enrichment are: (1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and impoverishment, (4) the absence of justification, and (5) the absence of a remedy provided by law.
[citations omitted] Nemec, 991 A.2d at 1130.
The Supreme Court, however, did not address the Court of Chancery's holding "that because the conduct making the . . . enrichment unjust' arises from a relationship governed by contract, that contract alone must provide the measure of the plaintiff's rights.'" Id. at 1131, citing Nemec v Shrader, 2009 LEXIS 67 (Del Ch April 30, 2009). The Supreme Court stated that "[w]hether or not that is a correct view of the law, the [Court of Chancery] did not err in dismissing Count III [the unjust enrichment claim] of the complaint." Id.
It is the Court of Chancery's holding in Nemec that Sandalwood relies on in its motion to dismiss plaintiff's unjust enrichment claim. See Defendants' MOL, at 12-14. The Court of Chancery in Nemec stated that, "Delaware courts . . . have consistently refused to permit a claim for unjust enrichment when the alleged wrong arises from a relationship governed by contract." See Nemec, 2009 LEXIS 67, at * 17, citing Res. Ventures, Inc. v Ress. Mgmt. Int'l, Inc., 42 FSupp2d 423, 440 (D Del 1999); ID Biomedical Corp. v. TM Techs., 1995 LEXIS 34 *39 (Del Ch Mar 16, 1995) ("A party cannot seek recovery under an unjust enrichment theory if a contract is the measure of the plaintiff's rights."). The Chancery Court in Nemec ultimately held that "Plaintiffs cannot . . . maintain an unjust enrichment claim in the face of a valid and enforceable contract." See Nemec, 2009 LEXIS 67, at * 17, citing Albert v Alex. Brown Mgmt. Servs., 2005 LEXIS 133 *8 (Del Ch Aug. 26, 2005) (for the proposition that "there can be no unjust enrichment claim where there is a governing contract").
Here, the relationship between Sandalwood and the Fund is governed by a valid and enforceable contract, the LPA. Hence, under the Chancery Court's holding in Nemec, and the line of Delaware cases cited therein, plaintiff cannot maintain an unjust enrichment claim against Sandalwood in the face of the LPA. The Delaware cases that plaintiff cites are not to the contrary. In Breakaway Solutions, the Court of Chancery was applying New York law to the unjust enrichment claim. See 2004 LEXIS 125, at *56. Hills Store is distinguishable from Nemec, the line of cases cited by the Chancery Court in Nemec, and ultimately the case at bar, because the relationship giving rise to the unjust enrichment claim in Hills Store was not one "governed by contract." See Hills Stores Co. v Bozic, 769 A2d 88, 110, n. 74 (Del Ch 2000); see also Nemec, 2009 LEXIS 67, at * 17 ("Delaware courts . . . have consistently refused to permit a claim for unjust enrichment when the alleged wrong arises from a relationship governed by contract."). The court in Hills Stores explained that the plaintiffs are only entitled to relief in this dispute involving rights under written Employment Agreements if they show that the Covered Executives received Severance improperly as a result of breaches of fiduciary duty by the defendant-directors or breaches of the Employment Agreements themselves. If the plaintiffs make either of the required showings of a fiduciary or contractual breach, relief necessary to ensure that the defendant-directors are not "unjustly enriched" will be awarded, . . . but not because plaintiffs have proven a free-standing "unjust" enrichment claim. Nonetheless, I leave the unjust enrichment claim in the case for a narrow reason. Even if Bozic, Matthews, and Reen can convince me that they had no role in causing any excessive payments to themselves, they still would be unjustly enriched if they received them. Just as someone can't keep a mistakenly excessive tax refund or automatic teller pay out, these defendants cannot hold on to overpayments from the company to which they owed fiduciary duties. [citations omitted] [emphasis supplied] Id.
Unlike in Hills Stores, the unjust enrichment claim at issue here is not one arising from the fiduciary duties that Sandalwood owed to the Fund — for there were none — but rather by the parties' arms-length relationship, which was governed exclusively by contract. See Tolliver v Christina Sch. Dist., 564 FSupp2d 312, 316 (D Del 2008).
In Tolliver, the court noted that "Delaware law permits a claim for unjust enrichment where an express contract exists that does not govern exclusively the obligations or rights of the parties at issue."[emphasis supplied] Id. However, the court dismissed the unjust enrichment claim after finding that the contract at issue did exclusively govern the rights and duties of the parties. Id. This finding, in turn, was based on the fact that the relevant contract contained a merger provision stating that the contract "constitute[d] the complete and entire agreement" between the parties. Id. Similarly, here, Section 8.10 of the LPA states that "[t]his Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto." Since the LPA exclusively governed the rights and duties of the parties, a claim for unjust enrichment cannot be stated under Delaware law. Defendants' motion to dismiss plaintiff's unjust enrichment claim, therefore, is granted.
D. Money Had and Received
Similarly, defendants' motion to dismiss plaintiff's claim for money had and received is granted. "[M]oney had and received' is an ancient cause of action subsumed by modern law regarding breach of contract." St. Search Partners, LP v Ricon International, 2005 LEXIS 246 * 4 (Del Super Aug 1, 2005). It "requires proof that the defendant did not use the money for an agreed purpose." Id. Plaintiff does not dispute that a cause of action for money had and received is not legally cognizable under Delaware law, or that Delaware law applies to this cause of action. Also, as discussed above, a claim for money had and received is the legal equivalent of an equitable claim for unjust enrichment. For this reason, it is barred by a commercial relationship that is exclusively governed by a valid and enforceable contract between the parties. See Nemec, 2009 LEXIS 67, at * 17 ("Delaware courts . . . have consistently refused to permit a claim for unjust enrichment when the alleged wrong arises from a relationship governed by contract."). Accordingly, it is
ORDERED that defendants' motion to dismiss is granted with respect to plaintiff's claims for breach of the implied covenant of good faith and fair dealing, unjust enrichment, and money had and received; and it is further
ORDERED that defendants' motion to dismiss is denied with respect to plaintiff's breach of contract claim.