Sustainable Energy v. Photon Energy ( 2014 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
SUSTAINABLE ENERGY GENERATION )
GROUP, LLC, )
)
Plaintiff, )
)
v. ) Civil Action No. 8524-VCP
)
PHOTON ENERGY PROJECTS B.V., )
PHOTON ENERGY N.V., and PHOTON )
ENERGY INVESTMENTS N.V., )
)
)
Defendants. )
MEMORANDUM OPINION
Submitted: January 14, 2014
Decided: May 30, 2014
Richard P. Rollo, Esq., Kevin M. Gallagher, Esq., RICHARDS, LAYTON & FINGER,
P.A., Wilmington, Delaware; Michael C. Hefter, Esq., BRACEWELL & GIULIANI
LLP, New York, New York; Attorneys for Plaintiff.
M. Duncan Grant, Esq., Christopher B. Chuff, Esq., PEPPER HAMILTON LLP,
Wilmington, Delaware; Attorneys for Defendants.
PARSONS, Vice Chancellor.
This action arises from the exchange of confidential information between entities
in the alternative energy industry. The plaintiff, an entity incorporated and based in
Delaware, was solicited by the defendants, a group of related Dutch companies, to partner
on solar energy projects in the United States. After an in-person meeting between
representatives from both sides, a confidentiality agreement was executed and the
plaintiff shared purportedly confidential information with the defendants. The plaintiff
and the defendants, however, were unable to partner successfully on any projects. The
plaintiff alleges that the defendants never intended to partner with it, but instead were
interested only in using the plaintiff‟s confidential information to help them raise capital
through a bond offering. As a result, the plaintiff has asserted claims for breach of the
confidentiality agreement, misappropriation of confidential information, and tortious
interference with prospective business opportunities. The plaintiff seeks, among other
relief, monetary damages for the defendants‟ tortious interference and an injunction
prohibiting the defendants from any further use or disclosure of its confidential
information.
The defendants have moved to dismiss the complaint in its entirety on the grounds
that this Court lacks personal jurisdiction over them and that the plaintiff failed to provide
them with adequate service of process. In addition, the defendants argue that the plaintiff
has failed, in each count of the complaint, to state a claim upon which relief can be
granted.
Having considered the parties‟ briefs and heard argument on the motion, I
conclude that the defendants‟ motion to dismiss should be granted with respect to Count
1
V of the complaint for tortious interference with a prospective business relationship. In
all other respects, the motion to dismiss is denied.
I. BACKGROUND
A. The Parties
Plaintiff, Sustainable Energy Group, LLC (“SEG”), is a Delaware limited liability
company with its principal place of business in Hockessin, Delaware. SEG is a
renewable energy company specializing in energy engineering and the development of
renewable energy projects.
Defendant Photon Energy N.V. (“Photon”) is a Dutch corporation that develops
renewable energy power projects around the world and operates through several
subsidiary entities. Defendants Photon Energy Projects B.V. (“PEP”) and Photon Energy
Investment N.V. (“PEI,” and together with Photon and PEP, “Defendants”) are both
Dutch corporations and wholly owned subsidiaries of Photon. Photon, PEP, and PEI
each have their principal place of business in Amsterdam, The Netherlands.
B. Facts1
1. Photon approaches SEG
In October 2012, Photon approached SEG about potentially working together on a
sustainable energy project. At the time, SEG was developing similar projects on the East
Coast of the United States in Delaware, New Jersey, Pennsylvania, and Vermont. On
1
Unless otherwise indicated, the facts recited in this Memorandum Opinion are
based on the allegations in Plaintiff‟s complaint, documents integral to or
incorporated in the complaint, or facts of which the Court may take judicial notice.
2
October 18, 2012, Peter Novotny, Photon‟s co-founder, and Jeff Fry, a Photon executive,
traveled to the United States to meet with Peter Burcat and Pierre D‟Amours, SEG‟s
principals.
After landing in Philadelphia, Novotny and Fry met Burcat and D‟Amours at
SEG‟s pipeline project in Northeast Philadelphia. From there, the group went on to see
SEG‟s pipeline projects in Millville, New Jersey, and in Milford, Delaware. At the end
of the day, the group met in Wilmington, Delaware to discuss a potential business
transaction between the two parties. During the meeting in Wilmington, Novotny and
Fry disclosed that Photon was planning to raise capital through a bond offering in
Europe, and that they believed the success of the offering depended, at least in part, on
SEG being able to show growth in its global pipeline of renewable energy projects.
Novotny and Fry also indicated that when they left Delaware, they would be traveling to
New York to discuss the potential bond offering with investment professionals.
Subsequent to the Delaware meeting, the parties continued to discuss a potential
transaction. The discussions occurred primarily by email, telephone, and Skype between
SEG‟s offices in Delaware and Photon‟s offices in Europe. As talks between the parties
progressed, they decided to execute a non-disclosure agreement (the “NDA”). After
exchanging drafts between their respective offices, on November 29, 2012, SEG and PEP
entered into the NDA.
3
2. The terms of the NDA
Under the NDA, which is governed by Delaware law, SEG and PEP agreed “to
hold in confidence and refrain from the unauthorized use of any confidential or
proprietary information of the other party.”2 “Proprietary Information” is defined as:
[A]ll information concerning the business and affairs of a
party, including but not limited to, any and all proprietary
information, trade secrets, product specifications, data, know
how, formulae . . . expansion plans (e.g. existing, and new
entry into new, geographic and/or product markets); locations
of new offices (including proposed locations) . . . whether
furnished or learned before or after the date hereof, whether
oral, written or electronic, and regardless of the manner or
form in which it is furnished and learned, customer names
and financial information, business records, financial
statements, files, documents in any format, videos,
spreadsheet, and Proprietary Information received from
Representatives of the Parties.3
SEG and PEP also agreed that “[a]ll Proprietary Information shall remain the sole and
exclusive property of the disclosing party and nothing in this Agreement, or any course of
conduct between the Parties shall be deemed to grant to the receiving party any license or
rights in or to the Proprietary Information”4 of the disclosing party.
Under Section 1(b) of the NDA, the parties also specified that Proprietary
Information did not include information that:
(i) [w]as available to the public prior to the time of disclosure;
(ii) becomes available to the public through no act or
2
Compl. ¶ 22.
3
Id. ¶ 23.
4
Id. ¶ 25.
4
omission of the other party or its Representative; (iii) is
communicated rightfully and explicitly to the other party free
of any obligation of nondisclosure and without restriction as
to its use; (iv) was in the other party‟s possession and
obtained on a non-confidential basis prior to its disclosure by
the disclosing party or its Representatives; or (v) is
independently developed by the other party without reference
to or use of the Proprietary Information of the disclosing
party.
The underlying purpose of the NDA appears to have been to facilitate the
exchange of confidential and proprietary information so that each party could evaluate
“whether to enter into the Transaction5 and, if such Transaction is consummated, how
best to effect such Transaction.”6
3. The Burlington and Woolwich Township projects
At some point after the parties met in Delaware, SEG, with Photon‟s consent,
represented to the owners of sustainable energy projects in Burlington and Woolwich
Township, New Jersey, that Photon was interested in proceeding with an investment in
each of those respective projects.
a. The Burlington project
On November 28, 2012, Filippo Lambert, a Director at Photon, emailed Burcat
and D‟Amours laying out a “schedule of needed actions” that needed to be completed
before work could begin on an 8.1-megawatt solar project in Burlington, New Jersey.
5
The NDA defines the Transaction as a “possible business relationship or
transaction” between SEG and PEP. Defs.‟ Opening Br. Ex. E at 1.
6
Compl. ¶ 24.
5
A few weeks later, after Photon had the opportunity to conduct significant due
diligence on the project, D‟Amours noted in a December 19, 2012 email to Fry that the
Burlington project owner was continuing to ask for documentation verifying that the
funding to be provided by Photon, which was needed to launch the project, was in place.
