LCT Captial, LLC v. NGL Energy Partners LP ( 2023 )


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  •        IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
    LCT CAPITAL, LLC,                           :
    :
    Plaintiff,              :
    :
    v.                             :    C.A. No. N15C-08-109 JJC CCLD
    :
    NGL ENERGY PARTNERS LP and                  :
    NGL ENERGY HOLDINGS LLC,                    :
    :
    Defendants.             :
    Submitted: January 25, 2023
    Decided: January 30, 2023
    ORDER
    On this 30th day of January 2023, after considering the parties’ positions
    regarding the admissibility of evidence in the new trial, it appears to the Court that:
    1.     In 2015, Plaintiff LCT Capital, LLC (“LCT”) sued Defendants NGL
    Energy Partners LP, and NGL Energy Holdings LLC (collectively “NGL”) for
    breach of contract, fraud, and quasi-contractual damages. Initially, LCT’s quasi-
    contractual claims included unjust enrichment and quantum meruit. After a first
    trial, post-trial decisions, and an interlocutory appeal, only a quantum meruit claim
    remains. Jury selection for a second trial will be on February 2, 2023, and it will
    begin on February 6, 2023.
    2.     At this stage of the litigation, the Superior Court’s and the Supreme
    Court’s prior decisions provide a tripartite law of the case.         First, the Superior
    Court’s undisturbed rulings before, during, and after the first trial control.1 Second,
    the Delaware Supreme Court’s decision on an interlocutory appeal commands
    1
    See e.g., LCT Capital, LLC v. NGL Energy Partners LP, 
    2019 WL 6896463
     (Del. Super. Dec. 5,
    2019).
    primacy regarding the issues it either explicitly or implicitly decided.2 Third, the
    Superior Court’s recent decision regarding the parties’ motions in limine, issued on
    December 22, 2022 (the “December decision”),3 provides the evidentiary road map
    for next week’s trial.
    3.     The Court’s forty-page December decision decided five motions in
    limine and navigated the parties’ numerous contentions. Namely, it granularly and
    carefully examined Daubert issues, issues of relevance based upon claims now
    removed from the case, and Delaware Rule of Evidence 403 concerns.
    4.     To navigate the law of the case, the Court first looks to the Delaware
    Supreme Court’s explanation of the doctrine:
    the law of the case doctrine is a self-imposed restriction that prohibits
    courts from revisiting issues previously decided, with the intent to
    protect “efficiency, finality, stability, and respect for the judicial
    system.” . . . The doctrine is not an absolute restriction, and it allows
    the Superior Court . . . to reexamine issues that are “clearly wrong,
    produce[] an injustice[,], or should be revisited because of changed
    circumstances.4
    Here, the tripartite law of the case, when considered in its entirety, requires the Court
    to revisit one issue decided in the December decision.
    5.     To explain why it is necessary to do so, the Court first summarizes the
    nature of the two quasi-contractual claims that LCT originally pled. First, a contract
    implied in law may provide for a quasi-contractual claim for unjust enrichment.
    Damages under that mechanism turn on the value of unfair gain enjoyed by the
    defendant.5    In that respect, it has more of a punitive and equitable flavor. LCT’s
    claim for unjust enrichment no longer remains as part of the case.
    2
    LCT Capital, LLC v. NGL Energy Partners LP, 
    249 A.3d 77
    , 80 (Del. 2021); see also Estate of
    Krieger v. AmGuard Insurance Co., 
    2021 WL 733442
    , at *2 (Del. Super. Feb. 25, 2021)
    (recognizing that the doctrine encompasses matters both explicitly and implicitly decided).
    3
    LCT Capital, LLC v. NGL Energy Partners LP, 
    2022 WL 17851423
     (Del. Super. Dec. 22, 2022).
    4
    State v. Wright, 
    131 A.3d 310
    , 321 (Del. 2016) (citations omitted).
    5
    Nemec v. Shrader, 
    991 A.2d 1120
    , 1130 (Del. 2010).
    2
    6.     A second quasi-contractual claim provides recovery in quantum meruit.
    Recovery in quantum meruit turns on the value of the plaintiff’s services to the
    defendant.6     The phrase translates literally to “as much as he deserves.”7             The
    measure of value of the services must be “based on the facts of the case, as to the
    worth of the specific services rendered to the defendant[].”8 The difference between
    unjust enrichment and quantum meruit claims distills to whether the plaintiff
    recovers for (1) the value of the benefits unjustly provided to the defendant (in the
    case of unjust enrichment), or (2) the value of the plaintiff’s services (in the case of
    quantum meruit). In some cases, such as this one, the same evidence is admissible
    to prove both claims. In other cases, evidence offered to prove one may be separately
    inadmissible to prove the other.
    7.     Here, the Court’s December decision bars LCT from attempting to
    prove the value that LCT added to NGL’s acquisition. When doing so, it believed
    such value to no longer be relevant because no claim for unjust enrichment remains.
    LCT’s claim seeks quantum meruit damages, however, for highly specialized and
    particularized investment banking services that it provided to NGL. In such a case,
    the appropriateness of a flat fee for LCT’s services, as urged by NGL’s expert, Ms.
    Lancaster, is not a foregone conclusion. Apart from Ms. Lancaster’s testimony,
    there is evidence of record that supports an inference that the value of LCT’s services
    cannot be reduced to such a flat fee.         In fairness, the jury must be permitted to
    consider the increased value LCT added to the TransMontaigne acquisition when it
    decides how much LCT “deserves.”
    8.     Along those same lines, the Supreme Court’s decision in this case
    recognized that “LCT played an unusually valuable role in the transaction.”9
    6
    Marta v. Nepa, 
    385 A.2d 727
    , 730 (Del. 1978).
    7
    Hynansky v. 1492 Hospitality Group, Inc., 
    2007 WL 2319191
    , at *1 (Del. Super. Aug. 15, 2007).
    8
    
