Flex Ltd. v. Nextracker Inc.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

FLEX LTD. and FLEXTRONICS )
INTERNATIONAL USA, INC., )
)
)
Plaintiffs,
)
) C.A. No. 2025-0197-KSJM
v.
)
)
NEXTRACKER INC., NEXTRACKER
)
LLC, YUMA ACQUISITION SUB
)
LLC and YUMA SUBSIDIARY, INC.,
)
)
Defendants.
)

MEMORANDUM OPINION

Date Submitted: October 20, 2025
Date Decided: January 21, 2026

Oderah C. Nwaeze, Angela Lam, FAEGRE DRINKER BIDDLE & REATH LLP,
Wilmington, Delaware; Lawrence G. Scarborough, FAEGRE DRINKER BIDDLE &
REATH LLP, New York, New York; Jacob A. Kramer, FAEGRE DRINKER BIDDLE
& REATH LLP, Washington, D.C.; Desmonne A. Bennett, FAEGRE DRINKER
BIDDLE & REATH LLP, Denver, Colorado; Counsel for Plaintiffs Flex Ltd. and
Flextronics International USA, Inc.

Kevin M. Coen, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington,
Delaware; Brian M. Burnovski, DAVIS POLK & WARDWELL LLP, New York, New
York; Counsel for Defendants Nextracker Inc., Nextracker LLC, Yuma Acquisition Sub
LLC, and Yuma Subsidiary, Inc.

McCORMICK, C.
This dispute concerns tax liabilities incurred before the plaintiffs spun off

Nextracker LLC. Before the spin-off, Nextracker made quarterly distributions under

to the LLC agreement to its members in amounts calculated to cover the members’

tax liabilities. Flex Ltd. owned Nextracker’s members, and Flex would cause the

members to transfer the quarterly distributions up the corporate chain to Flex. Flex

incurred tax liabilities for Nextracker’s earnings during the quarter right before the

spin-off. After the spin-off, Flex demanded payment from Nextracker to cover those

liabilities. Nextracker refused. Flex filed this suit for breach of contract to force

payment. Flex’s primary claim is that Nextracker’s refusal to pay amounts equal to

Flex’s tax liabilities violates the wrong-pockets and retained-assets provisions of the

separation agreement governing the spin-off. But Flex ignores the more specific

language of a tax agreement entered to facilitate the spin-off, which allocates the tax

liabilities at issue to Flex. The defendants have moved to dismiss the complaint based

on the plain language of the suite of agreements, and this decision grants the motion.

I. FACTUAL BACKGROUND

The facts are drawn from the Verified Complaint (the “Complaint”) and the

documents it incorporates by reference.1

A. Flex Acquires Nextracker.

Plaintiff Flex Ltd. is a Singaporean company. It owns plaintiff Flextronics

International USA Inc. (“Flex USA” and with Flex Ltd., “Flex” or “Plaintiffs”). Flex

USA is responsible for U.S. income taxes for itself and its subsidiaries.

1 C.A. 2025-0197, Docket (“Dkt.”) 1 (“Compl.”).
Flex acquired Nextracker in December 2015 for approximately $330 million.

Nextracker provides solar tracking and software solutions to utility-scale solar

projects around the world. Its products allow solar panels to follow the sun’s

movement, optimizing utility-scale plant performance.

B. Flex Prepares To Spin-Off Nextracker.

In 2021, Flex considered a full or partial separation from Nextracker through

an IPO, sale, spin-off, or other transaction. On February 1, 2022, Nextracker and

Flex entered into a Separation Agreement. At that time, Flex owned Yuma

Acquisition Sub LLC and Yuma Subsidiary, Inc. (the “Yuma Members”). The Yuma

Members held membership interests in an operating entity, Nextracker LLC (with

Nextracker Inc. and the Yuma Members, “Defendants”). Nextracker LLC operates

pursuant to a Third Amended and Restated Limited Liability Company Agreement

(the “LLC Agreement”). Nextracker Inc. was formed as a Flex subsidiary to serve as

a publicly traded entity. Nextracker Inc. is also Nextracker LLC’s managing member.