D‟Amours informed Fry that the project owner would not continue producing relevant
documents unless it received assurances of Photon‟s commitment to fund the project.
That same day, Burcat wrote to Lambert and D‟Amours expressing a similar sentiment:
the Burlington project owner would not continue to provide due diligence materials
unless Photon delivered “the single financial document” that the owner requested
confirming Photon‟s commitment to fund the project. Photon did not provide the
requested document or any other document confirming its interest in providing funding.
b. The Woolwich Township project
Concurrent with the project in Burlington, SEG and Photon also were in
discussions to partner on a 312-kilowatt solar project in Woolwich Township, New
Jersey. On November 26, 2012, in a conversation between Burcat, D‟Amours, Novotny,
and Lambert, Burcat and D‟Amours requested that their Photon counterparts send them
certain cost-savings spreadsheets by the end of the week.7 The spreadsheets were to
include information that Woolwich‟s Town Council could use to compare the
SEG/Photon bid to that of the project‟s only other bidder. Burcat and D‟Amours wanted
7
Because, if their bid was successful, Woolwich would be signing a power
purchase agreement with Photon, not SEG, Photon was the party that needed to
provide the requisite “financial assurances and obligations.”
6
to be able to forward that information to the members of the Town Council on November
30, so that they could review it before a scheduled December 3 Town Council meeting,
where the project was scheduled to be discussed.
Photon did not deliver the cost-savings spreadsheets to SEG until the night of
December 2, 2012. At the December 3 meeting, the Township Solicitor, the Mayor, and
three Council members each remarked individually how SEG‟s failure to provide the
Town Council with the requested documents before the meeting was unacceptable and
unprofessional. Indeed, the Town Council refused to accept D‟Amours‟s oral
representation of the cost-saving figures, informed SEG it was not necessary for them to
submit any documents that evening, and summarily dismissed Burcat and D‟Amours
from the meeting.
Notwithstanding SEG‟s prior relationship with Woolwich Township, which
included SEG previously having completed a solar project for the township and SEG‟s
reliance on the township to provide business references as to the quality of its work, SEG
was not chosen for the 312-kilowatt solar project.
4. Photon’s alleged use of SEG’s “Proprietary Information”
The discussions between SEG and Photon and its subsidiaries did not result in the
consummation of a transaction or the creation of some other type of business relationship.
Nevertheless, pursuant to Section 6 of the NDA, SEG and PEP continue to be bound by
its terms.
On February 11, 2013, Photon announced publicly its intention to launch a bond
offering, through PEI, on the Frankfurt Stock Exchange. In connection with the
7
prospective bond sale, PEI disseminated a prospectus and a February 2013 investor
presentation (the “Bond Investor Presentation”) to eligible investors. According to SEG,
the Bond Investor Presentation, the bond prospectus, and credit analyst reports
concerning the sale of the bonds contain “Proprietary Information” relating to SEG‟s
United States pipeline projects. SEG also denies having authorized the use of its
information in the Bond Investor Presentation, the bond prospectus, or credit analyst
reports.
After learning of the alleged unauthorized use of its Proprietary Information, SEG
sought an explanation from Photon. In a February 24, 2013 discussion, Photon
acknowledged that the use of SEG‟s pipeline project information in the bond solicitation
materials was not authorized and pledged to rectify the situation. Since making that
pledge, Photon has removed some, but allegedly not all, references to SEG‟s project
pipeline from the bond solicitation materials. Specifically, in its amended investor
presentation, Photon continues to refer to at least one SEG project in the United States.
On March 11, 2013, SEG sent Photon and its affiliates a cease and desist letter
demanding that they stop using SEG‟s United States pipeline project information in their
bond disclosures without SEG‟s authorization. In response, Photon invited SEG to
participate in a Skype teleconference to discuss the issues raised in the March 11 letter.
The next day, on March 12, Burcat, Novotny, and Peter Deege, another Photon
representative, participated in a Skype call. According to SEG, Deege stated during this
call that including SEG‟s United States projects in the list of Photon‟s pipeline projects
contained in the bond materials given to investors was “stupid.”
8
Deege and Novotny attempted to convince Burcat that any problematic references
to SEG‟s projects in Photon‟s bond materials had been removed, but allegedly were
unable to respond when Burcat pointed to statements in the revised bond materials that
SEG contended violated the terms of the NDA. At the end of the call, Burcat and Deege
agreed that the parties should have another call the following day (March 13), so that
D‟Amours could participate. At the appointed time the next day, Photon failed to join the
call or explain its absence.
On March 15, 2013, SEG sent Photon another letter expressing its belief that the
bond materials contained at least one impermissible reference to an SEG project and that
Photon‟s failure to join the March 13 follow-up call was “inappropriate.” Georg Hotar,
Photon‟s Chief Executive Officer, responded by stating that he would “revert” on March
18. Since Hotar‟s reply, however, Photon has not responded to any of SEG‟s requests for
information.
C. Procedural History
SEG filed its verified complaint (the “Complaint”) in this action on May 3, 2013.
On July 1, I granted Defendants‟ motion for enlargement of time to respond to the
Complaint until July 10, 2013. On that date, Defendants moved to dismiss the Complaint
in its entirety. After full briefing, I heard argument on that motion on January 14, 2014.
At the argument, I denied that aspect of Defendants‟ motion that sought to dismiss the
Complaint on the grounds that it had been filed carelessly in Plaintiff‟s operating, rather
than legal, name, but reserved judgment on all other facets of the motion. This
9
Memorandum Opinion constitutes my ruling on the remaining aspects of Defendants‟
motion to dismiss.
D. Parties’ Contentions
SEG asserts five claims against various combinations of Defendants. In Count I,
SEG alleges that PEP has breached the NDA by, for example, sharing and using SEG‟s
Proprietary Information. Count II is the same cause of action, but directed at Photon and
PEI. In Counts III and IV, SEG avers that PEP, and Photon and PEI, respectively, have
misappropriated its confidential information through their unauthorized use of its
Proprietary Information. Finally, in Count V, SEG accuses Photon of tortiously
interfering with its prospective business relationships with the owner of the Burlington
project and with Woolwich Township.
Defendants argue first that this Court lacks personal jurisdiction over them.
According to Defendants, they lack the requisite continuous presence in Delaware to be
subject to general jurisdiction here and SEG has not alleged that any of its claims “arise
from” Defendants‟ connections with Delaware. Thus, Defendants deny that they are
subject to personal jurisdiction under any aspect of Delaware‟s Long Arm Statute.
Defendants also assert that Plaintiff‟s attempt to serve them with the Complaint in this
litigation through Federal Express and international mail is insufficient under the Hague
Convention of the Service Abroad of Judicial and Extrajudicial Documents in Civil or
Commercial Matters (the “Hague Convention”).
Defendants also have moved to dismiss under Court of Chancery Rule 12(b)(6).
As to Plaintiff‟s breach of contract claims, Defendants aver that Plaintiff has failed to
10
allege adequately that the information disclosed in the bond solicitation materials was
Proprietary Information under the NDA. Consequently, Defendants assert that the
disclosures in their bond solicitation materials were made consistent with their
obligations under the NDA. Regarding the claim for misappropriation of confidential
information, Defendants argue, again, that Plaintiff has failed to allege that they used any
information in their bond solicitation materials that could be considered proprietary or
confidential. Finally, as to SEG‟s tortious interference claim, Defendants contend that
SEG has not pled sufficient facts from which the Court can infer that SEG had a
reasonable expectancy of a business opportunity regarding either the Burlington or
Woolwich Township projects. In addition, Defendants argue that, to the extent SEG
reasonably expected to be awarded either of those business opportunities, the Complaint
does not support an inference that Defendants interfered intentionally with either of them.
II. ANALYSIS
Before examining the substance of SEG‟s allegations against Defendants, I first
must address the procedural questions of whether this Court may exercise personal
jurisdiction over Defendants and whether Defendants were served properly in accordance
with the Hague Convention. I consider these issues in turn.
