Linden J. Fellerman v. Collections Acquisition Company, Inc.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

LINDEN J. FELLERMAN, in his )
Capacity as the Stockholder’s )
Representative for the former )
Stockholders of Secure Payment )
Systems, Inc., )
)
Plaintiff, ) C.A. No.: 2024-0363-EMD
)
v. )
)
COLLECTIONS ACQUISITION )
COMPANY, INC. )
)
Defendant. )

Submitted: October 13, 2025
Decided: December 16, 2025
Redacted: January 21, 2026 1 F

Upon Plaintiff’s Motion for Judgment on the Pleadings,
DENIED

Joeseph L. Christensen, Esquire, Anne M. Steadman, Esquire, Christensen Law LLC,
Wilmington, Delaware. Attorneys for Plaintiff Linden J. Fellerman.

James H.S. Levine, Esquire, Troutman Pepper Locke LLP, Wilmington, Delaware; Richard J.
Zack, Esquire, Brian M. Nichilo, Esquire, Troutman Pepper Locke LLP, Philadelphia,
Pennsylvania. Attorneys for Defendant Collections Acquisition Company, Inc.

DAVIS, P.J.

1
The Court received a request from the parties to keep certain portions of the decision confidential to Del. Super.
Civ. R. 5(g)(4). The parties seek confidential treatment only as to certain facts and not to any substantive portion of
the decision. After review, the Court finds the parties’ request complies with Del. Super. Civ. R. 5(g)(4) and is
redacting portions of this decision as confidential.
I. INTRODUCTION

This is a breach of contract action filed in the Delaware Court of Chancery and cross-

designated to the Complex Commercial Litigation Division of the Superior Court. 2 On April 4, 1F

2024, Plaintiff Linden J. Fellerman, in his capacity as the Stockholders’ Representative for the

former stockholders of Secure Payment Systems, Inc. (“SPS”), commenced this action against

Defendant Collections Acquisition Company, Inc. (“CAC”). 3 Mr. Fellerman claims that CAC
2F

breached its contractual obligation under the Stock Purchase and Sale Agreement (“PSA”) to

release the holdback of sale proceeds (the “Holdback Amount”). Moreover, Mr. Fellerman

asserts that he is entitled to indemnification pursuant to the PSA.

Initially, CAC moved to dismiss Mr. Fellerman’s Complaint. 4 The Court denied that
3F

motion on November 13, 2024. 5 On December 23, 2024, CAC filed its Answer to the Complaint
4F

(the “Answer”). 6 In the Answer, CAC denied the allegations that it breached its contractual
5F

obligations, and that Mr. Fellerman is entitled to indemnification under the PSA. Further, CAC

asserted counterclaims of fraud and indemnification.

Presently before the Court is Mr. Fellerman’s Motion for Judgement on the Pleadings

(the “Motion”), which was filed on April 30, 2025. 7 CAC filed its opposition on June 18, 2025. 8
6F 7F

The Court heard oral arguments on the Motion on October 13, 2025. 9 At the conclusion
8F

of the hearing, the Court took the Motion under advisement.

2
The Court of Chancery assigned the action to this Court on November 6, 2023, pursuant to the February 23, 2023
Cross-Designation Order under 8 Del. C. § 111. See Cross-Designation Letter and Order (D.I. No. 5).
3
D.I. No. 1.
4
Defendant Collections Acquisition Company, Inc.’s Motion To Dismiss Plaintiff’s Verified Complaint with
Certificate Of Service (D.I. No. 7).
5
Chancery Court Proceeding Sheet for Defendant's Motion to Dismiss, heard on November 13, 2024. Defendant's
Motion to Dismiss has been DENIED for the reasons stated on the record (D.I. No. 19).
6
D.I. No. 23.
7
D.I. No. 36.
8
D.I. No. 41.
9
D.I. No. 49.

2
For the reasons stated below, the Court DENIES the Motion.

II. BACKGROUND

A. THE PARTIES

1. Plaintiff

Mr. Fellerman is an individual domiciled in the State of Nevada. 10 Mr. Fellerman is the
9F

founder of SPS. 11 Mr. Fellerman served as President and CEO of SPS from its founding until
10F

CAC terminated his employment on May 3, 2022. 12 Under the PSA, Mr. Fellerman is
11F

authorized to act as an “agent, proxy and attorney in fact” on behalf of “the former stockholders

of SPS (the “Stockholders”).” 13 12F

2. Defendant

CAC is an Ohio corporation with its principal place of business in Ohio. 14 CAC is 13F

registered in Delaware as a foreign corporation. 15 CAC is a wholly owned subsidiary of
14F

Payliance, Inc. (“Payliance”) and was created to acquire SPS. 16 15F

B. RELEVANT NON-PARTIES

Payliance is a “payment processing company offering payment, verification, and

recovery services.” 17 Payliance is the parent company of CAC. 18 SPS is a company that
16F 17F

provided “payment processing and information services” to customers. 19 18F

10
Verified Compl. (“Compl.”) (D.I. No. 1) ¶ 12.
11
Id. ¶ 17.
12
Id. ¶ 19.
13
See id. ¶ 12.
14
Id. ¶ 13.
15
Id.
16
Id. ¶ 21.
17
Id. ¶ 20.
18
See id. ¶ 21.
19
Id. ¶ 11.