In February 2023, Nextracker and Flex executed an Agreement and Plan of

Merger and an Amended and Restated Separation Agreement (the “Separation

Agreement”).2 The Separation Agreement governed the Nextracker spin-off. Under

the Separation Agreement and related contracts, Flex had discretion to choose when

to spin-off Nextracker.

2 Id. ¶ 26.

2
Two aspects of the Separation Agreement are relevant to the parties’ dispute.

Section 2.4(b) of the Separation Agreement is a “Wrong-Pockets Provision.”3 That

provision requires that each party return any mistaken payments after the spin-off.

Sections 2.2, 2.6, and 2.8 collectively establish “Retained-Assets Provisions”

identifying the assets that Flex would retain after the spin-off.4

In 2022 and 2023, Flex executed several transactions to begin its divestment

of Nextracker. In February 2022, it sold $500 million of convertible preferred equity

in Nextracker LLC to a third party. In February 2023, it completed an IPO of its

shares in Nextracker Inc. In July 2023, Nextracker Inc. completed a follow-on

offering, leaving Flex with 51.5% of the total outstanding shares of Nextracker Inc.

common stock.

C. Nextracker Makes Tax Distributions To The Yuma Members.

Meanwhile, Nextracker Inc. made tax distributions to the Yuma Members.

Nextracker LLC is treated as a partnership for federal income tax purposes, which

means that its taxable income “passes through” to the Yuma Members. Flex USA,

through its ownership of the Yuma Members, is ultimately responsible for paying

taxes on Nextracker’s income.

3 Compl., Ex. A (Separation Agreement) § 2.4(b).

4 Id. §§ 2.2, 2.6, 2.8.

3
Both Nextracker and Flex operate with a fiscal year ending in March. 5 Each

quarter, Nextracker LLC made tax distributions to the Yuma Members, and Flex

USA caused the Yuma Members to transfer the funds to Flex USA, the entity

responsible for U.S. tax payments. This procedure occurred in Q4 2023, Q1 2024, and

Q2 2024.6

D. Flex Finalizes The Spinoff.

Flex spun-off Nextracker on January 2, 2024. The spin-off involved a two-step

merger where (1) Yuma Inc. merged with a wholly owned corporate subsidiary of

Nextracker (and Yuma Inc. survived), and then (2) Yuma Inc. merged into an LLC

wholly owned by Nextracker (Yuma Acquisition Sub, which survived).

That same day, the parties executed a Tax Matters Agreement (the “Tax

Agreement”).7 The Tax Agreement allocated tax responsibilities between Nextracker

and Flex and contained provisions governing which party could receive refunds. It

also protected the transaction’s tax-free status.

E. The Q3 2024 Tax Distribution

The tax distribution for Q3 2024 was due on January 10, 2024, but Nextracker

LLC delayed it until February 6, 2024, when it distributed $48.5 million to the Yuma

5 The first quarter ran from April 1 to June 30, the second quarter ran from July 1 to

September 30, the third quarter ran from October 1 through December 31, and the
fourth quarter ran from January 1 to March 31.
6 Compl. ¶¶ 50, 125.

7 Dkt. 16, Ex. E (Tax Agreement). The court may consider the Tax Agreement because

it is incorporated by reference in the Complaint. See Compl. ¶ 45 n.1 (citing
Nextracker Inc.’s Form S-4 dated October 25, 2023, which attaches as an exhibit a
form of the Tax Matters Agreement that is materially identical to the final version of
the agreement); Dkt. 16, Ex. A.

4
Members (the “Q3 Tax Distribution”). Because Flex no longer controlled the Yuma

Members, it could not force those entities to send the payment up the corporate chain.

Flex thus demanded that Defendants pay it the Q3 Tax Distribution, which

covered the period before the spin-off during which Flex earned approximately $167

million through its ownership of Nextracker LLC. Defendants refused to pay the Q3

Tax Distribution to Flex.

F. This Litigation

Plaintiffs filed this action against Defendants on February 21, 2025, asserting

four counts:

• In Count I, Plaintiffs claim that Nextracker Inc. breached the Wrong
Pockets and Retained Assets Provisions of the Separation Agreement by
failing to forward the Q3 Tax Distribution to Flex.

• In Count II, asserted in the alternative against Nextracker Inc.,
Plaintiffs claim breach of the implied covenant of good faith and fair
dealing.