A. Personal Jurisdiction
1. Legal standard
Under Rule 12(b)(2), the plaintiff bears the burden of demonstrating this Court‟s
jurisdiction over a nonresident defendant. When evaluating a 12(b)(2) motion, the court
may consider facts and evidence outside of the complaint such as affidavits and any
11
discovery of record.8 Whatever record the court considers is construed in the light most
favorable to the plaintiff.9 If no evidentiary hearing has been held, the plaintiff must
make a prima facie showing of personal jurisdiction.10
Delaware courts use a two-step analysis in determining whether a nonresident
party is subject to personal jurisdiction. First, the court must decide whether the party‟s
conduct falls under Delaware‟s Long Arm Statute.11 The Long Arm Statute is broadly
construed to “confer jurisdiction to the maximum extent possible under the Due Process
Clause.”12 If jurisdiction exists under the statute, the next step is to evaluate whether
exercising personal jurisdiction over the party in question is consistent with the Due
Process Clause of the Fourteenth Amendment.13
2. Personal jurisdiction must be established over each individual Defendant
SEG asserts that this Court may exercise personal jurisdiction over Defendants
because they have transacted business in Delaware under the meaning of 10 Del. C.
§ 3104(c)(1). Delaware law requires that a plaintiff demonstrate a statutory basis for
8
Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007).
9
Id.
10
Id.
11
AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 437 (Del.
2005); 10 Del. C. § 3104(c).
12
Hercules Inc. v. Leu Trust & Banking (Bahamas) Ltd., 611 A.2d 476, 480 (Del.
1992).
13
Id.
12
personal jurisdiction as to each individual defendant.14 Although the three Defendants in
this case appear to be part of the same corporate family, there is no dispute that they are
distinct corporate entities.15 In an apparent attempt to avoid its burden of making a prima
facie showing that this Court has personal jurisdiction over each of Photon, PEP, and
PEI, SEG, in a single sentence in a footnote of its answering brief, half-heartedly asserts
that at least some of Defendants, without specification, are subject to jurisdiction under
the “conspiracy theory” of personal jurisdiction.16
The manner in which SEG has purported to invoke the conspiracy theory of
jurisdiction demonstrates a surprising lack of awareness of, or regard for, this Court‟s
repeated admonitions that the conspiracy theory is a “strict test that should be construed
narrowly” and requires “factual proof of each” of the five elements enumerated in Istituto
Bancario. Because SEG, in its briefing and the Complaint, makes no effort to
demonstrate the factual grounds for its conspiracy theory of jurisdiction argument beyond
merely invoking the doctrine itself, SEG has failed to present a prima facie case that this
Court may exercise jurisdiction over any of Defendants on the basis of that doctrine.17
14
Metro. Life Ins. Co. v. Tremont Gp. Hldgs. Inc., 2012 WL 6632681, at *6 (Del.
Ch. Dec. 20, 2012).
15
SEG has not advanced any veil piercing or alter-ego type argument that
Defendants‟ independent corporate forms should be disregarded.
16
Pl.‟s Answering Br. 13 n.2 (citing Istituto Bancario Italiano SpA v. Hunter Eng’g
Co., 449 A.2d 210 (Del. 1982)).
17
In that regard, SEG has not explained, in any way, how Photon, PEP, and PEI,
either conspired with or aided and abetted one another. Such allegations are of
13
Therefore, I must address separately as to each of the Defendants whether it is subject to
personal jurisdiction in Delaware under the Long Arm Statute.
3. Photon is subject to personal jurisdiction under 10 Del. C. § 3104(c)
Photon is alleged to have breached the NDA, misappropriated SEG‟s Proprietary
Information, and tortiously interfered with SEG‟s business opportunities in Burlington
and Woolwich Township. Thus, the relevant inquiry in determining whether Photon is
subject to personal jurisdiction in Delaware under the Long Arm Statute is whether: (1)
Photon “transacted business” in Delaware; (2) SEG‟s claims against Photon “arise from”
that transaction of business; and (3) exercising jurisdiction over Photon comports with
due process. I discuss these issues in turn.
particular importance in cases like this where the plaintiff is alleging, at least in
theory, the existence of a conspiracy between a parent entity and its wholly owned
subsidiaries or a conspiracy among corporate affiliates. Concluding that it would
be proper to exercise personal jurisdiction over a parent company on the grounds
that it conspired with its wholly owned subsidiary or subsidiaries implicates
“particular concerns” that SEG has failed to address in a meaningful way. See Red
Sail Easter Ltd. P’rs, L.P. v. Radio City Music Hall Prods., Inc., 1991 WL
129174, at *4 (Del. Ch. July 10, 1991) (“A theory of personal jurisdiction based
upon an alleged conspiracy between a foreign corporation and its wholly owned
Delaware subsidiary is very close to being merely another way to assert that a
controlling shareholder may always be sued in Delaware on any claim made
against the subsidiary. A controlling shareholder does by definition control (or
have the power to control) the acts of its subsidiary. Thus, an attempt to apply a
conspiracy theory to parent-subsidiary corporations in order to extend the reach of
Section 3104 raises particular concerns.”).
14
a. Photon transacted business in Delaware
“Delaware courts have arguably taken an expansive view of what constitutes
„transacting business‟ in Delaware.”18 While a defendant‟s physical presence in
Delaware often weighs heavily in favor of finding that a defendant transacted business in
Delaware, such physical presence is by no means necessary to support a finding of
personal jurisdiction under the Long Arm Statute.19 Moreover, a “transaction” need not
actually be consummated for the Long Arm Statute to apply; the solicitation of business
can satisfy the requirements of Section 3104(c)(1), particularly in situations where the
solicitation “is directed to and received in Delaware.”20
18
Boulden v. Albiorix, Inc., 2013 WL 396254, at *6 n.59 (Del. Ch. Jan. 31, 2013).
19
See AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 440
(Del. 2005) (“While evidence of physical presence may be helpful in determining
a party‟s intent to transact business and to show the actual transaction of business
in this State, we hold that such evidence is not the sine qua non for jurisdiction
under Delaware‟s Long Arm Statute.”). See also NRG Barriers, Inc. v. Jelin, 1996
WL 377014, at *3 (Del. Ch. July 1, 1996) (“Furthermore, Defendants rely too
heavily on „physical ties to Delaware.‟ I find an analytical approach based upon
facts denoting physical presence is an increasingly anachronistic methodology for
determining whether the transaction of business occurred in Delaware. The advent
of superior communications technology lessens the need for face-to-face
encounters in the business context. Facsimile machines, video conferencing,
electronic mail, and super computing are liberalizing the traditional idea of
„transacting business‟ in Delaware and other states.”).
20
Enter. Pub., Inc. v. Janov, 1990 WL 96569, at *3-4 (Del. Super. July 9, 1990).
See also Mumford v. Carey’s Diesel, Inc., 1995 WL 108885, at *2 (Del. Super.
Feb. 6, 1995) (“The Delaware Long-Arm statute is closely modeled after the
Illinois statute. Illinois courts have held that when a defendant initiates a
transaction by seeking out a citizen of Illinois to propose a business transaction,
the statute is satisfied.”).
15
In this case, SEG has alleged that: (1) Photon approached SEG about potentially
partnering on a solar development project; (2) two Photon representatives traveled to the
United States to meet with SEG‟s principals in furtherance of their professed desire to
partner with SEG; (3) the meetings with SEG included tours of some of SEG‟s pipeline
projects, including one in Milford, Delaware; (4) the meetings also included a dinner in
Wilmington, Delaware where the parties discussed a potential business transaction; and
(5) following the in-person meeting, Photon and SEG continued to engage in discussions
and negotiations related to a potential business transaction by email, telephone, and
Skype. Based on these allegations, SEG has made a prima facie showing that Photon has
“transacted business” in Delaware by virtue of its deliberate solicitation of a company
actually based, and not just incorporated, in Delaware, its physical presence in Delaware
(albeit only briefly) in furtherance of those solicitations, and the numerous
communications, electronic and otherwise, it directed towards Delaware to facilitate a
potential transaction with that Delaware-based entity.