    Id.
     (emphasis added).
    9
    LCT Capital, 249 A.3d at 80.
    3
    Elsewhere in the decision, the Supreme Court recognized that LCT’s efforts were
    “extraordinary,” “unique,” and “critical,” based upon the evidence presented at the
    first trial.   10
    If the jury finds that LCT’s efforts were unique, extraordinary, and
    critical in the retrial, it can permissibly place a value on those efforts when it
    determines how much LCT deserves.11 After all, the sole goal of LCT’s services
    was to increase the deal’s value for NGL. It follows that for such unique, or one-
    of-a-kind, services, LCT should not be precluded from presenting evidence or
    argument that the reasonable value of its services cannot be ascertained without
    understanding the value it added to NGL’s acquisition.12
    9. To determine whether evidence is admissible, the Court must first ask the
    proponent to explain what he or she offers that evidence to prove. The answer
    dictates the relevancy of the evidence, and steers the balancing required by DRE
    403. Here, LCT, does not offer the evidence of the value that it added to the
    TransMontaigne acquisition to prove NGL’s unjust enrichment. Rather, it offers the
    evidence to prove the value of LCT’s services given their unique character. Again,
    the relevance is properly viewed in the context of the goal of the services at issue –
    to add value to NGL’s deal. Because the evidence is highly probative when offered
    to prove the value of what LCT did for NGL, and since a limiting instruction can
    adequately mitigate unfair prejudice, the Court modifies its previous decision of
    December 22, 2022, to clarify that such evidence is admissible.
    10
    Id. at 82, 101.
    11
    The December decision incorrectly treats evidence of the value that LCT added to the deal as
    irrelevant because the Court dismissed LCT’s unjust enrichment claim.
    12
    While the Court recognizes LCT’s argument that the Supreme Court’s decision in Marta v.
    Nepa, 
    385 A.2d 727
     (Del. 1978) could be read to preclude evidence of a typical commission or fee
    in this case, the Court will not revisit the December decision’s ruling that Ms. Lancaster’s opinion
    is admissible. She is expected to testify that a typical banker investment fee of .5 to 2 percent
    appropriately values LCT’s services. The jury will be free to accept or reject her opinion.
    Similarly, it would be manifestly unfair to preclude LCT from presenting alternative evidence
    about how much value LCT’s services provided NGL, since the goal of LCT’s services, as
    indicated supra, was to increase value for NGL.
    4
    10.     This ruling has at least one important implication regarding a central
    piece of evidence. Namely, the December decision found Mr. Krimbill’s letter of
    October 24, 2014 (the “letter”) inadmissible, at least in critical part.13                     The
    December decision also precluded one of LCT’s experts, Mr. McQuilken, from
    discussing the letter in his testimony.14 Mr. Krimbill wrote the letter in his capacity
    as Chief Executive Officer of NGL. In it, he recommended to NGL’s owners that
    a certain buy-in arrangement for LCT was equivalent “to a $ 29 million success fee
    . . . [and was] a fair arrangement [to compensate LCT for its services]. . . as we never
    would have had this opportunity at our price without LCT bringing it to us.”                   The
    letter assumed center stage in the first trial.15 Next, after the first trial and on appeal,
    the Supreme Court quoted the letter approvingly when it recognized that a quantum
    meruit claim survived.16 Here, the reasonable value of LCT’s services may, in large
    part, depend on the value that LCT brought to NGL. When offered for that purpose,
    the letter is a highly relevant admission by a party opponent that the value of LCT’s
    services was equivalent to $29 million.17 Accordingly, it would be manifestly unfair
    to exclude important portions of the letter from evidence because those portions
    directly address what is in controversy. On balance, the letter is relevant, no DRE
    13
    Id. at *22–23.
    14
    Id.
    15
    See LCT Capital, 249 A.3d at 101, n.188 (quoting LCT’s closing argument that addressed in
    detail the importance of Mr. Krimbill’s $29 million valuation found in the letter).
    16
    Id. at 100.
    17