• In Count III, asserted in the alternative against Nextracker Inc. and
Nextracker LLC, Plaintiffs seek to reform the Separation Agreement
based on theories of unilateral and mutual mistake.

• In Count IV, asserted in the alternative against Nextracker Inc. and the
Yuma Members, Plaintiffs claim that Nextracker Inc.’s failure to
forward the Q3 Tax Distribution unjustly enriched Nextracker Inc. and
the Yuma Members.8

8 Compl. ¶¶ 97–142.

5
On March 25, 2025, Defendants moved to dismiss the Complaint.9 The parties

concluded briefing on July 31, 2025, and the court held oral argument on October 20,

2025.10

II. LEGAL ANALYSIS

Defendants moved to dismiss the Complaint for failure to state a claim under

Court of Chancery Rule 12(b)(6). “[T]he governing pleading standard in Delaware to

survive a motion to dismiss is reasonable ‘conceivability.’”11 When considering a Rule

12(b)(6) motion, the court must “accept all well-pleaded factual allegations in the

[c]omplaint as true . . . , 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.”12 The court, however, need not

“accept conclusory allegations unsupported by specific facts or . . . draw unreasonable

inferences in favor of the non-moving party.”13

A. Breach Of Contract

Plaintiffs claim that Nextracker Inc. breached the Wrong-Pockets Provision

and Retained-Assets Provision by refusing to pay them the Q3 Tax Distribution.

9 Dkt. 13.

10 See Dkts. 16, 19, 22, 29.

11 Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del.

2011).
12 Id. (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002)).

13 Price v. E.I. du Pont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011), overruled on

other grounds by Ramsey v. Georgia S. Univ. Advanced Dev. Ctr., 189 A.3d 1255, 1277
(Del. 2018) (citing Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)).

6
To prevail on a claim for breach of contract, a party must demonstrate the

existence of a contract, the breach of an obligation imposed by that contract, and harm

or damage resulting from the breach.14

Defendants dispute that they committed a breach, arguing that the Q3 Tax

Distribution falls outside the Wrong-Pockets and Retained Assets Provisions. And

even if it does not, Defendants argue that the Tax Agreement forecloses liability

because it governs the Q3 Tax Distribution.

Delaware courts follow the objective theory of contracts, giving words “their

plain meaning unless it appears that the parties intended a special meaning.”15 In

practice, the objective theory requires that a court “give priority to the parties’

intentions as reflected in the four corners of the agreement, construing the agreement

as a whole and giving effect to all its provisions.”16 “In so doing, the court evaluates

the relevant provision’s semantics, syntax, and context, aided by interpretive

canons.”17

Where language is unambiguous, courts “will give effect to the plain meaning

of the contract’s terms and provisions.”18 “Language is ambiguous if it is susceptible

14 See VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).

15 Allen v. Encore Energy P’rs, L.P., 72 A.3d 93, 104 (Del. 2013).

16 In re Viking Pump, Inc., 148 A.3d 633, 648 (Del. 2016) (internal quotation marks

omitted).
17 JJS, Ltd. v. Steelpoint CP Hldgs., LLC, 2019 WL 5092896, at *5 (Del. Ch. Oct. 11,

2019).
18 Manti Hldgs., LLC v. Authentix Acq. Co., Inc., 261 A.3d 1199, 1208 (Del. 2021)

(quoting Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159–60 (Del. 2010)).

7
to more than one reasonable interpretation.”19 “An interpretation is unreasonable if

it ‘produces an absurd result’ or a result ‘that no reasonable person would have

accepted when entering the contract.’”20 “The parties’ steadfast disagreement over

interpretation will not, alone, render the contract ambiguous.”21

1. The Wrong-Pockets Provision

The Wrong-Pockets Provision states:

As between the Parties (and the members of their
respective Group) all payments and reimbursements
received after the Operative Time by one Party (or member
of its Group) that relate to a[n] . . . Asset or Liability of the
other Party (or member of its Group), shall be held by such
Party for the use and benefit of the Party entitled thereto
(at the expense of the Party entitled thereto) and, promptly
upon receipt by such Party of any such payment or
reimbursement, such Party shall pay . . . the amount of
such payment or reimbursement without right of set-off.22

This provision has two key parts. It requires that Nextracker pay to Flex the

amount of: (a) “all payments and reimbursements” received by Nextracker or its

affiliates that “relate to” an (b) “Asset” or “Liability” of Flex.23

Nextracker disputes Plaintiffs’ interpretation of these provisions and further

argues that the Wrong-Pockets Provision must be read in harmony with the Tax

Agreement.