The conclusion that SEG has made a prima facie showing that Photon transacted
business in Delaware is supported further by the Burcat Affidavit submitted with SEG‟s
opposition to Defendants‟ motion to dismiss. According to Burcat‟s sworn statement: (1)
Photon and SEG discussed specifically the possibility of partnering to develop at least
one project located in Delaware; (2) while meeting in Wilmington, Photon and SEG also
discussed the possibility of Photon acquiring SEG so that it could establish a permanent
presence in the United States; and (3) the parties began negotiating the terms of the NDA
16
while they met in Delaware.21 Considered together with the Complaint, the Burcat
Affidavit makes a strong showing that Photon‟s conduct in this case constitutes the
transaction of business in Delaware within the meaning of Delaware‟s Long Arm Statute.
b. SEG’s causes of action arise from Photon’s transaction of business in
Delaware
In addition to alleging that a defendant transacted business in Delaware, a plaintiff
asserting that jurisdiction exists under the Long Arm Statute also must allege that there is
a “nexus” between that transaction of business and its cause of action. 22 “The „arising
from‟ language in 10 Del. C. § 3104(c)(1) requires that the defendant‟s act set „in motion
21
Burcat Aff. ¶¶ 2, 7. Defendants dispute SEG‟s claim as to when negotiations over
the NDA began. In a November 28, 2012 email from Lambert to Burcat and
D‟Amours, Lambert requested that SEG “please also provide an NDA if you have
a standard one.” Defs.‟ Opening Br. Ex. C at 3. According to Defendants, it is
unlikely that Lambert would have requested that SEG send a “standard” NDA, if,
as SEG claims, the parties had been negotiating the terms of an NDA for months.
Notably, the final NDA was signed by PEP, not Photon. One reasonable inference
that could be drawn at this early stage of the proceedings is that after Photon and
SEG began negotiating the terms of the NDA, it was decided that it would be more
appropriate to make PEP, rather than Photon, a party and that, after that point,
Lambert decided on PEP‟s behalf that using SEG‟s standard form was the best
way to proceed. Therefore, while I cannot resolve this disputed fact issue at this
juncture, I note that SEG‟s assertion that it began negotiating the terms of the
NDA with Photon while meeting with Photon in Delaware is sufficiently colorable
that I can assume its truth for purposes of deciding Defendants‟ motion to dismiss.
22
Mobile Diagnostic Gp. Hldgs., LLC v. Suer, 972 A.2d 799, 804 (Del. Ch. 2009).
See also 10 Del. C. § 3104(c) (stating the statute applies only to “a cause of action
brought by any person arising from any of the acts enumerated in this section”)
(emphasis added).
17
a series of events which form the basis for the cause of action before the court.‟”23 This
Court also has interpreted the “arise from” language such that it encompasses a party‟s
“acts within the jurisdiction that were „critical steps in the chain of events‟ resulting in
the cause of action before the court.”24
As to SEG‟s claims that Photon breached the terms of the NDA and
misappropriated its Proprietary Information, the allegations in the Complaint and the
Burcat Affidavit suffice to make a prima facie showing that those claims “arise from”
Photon‟s transaction of business in Delaware. Photon solicited the Delaware-based SEG,
met with SEG in Delaware, and allegedly directed hundreds of communications,
electronic and otherwise, to SEG in Delaware for the apparent purpose of trying to find at
least one solar development project on which the two sides could partner. The Burcat
Affidavit suggests that the parties understood as of the time they held an in-person
meeting in Delaware that it would be necessary to exchange some confidential
information, and that they began immediately to take steps to facilitate such an exchange.
After the in-person meeting, Photon continued to direct communications into Delaware
for the purpose of coming to an agreement with SEG that would enable Photon to have
access to SEG‟s confidential information. Finally, the gravamen of the Complaint is that
23
Sprint Nextel Corp. v. iPCS, Inc., 2008 WL 2737409, at *9 (Del. Ch. July 14,
2008) (quoting Haisfield v. Cruver, 1994 WL 497868, at *4 (Del. Ch. Aug. 25,
1994)).
24
Id. at *9 n.64 (quoting Sears, Roebuck & Co. v. Sears plc, 752 F. Supp. 1223,
1227 (D. Del. 1990)).
18
the real reason Photon reached out to SEG in the first place was to gain access to SEG‟s
project pipeline and other confidential information, not to actually reach a partnership
arrangement with it. Photon‟s actions in, as well as those directed toward, Delaware,
therefore, were “critical steps in the chain of events resulting in the cause of action before
the court.” Thus, SEG has made a prima facie showing that its claims against Photon
“arise from” its transaction of business in Delaware.
In resisting that conclusion, Defendants argue that SEG‟s causes of action cannot
“arise from” their transaction of business in Delaware because SEG‟s claims relate to
events that occurred after the signing of the NDA, and any “transaction of business” in
Delaware by Defendants occurred before the NDA was executed. Based on the
allegations in the Complaint, however, I find Defendants‟ argument to be hypertechnical
and unpersuasive.
On the limited record before me, Defendants‟ conduct in Delaware and directed
toward Delaware appears to be bound inextricably to SEG‟s claims. Contrary to
Defendants‟ assertions otherwise, it does not appear that, at this juncture, this Court could
delineate definitively which of Plaintiff‟s claims, if any, solely arise from Defendants‟
actions in Delaware before the execution of the NDA. Moreover, if Defendants‟
understanding of Delaware law were correct, a non-Delaware party could come into the
State to negotiate the terms of an agreement with a Delaware resident, and yet the
Delaware resident would not be able to pursue a breach of contract claim against that
party in a Delaware court if the non-Delaware party executed the agreement outside of
Delaware and the breach also occurred outside of Delaware. Not surprisingly,
19
Defendants cited no authority suggesting that their assertion represents an accurate
statement of Delaware law.25
While a more developed evidentiary record may reveal that Plaintiff‟s claims do
not arise from Defendants‟ transaction of business in Delaware, SEG has made a prima
facie showing that the opposite is true. Therefore, I conclude that SEG has made the
requisite showing as to Photon‟s amenability to personal jurisdiction under Delaware‟s
Long Arm Statute.
c. The Court’s exercise of personal jurisdiction over Photon comports with due
process
Having determined that SEG‟s allegations against Photon satisfy Section
3104(c)(1) of the Long Arm Statute, I also must address whether subjecting Photon to
jurisdiction in Delaware would be consistent with the Due Process Clause of the
Fourteenth Amendment. Personal jurisdiction over a nonresident is consistent with due
25
Moreover, adopting Defendants‟ argument likely would increase significantly the
number of instances in which Delaware residents would be forced to file suit in
foreign jurisdictions to vindicate their rights. As a practical matter, this would
make it more difficult, if not impossible, for Delaware residents to seek redress for
harms done to them by foreign parties who make a conscious decision to come to
Delaware and seek them out. Delaware public policy underpinning the Long Arm
Statute mandates that it be interpreted as broadly as due process will allow,
thereby affording Delaware residents with the greatest protections possible. See
Hercules Inc. v. Leu Trust & Banking (Bahamas) Ltd., 611 A.2d 476, 480 (Del.
1992) (“First, we must consider whether Delaware‟s long arm statute is applicable,
recognizing that 10 Del. C. § 3104(c) is to be broadly construed to confer
jurisdiction to the maximum extent possible under the Due Process Clause.”).
Because Defendants‟ position would lead to results directly inimical to that long-
standing and settled policy, I find it to be without merit.