    NGL’s arguments that the Court should exclude the letter because it interjects subjective opinion
    into what should be an objective determination is not availing for two reasons. First, there was
    never a contract, so there is no integrated agreement that generates parol evidence considerations.
    Nor does the objective theory of contract apply because there was no contract. Second, and more
    directly, the Delaware Rules of Evidence directly contemplate that an admission against interest
    includes the beliefs and opinions of a party-opponent if they are offered against the opponent’s
    interest. D.R.E. 801(d)(2)(D).
    5
    403 concerns substantially outweigh its relevance, and it is non-hearsay as an
    admission.18
    11.     Apart from the letter and other NGL statements that may qualify as
    admissions regarding the value of LCT’s services, this modification does little to
    alter the litigation’s landscape. All other aspects of the case remain controlled by
    the December decision, with only these minor adjustments.
    12.     For instance, the permitted scope of Mr. McQuilken’s proposed
    testimony remains nearly unchanged. In the December decision, the Court barred
    some of his opinions under Daubert as ipse dixit and as otherwise lacking
    foundation. 19 Those Daubert-based decisions provide that LCT may not offer Mr.
    McQuilken’s opinions (1) that a reasonable fee range in this case would have been
    between $43.8 and $60 million, or (2) any other calculation that reduces his opinion
    regarding value to a firm figure.20            Nevertheless, it would be inappropriate to
    preclude an expert from testifying about a document that is in evidence. He may
    explain the terms in the letter and how the equity buy-in proposal could have worked,
    as well as how the mechanism could have equated to a $29 million finder’s fee as
    Mr. Krimbill acknowledged. Furthermore, as provided in the December decision,
    he may also explain the unique nature of LCT’s services, and opine why he believes
    those services warrant a greater fee than would be available in standard investment
    banking efforts. 21
    13.     The Court recognizes that admitting evidence regarding the value that
    LCT brought to this transaction risks prejudicing NGL. Any admission by a party-
    18
    The Court will entertain further argument from the parties regarding the possible redaction of
    paragraph one from the letter because it references value creation after the purchase, or, in the
    alternative, it will consider an additional limiting instruction to mitigate jury confusion. It will
    also consider any requested redactions from the letter referencing Energy Minerals Group because
    it is not a party to the case.
    19
    LCT Capital, 
    2022 WL 17851423
     at *14–16.
    20
    Id. at 15, 17.
    21
    Id. at 16, 18.
    6
    opponent that damages could be as high as $29 million may cause NGL prejudice.
    Likewise, NGL’s proposed expert testimony that a standard investment banker fee
    would be appropriate (as low as $1 million), may prejudice LCT. Unfair prejudice
    is the catchphrase, however. In this case, DRE 403 concerns do not substantially
    outweigh the relevance of either parties’ proffers. Nevertheless, because the Court
    recognizes that there is a risk of jury confusion, and unfair prejudice to NGL based
    upon “value added” evidence, the Court will entertain a request by NGL for
    appropriate limiting instructions both during trial and in the final charge. Such
    instructions may include, but not be limited to, telling the jury that: (1) the evidence
    of value added to the acquisition is offered only for the limited purpose of showing
    the reasonable value of LCT’s services to NGL; (2) the jury cannot consider such
    evidence to conclude that the two reached an agreement on compensation, because
    they did not as a matter of law; and (3) the jury may not consider the evidence for
    any purpose other than for the limited purpose for which it was offered.
    WHEREFORE, the Court’s decision of December 22, 2022, is modified as
    set forth above. All other aspects of the December decision will control the parties’
    presentations at trial.
    IT IS SO ORDERED.
    /s/ Jeffrey J Clark
    Resident Judge
    JJC:klc
    Via File & Serve Express
    7
    

Document Info

Docket Number: N15C-08-109 JJC CCLD

Judges: Clark R.J.

Filed Date: 1/30/2023

Precedential Status: Precedential

Modified Date: 1/31/2023