19 Id. (citing Osborn, 991 A.2d at 1160).

20 Id. (quoting Osborn, 991 A.2d at 1160).

21 Id.

22 Separation Agreement § 2.4(b) (emphases added).

23 Id.

8
a. Payments And Reimbursements

The LLC Agreement does not define “payment” or “reimbursement.” “Under

well-settled case law, Delaware courts look to dictionaries for assistance in

determining the plain meaning of terms which are not defined in a contract.”24

Black’s Law Dictionary defines “payment” as “[t]he money or other valuable thing so

delivered in satisfaction of an obligation.”25 It defines “reimbursement” as “[t]he act

or an instance of paying back a sum of money.”26

Under these definitions, the Q3 Tax Distribution is at least a payment.

Nextracker made the Q3 Tax Distribution under Section 5.01(b) of the LLC

Agreement. That provision states:

To the extent (i) [Nextracker Inc.] reasonably determines
that [Nextracker LLC] has Available Cash . . . [Nextracker
Inc.] shall cause [Nextracker LLC] to make distributions
for each Tax Year (or portion thereof) among the Common
Members with respect to their Common Units pro rata . . .
such that each Common Member receives an amount at
least equal to the excess of (A) the product of (x) the
aggregate net taxable income for such Tax Year allocated
by the Company to such Common Member (disregarding
any basis adjustments pursuant to Section 743(b) of the
Code), and (y) the Assumed Tax Rate for such Tax Year,
over (B) all prior distributions made to such Common
Member in such Tax Year with respect to its Common
Units (to the extent not previously taken into account
under this Section 5.01(b)). Any distribution made
pursuant to this Section 5.01(b) shall be treated as an
advance against future distributions payable to such
Member pursuant to Section 5.01(a) or Article XIII and
shall reduce such distributions on a dollar-for-dollar basis.

24 Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del. 2006).

25 Payment, Black’s Law Dictionary (12th ed. 2024).

26 Reimbursement, Black’s Law Dictionary (12th ed. 2024).

9
[Nextracker Inc.] shall cause [Nextracker LLC] to make
distributions pursuant to this Section 5.01(b) in quarterly
installments on an estimated basis on or before the 10th
day of April, July, October and January of such Tax Year.27

The language and structure of the provision reflect the parties’ intent to pay

LLC members for their tax liability. It is titled “Tax Distributions.”28 It repeats the

word “distribution” several times. And it uses tax inputs to calculate distributions.

The LLC Agreement takes a conservative approach, ensuring members will not

receive less than their actual tax liability by defining “Assumed Tax Rate” as “equal

to the highest marginal income tax rate.”29 Plus, the quarterly distribution

requirement is timed to match the members’ quarterly tax liability. The Q3 Tax

Distribution thus meets the definition of a “payment” because Nextracker LLC

“delivered [it] in satisfaction of an obligation”—the corresponding Q3 2024 tax

liability.30

Defendants argue that the Q3 Tax Distribution was neither a payment nor

reimbursement, but an advance or loan. They rely on the second half of Section

5.01(b), which treats tax distributions as an “advance against future distributions

payable to such Member pursuant to Section 5.01(a) or Article XIII” and states that

tax distributions “shall reduce such distributions on a dollar-for-dollar basis.”31

27 Compl., Ex. B (LLC Agreement) § 5.01(b).

28 Id.

29 Id. § 1.01.

30 Payment, Black’s Law Dictionary (12th ed. 2024).

31 LLC Agreement § 5.01(b) (emphasis added).

10
But even if the Q3 Tax Distribution did qualify as an advance or loan, it could

still be a “payment.” The terms are not mutually exclusive. When money is lent or

advanced, it is still delivered to satisfy an obligation. The Q3 Tax Distribution,

therefore, qualifies as a “payment” under the Separation Agreement.