20
process when it comports with traditional notions of fair play and substantial justice. 26 To
meet this standard, the “defendant‟s conduct and connection with the forum state should
be such that he can reasonably anticipate being haled into court in the nonresident
forum.”27 “A basic tenet of the due process analysis of a court‟s exercise of personal
jurisdiction is whether the party „purposefully availed‟ itself of the privilege of
conducting activities within the forum state, thus invoking the benefits and protections of
its laws.”28
In this case, Photon solicited a Delaware-based business, sent representatives to
attend an in-person meeting in Delaware, and directed scores, if not hundreds, of
electronic and telephonic communications into Delaware. Based on these facts, I
conclude that SEG has made a prima facie showing that Photon purposefully availed
itself of the privilege of conducting business within Delaware. In addition, because of its
extensive contacts and negotiations with a company located in Delaware, Photon
reasonably could have anticipated being haled into court in Delaware as a result of a
dispute arising from those same contacts and negotiations. SEG, therefore, has carried its
burden of making a prima facie showing that the exercise of personal jurisdiction over
Photon is consistent with the Due Process Clause of the Fourteenth Amendment.
26
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477–78 (1985).
27
Werner v. Miller Tech. Mgmt., L.P., 831 A.2d 318, 330 (Del. Ch. 2003).
28
Id. at 330 n.46.
21
4. PEP and PEI are subject to personal jurisdiction under 10 Del. C. § 3104(c)
According to the Complaint, PEP and PEI are wholly owned subsidiaries of
Photon. Although they are separate legal entities from Photon, at this early stage of the
proceedings, SEG has made a prima facie showing that there is sufficient overlap of
personnel between Photon, PEP, and PEI such that Photon‟s actions can be attributed to
both PEP and PEI because those who acted on Photon‟s behalf also were doing so as
employees of PEP or PEI .29
The NDA at issue in this case actually was executed between SEG and PEP.
Because at this stage of the litigation it appears that the NDA was the byproduct of the in-
person meeting in Delaware between Photon and SEG, one reasonable inference that can
be drawn from the Complaint is that SEG interacted and negotiated with at least some
key individuals who simultaneously were representing both Photon and PEP. This
inference is supported further by the allegations in the Complaint that SEG and PEP
executed the NDA for the purpose of evaluating the feasibility of partnering together on a
project, including the two projects in New Jersey that form the basis of SEG‟s tortious
interference claim. SEG alleges that, both before and after the NDA was signed, it was
working with Photon representatives, including Novotny and Fry, to put a bid together
for the New Jersey projects. Because one intended purpose of the NDA was to facilitate
29
The possibility remains, however, that a more fully developed evidentiary record
will show that Photon, PEP, and PEI are sufficiently distinct and their actions
sufficiently differentiable that the exercise of personal jurisdiction over PEP and
PEI ultimately would not be appropriate under the Long Arm Statute.
22
such interactions, the Complaint supports a reasonable inference that those responsible
for negotiating the NDA from Defendants‟ side of the transaction did so as
representatives of both Photon and PEP.
As to PEI, the Complaint alleges that: (1) Photon announced that PEI would be the
issuer of the bonds; (2) Photon prepared the Bond Investor Presentation that PEI
disseminated in connection with the sale of the bonds; and (3) SEG spoke with Photon
employees Peter Deege and Novotny when attempting to resolve the issue of the alleged
misuse of its proprietary and confidential information in connection with the bond
offering. In addition, Jan Krcmar, Photon‟s Communications Director, submitted an
affidavit claiming that he is “responsible for the management and dissemination to
Photon‟s stockholders and, when appropriate, to the public, of information about Photon
and its operations.”30 Significantly, Krcman defined “Photon” in his affidavit as Photon,
PEP, and PEI, collectively.31 Thus, Defendants themselves appear to acknowledge that at
least some of their employees have roles across multiple Photon entities and represent
those entities simultaneously, and that it is not always clear on which entity‟s behalf
those employees were acting in their interactions with SEG and others.
30
Defs.‟ Opening Br. Ex. F ¶ 2.
31
Id. ¶ 1. Novotny also submitted an affidavit in which he stated, among other
things, that “[f]ollowing the in-person visit to Philadelphia, New Jersey, and
Delaware, I and others from Photon communicated with SEG.” Defs.‟ Opening
Br. Ex. B ¶ 5. Novotny defined “Photon” in his affidavit to mean Photon Energy
N.V. together with its subsidiaries, including PEP and PEI. Id. ¶ 1.
23
In sum, based on the preliminary and limited record before me, I conclude that
SEG has made a prima facie showing that there is sufficient overlap between Photon,
PEP, and PEI such that those who solicited SEG, met with SEG representatives in
Delaware, directed numerous communications into Delaware, executed a confidentiality
agreement, and allegedly misused SEG‟s confidential information, did so directly on
behalf of some combination of Photon, PEP, and PEI. I already have concluded that
Photon is subject to personal jurisdiction in Delaware under the Long Arm Statute.
Because many, if not all, of Photon‟s actions also can be attributed to PEP and PEI at this
early stage in the litigation by virtue of the apparent overlap of key employees who
represented simultaneously the various Photon entities in their interactions with SEG,
SEG also has made a prima facie showing that PEP and PEI are subject to personal
jurisdiction in Delaware under the Long Arm Statute.32
B. Service of Process
Defendants next argue that the Complaint should be dismissed pursuant to Rule
12(b)(5) for insufficiency of service of process. According to SEG, Defendants were
served properly pursuant to Article 10(a) of the Hague Convention. Article 10 states:
Provided the State of destination does not object, the present
Convention shall not interfere with –
a) the freedom to send judicial documents, by postal
channels, directly to persons abroad,
32
The reasons that exercising personal jurisdiction over Photon comports with due
process apply with equal force to the exercise of personal jurisdiction over PEP
and PEI.
24
b) the freedom of judicial officers, officials or other
competent persons of the State of origin to effect
service of judicial documents directly through the
judicial officers, officials of other competent persons
of the State of destination,
c) the freedom of any person interested in a judicial
proceeding to effect service of judicial documents
directly through the judicial officers, officials or other
competent persons of the State of destination.33
After initiating this litigation, SEG served the Complaint on Defendants by
sending it to their place of business via Federal Express. After Defendants questioned
whether Federal Express constituted a “postal channel” within the meaning of Article 10,
SEG sent an additional copy of the Complaint to Defendants via international mail.
Defendants do not argue that The Netherlands, the “State of destination” in this case, has
objected to any provision in Article 10, nor do they argue that they failed to receive either
of SEG‟s mailings containing a copy of the Complaint. Rather, Defendants assert that
Article 10(a) does not authorize the service of initial process through “postal channels.”
The basis for Defendants‟ argument stems from the differences in word choice
utilized in the various subsections of Article 10. While Article 10(a) permits parties to
“send” judicial documents, both subsections (b) and (c) refer explicitly to “effect[ing]
service” of judicial documents. Defendants aver that had the Hague Convention‟s
drafters intended to allow service of process through Article 10(a), they would have used
the word “service,” as they did in Articles 10(b) and (c), instead of “send.” According to
33
Hague Convention Art. 10.
25
Defendants, therefore, service of process cannot be effectuated through Article 10(a), and
Defendants were never served properly in this litigation because SEG admits that it only
served Defendants in accordance with Article 10(a).
It does not appear that courts in the United States apply Article 10(a) uniformly.
Moreover, there is no Delaware Supreme Court case that addresses this issue.
Nevertheless, I conclude that the weight of the relevant authorities supports the
conclusion that Delaware would interpret Article 10(a) as providing an acceptable means
of providing service of process. “Delaware case law holds that where the requirements
for service of process under the Delaware long arm statute are satisfied, then so, too, are
the service requirements under the [Hague] Convention.”34 The Long Arm Statute allows
for service to be made “[b]y any form of mail addressed to the person to be served and
requiring a signed receipt.”35 Defendants do not contest seriously that SEG‟s mailings
through Federal Express and international mail comply with the Long Arm Statute‟s
service of process requirements. Consequently, SEG‟s actions in this case also satisfy the
requirements of the Hague Convention.
34
Stonington P’rs, Inc. v. Lernout & Hauspie Speech Prods., N.V., 2003 WL
21555325, at *3 (Del. Ch. July 8, 2003). Conceivably such a holding would be
inapplicable, or at least modified, in situations where a foreign country “objects”
to the utilization of some or all of the mechanisms prescribed in Section 10. I
need not address that potential issue, however, because The Netherlands has not
objected to any part of Article 10.
35
10 Del. C. § 3104(d)(3).
26
An additional and independent ground for finding that Defendants were served
properly in this litigation is that other Delaware courts have rejected their unduly narrow
interpretation of Article 10, either explicitly or in persuasive dicta. For example, in
Quinn v. Keinicke,36 the Delaware Superior Court offered a well-reasoned and
comprehensive analysis of why it would interpret Article 10(a) as being an acceptable
means of service of process if that issue actually was before it.37 The court in Quinn
noted that the purpose of the Hague Convention was to “lay a basic framework to which
all countries could agree and upon which a litigant could always fall back, while not
preventing ratifying countries from permitting, or litigants from using, less complex and
less bureaucratic methods [of service].”38 This, combined with the fact that the
“Preamble [to the Hague Convention] makes reference to „simplifying‟ and „expediting,‟
not complicating and hindering,” led the Quinn court to conclude, in dicta, that
“[a]llowing service by mail under Article 10(a) comports with the liberal approach
intended by the signatory nations.”39
36
700 A.2d 147 (Del. Super. 1996).
37
Id. at 156–60.
38
Id. at 160.
39
Id.
27
Quinn‟s discussion of Article 10(a) has been followed expressly by the Superior
Court40 and also has been cited approvingly by this Court.41 In addition, a leading treatise
on Delaware law has noted that Delaware courts have interpreted Article 10(a) as an
acceptable means of effectuating adequately service of process,42 and that such a position
appears to be most consistent with the intent of those that oversee the Hague
Convention.43 In the context of this case, I find the logic underpinning Quinn, Wright,
and Stonington Partners to be persuasive, particularly in light of the absence of any
40
See Wright v. Am. Home Prods. Corp., 768 A.2d 518, 526 (Del. Super. 2000)
(“This Court, under these circumstances, will further hold that plaintiffs‟ sending,
by registered mail to each defendant, constitutes service under Article 10(a) of the
Hague Service Convention. In reaching this holding, the Court accepts the dicta of
the Quinn court. It found more persuasive the line of cases that service was
effectuated by mail.”).
41
See Stonington P’rs, Inc. v. Lernout & Hauspie Speech Prods., N.V., 2003 WL
21555325, at *3 (Del. Ch. July 8, 2003) (“Delaware Courts have interpreted
Article 10(a) of the Convention broadly to effect its intended purpose, which is to
simplify service of process upon nonresident defendants abroad.”) (citing Quinn,
700 A.2d at 159).
42
See Donald J. Wolfe, Jr. & Michael A. Pittinger, Corporate and Commercial
Practice in the Delaware Court of Chancery § 3.04[e][3], at 3-117 (2013) (“The
state of Delaware has sided with jurisdictions holding that service by mail is
proper under the [Hague] Convention.”)
43
See id. at 3-118–19 (“The Special Commission on the Practical Operation of the
Hague Apostille, Evidence and Service Conventions („Special Commission‟)
seems to agree with the Delaware courts‟ interpretation of Article 10(a). In the
Fall of 2003, the Special Commission met to review the practical operation of the
Hague Conventions. In its conclusions, the Special Commission „reaffirmed its
clear understanding that the term „send‟ in Article 10(a) is to be understood as
meaning „service‟ through postal channels.‟”) (citations omitted).
28
significant Delaware case law to the contrary. Therefore, I conclude that Defendants
received adequate service of process under the Hague Convention.
Having decided that this Court may exercise personal jurisdiction over Defendants
and that Defendants were served properly, I turn next to Defendants‟ substantive
arguments that none of the counts of SEG‟s Complaint state a claim upon which relief
can be granted.
C. Failure to State a Claim Upon Which Relief Can be Granted
Because the Court may exercise personal jurisdiction over Defendants and because
Defendants were effectively served, I must determine whether SEG has pled adequately
its claims for breach of contract, misappropriation of confidential information, and
tortious interference with a prospective business opportunity. I examine SEG‟s asserted
causes of action in turn.
1. Legal standard
Pursuant to Rule 12(b)(6), this Court may grant a motion to dismiss for failure to
state a claim if a complaint does not assert sufficient facts that, if proven, would entitle
the plaintiff to relief. As recently reaffirmed by the Delaware Supreme Court, 44 “the
governing pleading standard in Delaware to survive a motion to dismiss is reasonable
„conceivability.‟”45 That is, when considering such a motion, a court must:
44
See Winshall v. Viacom Int’l, Inc., 2013 WL 5526290, at *4 n.12 (Del. Oct. 7,
2013).
45
Central Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531,
536 (Del. 2011) (footnote omitted).
29
accept all well-pleaded factual allegations in the Complaint as
true, accept even vague allegations in the Complaint as “well-
pleaded” if they provide the defendant notice of the claim,
draw all reasonable inferences in favor of the plaintiff, and
deny the motion unless the plaintiff could not recover under
any reasonably conceivable set of circumstances susceptible
of proof.46
This reasonable “conceivability” standard asks whether there is a “possibility” of
recovery.47 If the well-pled factual allegations of the complaint would entitle the plaintiff
to relief under a reasonably conceivable set of circumstances, the court must deny the
motion to dismiss.48 The court, however, need not “accept conclusory allegations
unsupported by specific facts or . . . draw unreasonable inferences in favor of the non-
moving party.”49 Moreover, failure to plead an element of a claim precludes entitlement
to relief and, therefore, is grounds to dismiss that claim.50
2. Breach of the NDA
a. Legal standard
To establish a breach of contract claim, a party must prove: (1) the existence of a
contract; (2) the breach of an obligation imposed by the contract; and (3) damages that
46
Id. (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002)).
47
Id. at 537 & n.13.
48
Id. at 536.
49
Price v. E.I. duPont de Nemours & Co., Inc., 26 A.3d 162, 166 (Del. 2011) (citing
Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)).
50
Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d 963, 972 (Del. Ch. 2000) (Steele,
V.C., by designation).
30
the plaintiff suffered as a result of the breach.51 In this action, the existence of a valid
contract between SEG and PEP is uncontested.52 Thus, to determine whether SEG has
stated claims for breach of contract, I focus on whether SEG adequately has pled the
elements of breach and damages as to the provisions of the NDA that it alleges have been
violated.
b. It is reasonably conceivable that Defendants breached the NDA
In Counts I and II of the Complaint, SEG alleges that PEP and Photon and PEI,
respectively, breached the provisions of the NDA requiring Defendants to hold SEG‟s
Proprietary Information in confidence. This includes the sharing of SEG‟s Proprietary
Information with “unauthorized third parties, while failing to take necessary steps to
protect against further disclosure and use” and using SEG‟s Proprietary Information “not
for the purpose of evaluating a potential transaction with SEG or determining how to
operate pursuant to such a transaction, but for [Defendants‟] own purposes in attempting
to woo prospective investors.”53
51
Osram Sylvania Inc. v. Townsend Ventures, LLC, 2013 WL 6199554, at *6 (Del.
Ch. Nov. 19, 2013).
52
Although PEP is the only Defendant that is a “party” to the NDA, SEG alleges that
Photon and PEI are “affiliates” or “Representatives” of PEP, meaning that they too
are bound by the NDA pursuant to Section 2(a) of that document. Defendants
have not challenged this allegation, and, thus, for purposes of this motion to
dismiss, I assume that the NDA is enforceable against Photon and PEI.