b. Asset Or Liability

The Separation Agreement defines “Asset” as:

all rights (including Intellectual Property), title and
ownership interests in and to all properties, claims,
Contracts, businesses, or assets (including goodwill),
wherever located (including in the possession of vendors or
other third parties or elsewhere), of every kind, character
and description, whether real, personal or mixed, tangible
or intangible, whether accrued, contingent or otherwise, in
each case, whether or not recorded or reflected on the books
and records or financial statements of any Person.32

To argue that the Q3 Tax Distribution constitutes an Asset under this

definition, Plaintiffs assert that they had a “right” to payment under the LLC

Agreement for the period of time through January 2, 2024. This argument fails

because Plaintiffs did not have a right to tax distributions under the LLC Agreement.

The Yuma Members held a right to receive tax distributions, not Plaintiffs. Plaintiffs

had no “right” to the Q3 Tax Distribution.

Although the Q3 Tax Distribution does not relate to a Flex “Asset,” it does

relate to a Flex “Liability.” The Separation Agreement defines “Liability” to include

“liabilities” and “Taxes” as follows:

any and all Indebtedness, liabilities, costs, expenses,
Taxes, interest and obligations, whether accrued or fixed,

32 Separation Agreement § 1.1(8) (emphasis added).

11
absolute or contingent, matured or unmatured, known or
unknown, reserved or unreserved, or determined or
determinable, including those arising under any Law
(including Environmental Law), Action, whether asserted
or unasserted, or order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any
Governmental Entity and those arising under any Contract
or any fines, damages or equitable relief which may be
imposed and including all costs and expenses related
thereto.33

The Separation Agreement defined “Taxes” as “all taxes, charges, fees, duties,

levies . . . of any kind imposed by any federal, state, local or non-United States Taxing

Authority. . . .”34

Flex alleges that the Yuma Members earned approximately $167 million

through Flex’s ultimate ownership of Nextracker LLC in Q3 2024. And through its

ownership of the Yuma Members, Flex USA is responsible for paying taxes on that

income. That tax liability is a “Liability” because it falls under the embedded “Taxes”

definition. It is a tax charge or fee imposed by a government authority.35

The Q3 Tax Distribution also “relate[s] to” the “Liability” on $167 million of

income. Under Delaware law, “relate to” is “paradigmatically broad.”36 “It captures

anything that touches on the subject.”37

33 Separation Agreement § 1.1(89).

34 Id. § 1.1(154).

35 See id.

36 Exit Strategy, LLC v. Festival Retail Fund BH, L.P., 2023 WL 4571932, at *12 (Del.

Ch. July 17, 2023), aff’d, 326 A.3d 356 (Del. 2024) (quoting Fla. Chem. Co. v. Flotek
Indus., 262 A.3d 1066, 1083 (Del. Ch. 2021)).
37 Id. (internal quotation marks omitted).

12
The Q3 Tax Distribution relates to Taxes and liabilities. As discussed above,

the language and structure of the LLC Agreement’s Section 5.01(b) makes clear that

the Q3 Tax Distribution corresponds to the tax liability on $167 million of income. 38

Defendants argue that the taxable income is allocated only to the Yuma

Members, not Flex. As a result, Flex did not incur a “Liability.” The parties did not

brief the intricacies of U.S. tax law. The Complaint, however, does allege that

“[b]ecause Flex USA was the parent of the consolidated group that included [the

Yuma Members] during Q3 2024, Flex USA was liable for the quarterly pass-through

tax liability arising from the membership interests in Nextracker LLC owned by [the

Yuma Members] during that quarter.”39 Accepting this allegation as true, it is

reasonably conceivable that plaintiff Flex USA incurred the tax liability associated

with Nextracker LLC’s Q3 2024 income.

The Q3 Tax Distribution is thus a payment that relates to a Liability covered

by the Wrong-Pockets Provision. If the analysis ended here, the court would deny the

motion to dismiss. But there is more to consider.

c. The Tax Agreement

Defendants argue that the court must read the Separation Agreement and the

Tax Agreement together and that specific provisions of the Tax Agreement defeat

Plaintiffs’ claims.