53
Compl. ¶ 61.
31
Much of the parties‟ briefing on this issue focused on the disclosures made in the
Bond Investor Presentation and an amended version of that presentation. In the original
version of that document, PEI listed “Woolwich PV 300” in New Jersey as one of its
pipeline projects.54 In the amended version of the presentation, the Woolwich reference
was removed.55 Defendants argue that the disclosure of the location of the project and
certain information about the project‟s electrical capacity cannot, as a matter of law,
constitute Proprietary Information because there were no other disclosures that revealed
any connection between SEG and the project.
At this early stage of the proceedings, it is unclear how much information the
phrase “Woolwich PV 300” actually revealed to the public.56 It also is unclear what, if
anything, about the Woolwich project was known publicly. But even if the phrase
“Woolwich PV 300” is not Proprietary Information, SEG‟s claims extend beyond that
one disclosure. SEG alleges in the Complaint that in addition to the Bond Investor
54
Defs.‟ Opening Br. Ex. H at 18.
55
Defs.‟ Opening Br. Ex. I at 18.
56
In the Complaint, SEG alleges: (1) in a conversation on February 24, 2013,
“Photon‟s representatives confirmed that the use of SEG‟s pipeline project
information in bond solicitation materials was not authorized”; (2) Defendants
removed SEG‟s pipeline information from various bond solicitation documents;
and (3) during a March 12, 2013 Skype call, “Deege [from Photon] stated that
including SEG‟s U.S. projects in the pipeline of Photon‟s projects in the
prospectus for the sale of PEI‟s bonds was „stupid.‟” Compl. ¶¶ 42-44. These
allegations support a reasonable inference that Defendants understood that the
information they were disclosing was confidential or proprietary in nature and
could qualify as Proprietary Information under the NDA.
32
Presentation, “credit analyst reports concerning the sale” of Defendants‟ bonds also
contained SEG‟s Proprietary Information.57 The exact nature of the information in these
credit reports is neither discussed in the Complaint nor referenced in any of the parties‟
briefing. It is reasonably conceivable that the credit reports contain information that
could be considered more definitively Proprietary Information than that contained in the
Bond Investor Presentation. The record for purposes of Defendants‟ motion to dismiss
does not indicate that Defendants have made any effort to have the credit analyst reports
amended or modified. Thus, it is reasonably conceivable that Proprietary Information
regarding the Woolwich Township project or other Proprietary Information appeared in
those reports as a result of Defendants‟ disclosures and remains publicly available in
violation of the NDA.
Moreover, even assuming that Defendants are correct in their assertion that, as a
matter of law, none of the information they disclosed publicly was Proprietary
Information, it nevertheless is reasonably conceivable that SEG can prove on a full
evidentiary record that one or more Defendants breached the NDA. Section 2(a)(ii) of
the NDA requires that Proprietary Information be used “solely for the purpose of
evaluating whether to enter into the Transaction and, if such Transaction is consummated,
how best to effect such Transaction.”58 One reasonable interpretation of this language is
that Defendants were prohibited from using SEG‟s Proprietary Information in another
57
Compl. ¶ 61.
58
Defs.‟ Opening Br. Ex. E at 2.
33
form for their own benefit. In this litigation, SEG has alleged sufficiently that
Defendants‟ purpose in executing the NDA was to obtain information from SEG that it
could use to make their bonds more appealing to investors. SEG also has alleged that
Defendants learned about certain solar projects in the United States as a result of SEG
sharing its Proprietary Information, such as expansion plans, with Defendants. Based on
the language of the NDA, it is reasonably conceivable that Defendants breached that
agreement by using SEG‟s Proprietary Information as a source for the data in the Bond
Investor Presentation, and its subsequent amendment. That is, even if the information
disclosed in the presentations did not constitute Proprietary Information, it is reasonably
conceivable that SEG could prove that Defendants used the data and other Proprietary
Information SEG made available to them to develop the language in the Bond Investor
Presentation. Because such a use would not be “solely for the purpose of evaluating
whether to enter into the Transaction,” SEG has alleged sufficiently that Defendants
breached the NDA regardless of whether the information disclosed in the Bond Investor
Presentation and elsewhere is itself Proprietary Information.
c. SEG has alleged adequately that it has incurred damages as a result of
Defendants’ alleged breach of the NDA
Section 7(b) of the NDA states that the unauthorized disclosure of Proprietary
Information is “likely to result in irreparable injury” to the non-breaching party and that
because a “remedy at law alone will be an inadequate remedy for such breach” the non-
34
breaching party “shall be entitled to seek the specific performance of” the NDA.59 SEG
also has alleged specifically that it has been irreparably harmed by Defendants‟
disclosure of its Proprietary Information.60 Because the Complaint supports a reasonable
inference that there are publicly available documents containing SEG‟s Proprietary
Information as a result of Defendants‟ disclosures of that information or that Defendants
have misused its Proprietary Information and because it is reasonably conceivable that
Defendants presently remain in possession of certain of SEG‟s Proprietary Information, it
follows that SEG‟s request for injunctive relief has not been mooted and that it is
reasonably conceivable that it will be entitled to at least the equitable relief it is seeking
in this litigation. In that regard, I note also that, based on the allegations in the
Complaint, monetary damages for Defendants‟ alleged breach of the NDA remains a
viable remedy. Because SEG alleges it made highly sensitive information available to
Defendants, depending on the nature of the Proprietary Information that SEG can prove
was used or disclosed improperly, it is conceivable that SEG can prove that those uses or
disclosures harmed its business in a manner that would entitle it to monetary relief.
Therefore, SEG has pled sufficiently all of the necessary elements of its breach of
contract claim. Accordingly, I will deny Defendants‟ motion to dismiss Counts I and II
of the Complaint.
59
Id. at 4.
60
Compl. ¶¶ 53-56.
35
3. Misappropriation of confidential information
a. Legal standard
A plaintiff asserting a claim for misappropriation or conversion of confidential
information must plead: (1) that it had a property interest in the confidential information;
(2) that the defendant wrongfully exerted dominion over the confidential information;
and (3) that the plaintiff sustained damages as a result.61
b. SEG has pled adequately its claim for misappropriation of confidential
information
At the outset, I note that the parties to this litigation devoted little argument to
SEG‟s claim for misappropriation. Between the three briefs that were filed related to
Defendants‟ motion, SEG and Defendants devoted less than two-and-a-half pages, in
total, to this claim. The parties‟ cursory treatment of Counts III and IV with arguments
that almost exclusively replicated those made with respect to Counts I and II indicate that
they viewed the misappropriation claim as essentially an alternative argument to SEG‟s
breach of contract claim. I concur that Counts III and IV most logically represent
alternative causes of action to Counts I and II, and, as such, my analysis of SEG‟s claim
for breach of the NDA applies equally to SEG‟s misappropriation claim. Counts III and
IV would apply if, for example, the NDA were held unenforceable against one or more
defendants.
61
Overdrive, Inc. v. Baker & Taylor, Inc., 2011 WL 2448209, at *5 (Del. Ch. June
17, 2011).
36
One element of SEG‟s misappropriation cause of action that was not encompassed
in my analysis of the breach of the NDA claim, however, is whether SEG has alleged
adequately that it had a property right in the confidential information that Defendants
purportedly misappropriated. As to that element, SEG and Defendants agreed
contractually to a broad definition of Proprietary Information in the NDA. Thus, each
side recognized that the other possessed a wide range of information that could be
considered confidential and which it had a right to protect. Based on these facts, it is
reasonably conceivable that SEG will be able to prove that it had a property interest in the
confidential information it shared with Defendants, and which Defendants are alleged to
have used and disclosed impermissibly. For example, at this juncture, it is a disputed
issue of fact as to whether, and to what extent, information about the Burlington and
Woolwich Township projects were known publicly. The Complaint supports a
reasonable inference that SEG learned about these projects through the expenditure of
resources and development of industry connections. Thus, if information about the
projects was not generally known to the public, it is reasonably conceivable that SEG can
prove that such information was confidential information in which it had a property
interest,62 thereby satisfying the first element of its misappropriation claim.