38 Exit Strategy, 2023 WL 4571932, at *12; see supra Section II.A.1(a).

39 Compl. ¶ 6.

13
Under Delaware law, “multiple documents evidencing the same transaction

must be construed together.”40 Documents evidence the same transaction when they

are executed at the same time, concern the same subject matter, and have similar

parties.41

The court must read the Separation Agreement and Tax Agreement together.

The parties did not sign the Separation Agreement at the same time as the Tax

Agreement. But that is because the parties structured the Separation Agreement to

give Flex the discretion to choose when it would execute the spin-off.42 The parties

executed the Tax Agreement on January 2, 2024, the same day Flex chose to spin-off

Nextracker under the Separation Agreement. And the Tax Agreement was entered

to facilitate the spin-off. This is evident from the recitals of the Tax Agreement, which

state its two objectives: “to (a) provide for the payment of Tax liabilities and

entitlement to refunds thereof, allocate responsibility for, and cooperation in, the

filing of Tax Returns, and . . . (b) set forth certain covenants and indemnities relating

40 Segovia v. Equities First Hldgs., LLC, 2008 WL 2251218, at *9 (Del. Super. Ct. May

30, 2008).
41 See Crown Books Corp. v. Bookstop, Inc., 1990 WL 26166, at *1 (Del. Ch. Feb. 28,

1990) (“[I]n construing the legal obligations created by [a] document, it is appropriate
for the court to consider not only the language of that document but also the language
of contracts among the same parties executed or amended as of the same date that
deal with related matters[.]”); see also Martin Marietta Mat’ls, Inc. v. Vulcan Mat’ls
Co., 56 A.3d 1072, 1120 & n.192 (Del. Ch.), aff’d, 68 A.3d 1208 (Del. 2012), as corrected
(July 12, 2012) (collecting authorities on interpreting multiple agreements).
42 Separation Agreement § 3.7 (“Flex shall, in its sole and absolute discretion,
determine (i) whether to proceed with all or part of the [spin-off].”). Flex executed
the spin-off on January 2, 2024—the date it entered into the Tax Agreement. Compl.
¶ 7; Tax Agreement.

14
to the preservation of the Tax-Free Status of the [spin-off].”43 The Tax Agreement

further notes that “[c]apitalized terms used and not defined herein shall have the

respective meanings set forth in the Separation Agreement[.]”44 And in several areas,

the Tax Agreement references the definitions the Separation Agreement uses.45 Plus,

the agreements involve nearly identical parties.46 The parties thus intended for the

Tax Agreement to facilitate the Separation Agreement.

Given the timing of, terms of, and parties to the Tax Agreement, it is evident

that either the Tax Agreement modified the Separation Agreement or is intended to

be read together with that agreement. Either way, the court must consider its terms

to resolve Defendants’ motion to dismiss, evaluating the contractual scheme in a

manner that harmonizes their provisions.

“[T]o harmonize two agreements, a court may find it necessary to give primacy

to one agreement when there is a dispute.”47 “The new contract, as a general matter,

will control over the old contract with respect to the same subject matter to the extent

that the new contract is inconsistent with the old contract or if the parties expressly

agreed that the new contract would supersede the old one.”48 Additionally, “[s]pecific

43 Tax Agreement at 1.

44 Id.

45 See, e.g., id. § 1.1(23) (“‘Flex Retained Business’ shall have the meaning set for in

the Separation Agreement.”).
46 Flex Ltd., Nextracker Inc., and Yuma Inc. are the Tax Agreement parties.Id. at 1.
Flex Ltd., Nextracker Inc., Nextracker LLC, and Flextronics International USA, Inc.
are the Separation Agreement parties. Separation Agreement at 1.
47 Karish v. SI Int’l, Inc., 2002 WL 1402303, at *3 (Del. Ch. June 24, 2002).