62
In many respects, the location of, and information about, the Burlington and
Woolwich Township projects, for example, appear to be analogous to a company
customer list. In certain instances, this Court has found customer lists to constitute
protectable confidential information. See, e.g., Great Am. Opportunities, Inc. v.
Cherrydale Fundraising, LLC, 2010 WL 338219, at *19 (Del. Ch. Jan. 29, 2010).
37
As discussed in my analysis of SEG‟s breach of contract claim, it also is
reasonably conceivable that Defendants wrongfully exerted dominion over SEG‟s
confidential information. SEG had pled sufficiently that Defendants have used or
disclosed its Proprietary Information in breach of the NDA. SEG provided Defendants
with its Proprietary Information subject to the conditions set forth in the NDA, and use of
SEG‟s information in violation of those conditions would be inconsistent with SEG‟s
rights to control its property. Thus, because it is reasonably conceivable that Defendants
used or disclosed impermissibly SEG‟s confidential information, it also is reasonably
conceivable that Defendants wrongfully exerted dominion over SEG‟s confidential
Proprietary Information.
Finally, as to the element of damages, SEG alleges that it has been harmed
irreparably by Defendants‟ misappropriation of its confidential information and seeks an
order from this Court requiring Defendants to return any and all SEG Proprietary
Information they currently possess. Defendants have failed to offer any persuasive
argument as to why it is not reasonably conceivable that the injunctive relief SEG is
seeking or some form of monetary damages would be unavailable should it prevail on the
merits of its misappropriation claim. Therefore, I conclude that SEG has pled adequately
each element of its misappropriation of confidential information claim, and, as such, I
deny Defendants‟ motion to dismiss Counts III and IV of the Complaint.
4. Tortious interference
Finally, I address SEG‟s claim that Photon tortiously interfered with its
prospective business opportunities with the Burlington and Woolwich Township projects.
38
a. Legal standard
SEG‟s tortious interference claim is predicated on an expectancy, rather than the
existence, of a contractual relationship with Burlington and Woolwich Township. Under
Delaware law, an action for tortious interference with prospective contractual relations
requires: (1) a reasonable probability of a business opportunity or prospective contractual
relationship; (2) intentional interference by a defendant with that opportunity; (3)
proximate cause; and (4) damages.63 Furthermore, all of these requirements must be
considered in light of a defendant‟s privilege to compete or protect his business interests
in a lawful manner.64 Because I find that SEG has not pled sufficiently that it had a
reasonable expectancy of being awarded either the Burlington or Woolwich Township
projects, I dismiss SEG‟s tortious interference claim with prejudice.65
b. The Burlington project
1. SEG has not alleged adequately a reasonable expectancy of being awarded
the Burlington project
The Complaint lacks sufficient allegations from which the Court can draw a
reasonable inference that SEG had a reasonable expectancy in the Burlington project.
63
DeBonaventura v. Nationwide Mut. Ins. Co., 428 A.2d 1151, 1153 (Del. 1981).
64
Id.
65
It also is highly questionable as to whether SEG has alleged adequately the
intentional interference element of its tortious interference claim. It is unclear
whether Defendants‟ purported misleading of SEG as to whether it wished to
partner with SEG on solar projects would be sufficient to establish intentional
interference. I need not address that issue, however, because I conclude that
SEG‟s tortious interference claim fails for the independent reason that it lacked a
reasonable expectancy in either of the projects at issue in this litigation.
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There are no allegations in the Complaint that describe SEG‟s relationship with the
Burlington project decisionmakers or the competitive landscape for the Burlington
project. That landscape would include, for example, the number of firms being
considered for the project and the reasons that SEG was at least as qualified as those
other firms and at least equally likely to be awarded the project.
In addition, SEG did not allege it was capable of procuring either the Burlington
or Woolwich Township project itself, and it appears from the Complaint that SEG‟s
ability to secure either or both of those projects was contingent on SEG having a business
partner, either in the nature of a solar developer or a funding source or both. SEG and
Defendants never reached an agreement to partner on the Burlington project, nor were
Defendants under any obligation to reach such an agreement with SEG. Moreover, SEG
has not alleged that it had a relationship with any other solar developers or financing
sources with whom they could have partnered to submit a conforming bid or proposal for
the Burlington project. SEG offers no persuasive explanation and cites no authority to
support its claim that it had a reasonable expectation of being awarded the Burlington
project when it could not satisfy certain of the project‟s most basic criteria such as a
partnership with a solar developer and proof of adequate financing.
SEG evidently expected that, together with one or more of Defendants, it could
have had a reasonable expectancy of obtaining the Burlington project. There is no
allegation, however, that SEG and any Defendant ever actually agreed jointly to pursue
the Burlington project or that any Defendant owed SEG an obligation to do so. There
40
also is no basis upon which the Court reasonably could infer that SEG could have
obtained the Burlington job on its own.
Finally, SEG‟s argument that Defendants‟ alleged inclusion of the Burlington
project in its bond marketing materials evidences SEG‟s reasonable expectancy in
securing that project is unpersuasive. As discussed supra, the alleged reference to the
Burlington project occurs in solicitation materials about Photon. It is one of numerous
listed “pipeline projects,” but that list bears an explicit legend that it is “subject to
change.”66 The reference makes no mention of SEG at all. Because the standard is
whether SEG had a reasonable expectancy of securing the project, I am not convinced
that Photon‟s apparent belief about the Burlington project, which was presented in a
report that was designed to facilitate the sale of Photon‟s bonds, allows me to overcome
the aforementioned deficiencies in SEG‟s Complaint and draw a reasonable inference
that SEG had a reasonable expectancy of being awarded the Burlington project. For this
reason, SEG‟s tortious interference claim with respect to the Burlington project is not
viable.
c. The Woolwich Township project
1. SEG has not alleged adequately a reasonable expectancy of being awarded
the Woolwich Township project
Although the allegations in the Complaint arguably come closer to being sufficient
in terms of whether SEG had a reasonable expectancy in the Woolwich Township
66
Defs.‟ Opening Br. Ex. I at 18-19.
41
project, they still are inadequate to survive a motion to dismiss. In addition to alleging
that SEG was one of only two potential bidders for the Woolwich Township project, the
Complaint also states that SEG: (1) previously had completed a solar project for
Woolwich Township; (2) relied on the township to provide business references attesting
to the quality of its work; and (3) had been told by members of Woolwich‟s Town
Council that they wanted SEG to work on the project. Like the Burlington project,
however, there are no allegations that SEG was capable of securing the Woolwich
Township project on its own. Rather, SEG needed to partner with a solar developer able
to provide any necessary financial assurances, such as Photon.67 Also like the Burlington
project, SEG has not alleged that any Defendants were obligated to partner with it on the
Woolwich Township project or that it had other potential partners it could have used if
Defendants had been honest about their intentions from the start of their relationship.
Because SEG could not have satisfied the Woolwich Township project requirement on its
own and had no right to compel Photon to partner with it on that project, SEG has failed
to demonstrate that it conceivably had a reasonable expectation of procuring the
Woolwich Township project. Thus, SEG‟s tortious interference claim regarding the
Woolwich Township project must be dismissed with prejudice.
67
See Compl. ¶ 32 (“As Woolwich Township would rely upon the cost savings
numbers for contractual purposes and would sign a power purchase agreement
with Photon, Photon was the party that needed to provide the financial assurances
and obligations.”) (emphasis added).
42
III. CONCLUSION
For the foregoing reasons, Defendants‟ motion to dismiss is granted with respect
to Count V of the Complaint. In all other respects, Defendants‟ motion to dismiss is
denied.
IT IS SO ORDERED.
43