48 Country Life Homes, Inc. v. Shaffer, 2007 WL 333075, at *5 (Del. Ch. Jan. 31, 2007).

15
language in a contract controls over general language, and where specific and general

provisions conflict, the specific provision ordinarily qualifies the meaning of the

general one.”49

The provisions of the Tax Agreement control the parties’ dispute. The Tax

Agreement is more specific than the Separation Agreement as to the matters it

addresses. Section 2.1, titled “Tax Relating to Joint Returns,” allocates “Taxes” for

specifically defined tax periods.50 Section 2.1(a) expressly allocates to Flex

responsibility “for any and all Taxes” before the January 2, 2024 spin-off, including

Flex’s Q3 2024 tax liabilities associated with its ownership of Nextracker.51 In

contrast, the Wrong-Pockets Provision speaks in general transaction terms, using

“payment,” “reimbursement,” “Asset,” and “Liability.” Because this case concerns the

Q3 Tax Distribution related to tax liabilities on $167 million of income, the tax-

specific language of the Tax Agreement controls. And Flex cannot claim a right to

payment for a liability it expressly allocated to itself under the Tax Agreement.

Section 2.6 of the Tax Agreement further supports the primacy of the Tax

Agreement. The provision broadly terminates “all prior Tax sharing or allocation

agreements or practices between” the parties.52 For three quarters, Flex alleges it

caused the Yuma Members to pay quarterly tax distributions to Flex USA. That is a

“practice” that Section 2.6 terminated.

49 DCV Hldgs., Inc. v. ConAgra, Inc., 889 A.2d 954, 961 (Del. 2005).

50 Tax Agreement § 2.1.

51 Id. § 2.1(a).

52 Id. § 2.6.

16
Flex argues that the Tax Agreement is consistent with the Wrong-Pockets

Provision because the Q3 Tax Distribution is a “Refund.” Under Section 2.5(a) of the

Tax Agreement, “Flex shall be entitled to all Refunds related to Taxes the liability for

which is allocated to Flex. . . .”53 The Tax Agreement defines Refund as “any refund,

reimbursement, offset, credit, or other similar benefit in respect of Taxes. . . .”54 The

Tax Agreement defines Taxes as charges imposed by government authorities.55 A

refund thus would arise when a government entity, like the IRS, pays Nextracker for

Taxes Flex already paid. In that case, Flex would receive a Refund. But that is not

the case here because the Q3 Tax Distribution does not arise from a payment to a

federal, state, local, or any other government agency. It arises from the Yuma

Members, which Flex no longer controls. The Q3 Tax Distribution is not a “Refund”

under the Tax Agreement.

In light of the Tax Agreement, Flex has failed to state a claim for breach of the

Separation Agreement under the Wrong-Pockets Provision.

53 Id. § 2.5(a).

54 Id. § 1.1(64).

55 Id. § 1.1(75) (defining Taxes as “all taxes, charges, fees, duties, levies, imposts,

rates or other assessments or governmental charges of any kind in the nature of a tax
imposed by any federal, state, local or non-United States Taxing Authority. . .”). The
Separation Agreement contains an identical definition. See Separation Agreement §
1.1 (154) (defining Taxes as “all taxes, charges, fees, duties, levies, imposts, rates or
other assessments or governmental charges of any kind imposed by any federal, state,
local or non-United States Taxing Authority. . .”).

17
2. The Retained-Assets Provisions

Flex repackages its argument that the Q3 Tax Distribution is an Asset it

should receive under the Separation Agreement. Section 2.2 of the Separation

Agreement instructs Nextracker to transfer the Flex Retained Assets to Flex.56 The

Separation Agreement defines “Flex Retained Assets” as “any and all Assets that are

expressly contemplated by this Agreement or any Ancillary Agreement as Assets to

be retained by [Flex]. . . .”57 Flex Retained Assets thus include Assets from Ancillary

Agreements.58 Plaintiffs argue that the Q3 Tax Distribution is an Asset under an

Ancillary Agreement, the LLC Agreement.

This theory fails for the same reason the Wrong-Pockets Provision does not

apply. As described above, the parent company does not have a right to the Q3 Tax

distribution. The Yuma Members do. And Plaintiffs lost the ability to force the Yuma

Members to send up tax distributions when they chose to execute the spin-off on

January 2, 2024. The Retained-Assets Provisions thus do not support Plaintiffs’

claim to the Q3 Tax Distribution.

Count I fails to state a claim and is dismissed.

56 Id. § 2.2.

57 Separation Agreement § 1.1(61)(i).

58 Id. § 1.1(61)(i).

18
B. Breach Of The Implied Covenant

To state a claim for breach of the implied covenant, a plaintiff must “allege a

specific implied contractual obligation, a breach of that obligation by the defendant,

and resulting damage to the plaintiff.”59

Plaintiffs plead their implied covenant claim in the alternative and only make

the claim to “the extent Flex’s (or its subsidiaries’) entitlement to the Q3 Tax

Distribution is not deemed to be explicitly, implicitly, or otherwise set forth in the

Separation Agreement[.]”60

There is no implied obligation. The plain language of the parties’ contractual

scheme covers this issue. Plaintiffs have failed to state a claim for breach of the

implied covenant of good faith and fair dealing because there is no gap in the parties’

contractual scheme for the covenant to fill.

Count II fails to state a claim and is dismissed.

C. Mistake

Again, Plaintiffs plead Count III in the alternative. This time, they make this

pleading to “the extent the Q3 Tax Distribution is not deemed a ‘payment or

reimbursement.’”61

“The Courts of this State have always insisted in reformation cases on a

showing of mutual mistake or, in appropriate cases, unilateral mistake on plaintiff’s

59 Fitzgerald v. Cantor, 1998 WL 842316, at *1 (Del. Ch. Nov. 10, 1998).

60 Compl. ¶ 111.

61 Id. ¶ 121.

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part coupled with knowing silence on defendant’s part.”62 The party seeking

reformation must have the “ability to show, by clear and convincing evidence, that

despite the existing written agreement one party maintains is accurate, that existing

writing erroneously expresses the parties’ true agreement.”63 “Unless there was a

clear understanding with which the formal contract conflicts, there is, of course, no

comparative standard upon which to base a reformation, and the contract as executed

must stand.”64 “In alleging fraud or mistake, a party must state with particularity

the circumstances constituting fraud or mistake.”65 “Rule 9(b) requires the pleading

to inform the opposing party of the precise transaction at issue and the fraud or

mistake alleged to have occurred in the transaction so as to notify the opposing party

of its precise alleged misconduct.”66

This claim falters for lack of any particularized allegations reflecting that the

contractual scheme was the product of mutual mistake.

Count III fails to state a claim and is dismissed.

D. Unjust Enrichment

In Count IV, Plaintiffs make an unjust enrichment claim “[i]f the Separation

Agreement is deemed not to govern Flex’s (or its subsidiaries’) entitlement to the Q3

62 Collins v. Burke, 418 A.2d 999, 1002 (Del. 1980).

63 Scion Breckenridge Managing Member, LLC v. ASB Allegiance Real Est. Fund, 68

A.3d 665, 680 (Del. 2013).
64 Hob Tea Room v. Miller, 89 A.2d 851, 857 (Del. 1952).

65 Ct. Ch. R. 9(b).

66 James River-Pennington Inc. v. CRSS Cap., Inc., 1995 WL 106554, at *9 (Mar. 6,

1995).

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Tax Distribution. . . .”67 Under this alternative theory, Plaintiffs allege that

Defendants were enriched because they retained the Q3 Tax Distribution despite not

incurring the associated tax liability.

To state a claim for unjust enrichment, Flex must show: (1) an enrichment,

(2) an impoverishment, (3) a relation between the enrichment and impoverishment,

and (4) the absence of justification.68

Plaintiffs meet the first three elements. The Q3 Tax Distribution enriched

Defendants. Plaintiffs did not receive the Q3 Tax Distribution. And the Q3 Tax

Distribution relates to the associated tax liability Plaintiffs incurred due to their

ownership of Nextracker during Q3 2024.

But Plaintiffs fail on the fourth element because the LLC Agreement and Tax

Agreement gives Defendants a clear justification. Under Section 5.01(b) of the LLC

Agreement, the members of Nextracker LLC receive tax distributions.69 Nextracker

Inc. made the Q3 Tax Distribution to the Yuma Members. The Tax Agreement

allocated tax liabilities thereafter. Defendants’ delay of the Q3 Tax Distribution until

February 6, 2024 is irrelevant to Plaintiffs because it did not affect their rights.

Count IV fails to state a claim and is dismissed.

III. CONCLUSION

Defendants’ motion to dismiss is granted.

67 Id. ¶ 135.

68 Garfield ex rel. ODP Corp. v. Allen, 277 A.3d 296, 341–51 (Del. Ch. 2022).

69 LLC Agreement § 5.01(b).

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