3
C. NATURE OF THE DISPUTE

1. Negotiations to Acquire SPS

In 2020, Payliance began negotiating with SPS to acquire SPS. 20 On June 30, 2021, SPS
19F

and Payliance executed an initial letter of intent (the “Original LOI”) regarding Payliance’s

proposed acquisition of SPS. 21 The Original LOI specified a proposed total enterprise value of
20F

[REDACTED]. 22 CAC would retain the holdback which would accrue interest at a rate of three
21F

percent per annum. 23 22F

On August 10, 2021, SPS shut down two of its largest cloud storage clients due to the

clients’ unresponsive nature. 24 On August 20, 2021, SPS received notice that the Department of
23F

Justice (“DOJ”) “obtained a temporary restraining order in the matter of USA v. Internet

Transaction Services, Inc., et al., No. 2:21-cv-6582-JFW(KSx) (C.D. Cal.) (the “Civil

Action”).” 25 The Civil Action is a civil enforcement action brought
24F

against numerous individuals and entities, including some of SPS’s merchant
clients, alleging they had ‘stolen millions of dollars’ in a multi-year and ‘ongoing
bank and wire fraud scheme’ where, among other actions, the defendants used
‘shell entities to charge unauthorized debts against victims’ bank accounts.’ 26 25F

The temporary restraining order resulted in the freezing of assets of certain SPS clients. 27 Mr. 26F

Fellerman informed CAC of the development, but “portrayed SPS as an unknowing victim…and

denied any culpability, including any participation on his part or SPS’s part.” 28 27F

20
Id. ¶ 23.
21
See id. ¶ 23; see also Compl., Ex. B.
22
Id. ¶ 24.
23
Id.
24
See id. ¶ 25.
25
Id. ¶ 1.
26
Defendant Collections Acquisition Company, Inc.’s Answer, Affirmative Defenses, And Counterclaims
(“Answer”) (D.I. No. 23) at 51.
27
Compl. ¶ 1.
28
Answer at 51-52.

4
After issuance of the temporary restraining order, SPS and Payliance executed a revised

letter of intent (the “Revised LOI”) on November 12, 2021. 29 The Revised LOI specified a total
28F

enterprise value of [REDACTED]. 30 The holdback was to be held by CAC and accrue at an
29F

interest rate of three percent per annum. 31 On January 3, 2022, SPS and CAC entered into the
30F

PSA based upon the terms contained in the Revised LOI. 32 SPS and CAC closed the transaction
31F

on January 13, 2022. 33 32F

2. The PSA

Under the PSA, the Stockholders agreed to sell the entirety of their interest to CAC for a

total of [REDACTED] (the “Purchase Amount”). 34 The PSA also included a provision that
33F

CAC would retain [REDACTED] of the Purchase Amount as the Holdback Amount for two

years to secure Mr. Fellerman’s and the Stockholders’ indemnification obligations. 353 F

i. Indemnification Obligations

PSA Section 7(b)(ii) sets forth the Stockholders’ indemnification obligations. 36 In
35F

relevant part, Section 7(b)(ii) states that the Stockholders are required to indemnify CAC against

any Loss resulting from:

(A) the breach or alleged breach of any representation or warranty set forth in
Section 5, [and]
(B) the breach or alleged breach by such Stockholder of any covenant or agreement
made by such Stockholder contained in this Agreement or any document delivered
by or on behalf of such Stockholder at or prior to closing… 37 36F

29
Compl. ¶ 27.
30
Id. ¶ 28.
31
Id.
32
See id. ¶¶ 31-32.
33
See id. ¶ 51.
34
See id. ¶ 34; see also Compl. Ex. A, § 1(a).
35
Id. ¶ 35; see also Compl. Ex. A, § 7, App. A.
36
See id. ¶ 37.
37
Id.; see also Compl. Ex. A, § 7(b)(ii).

5
PSA Section 7(b)(i) enumerates Mr. Fellerman’s indemnification obligations. Section

7(b)(i) states that Mr. Fellerman is obligated to indemnify CAC against any ‘Losses’ CAC may

suffer resulting from:

(A) the breach or alleged breach of any representation or warranty set forth in
Section 4, or
(B) the breach or alleged breach by [Mr. Fellerman] of any covenant or agreement
made by [Mr. Fellerman] contained in this Agreement or in any agreement,
document, instrument, or certificate contemplated by this Agreement… 38 37F

PSA Section 7(b)(iii) describes CAC’s indemnification obligations. Section 7(b)(iii)

provides:

[CAC] shall indemnify and hold harmless each Stockholder against any Losses
which it may suffer, sustain or become subject to as the result of (A) the breach or
alleged breach by [CAC] of any representation or warranty set forth in Section 6,
or (B) the breach or alleged breach by [CAC] of any covenant or agreement
contained in this Agreement or any document delivered by or on behalf of [CAC]
at or prior to the Closing (provided that this clause (iii) shall not derogate from
[CAC’s] rights or recoveries pursuant to Sections 7(b)(i) or 7(b)(ii)). 39
3 F

The term “Loss” is defined in the PSA as:

any claim, loss, Liability, deficiency, damage (whether direct, indirect, incidental,
special or consequential and including lost profits, business interruptions and
diminution in value based on a multiple of earnings or similar financial measure),
Tax or expense, including reasonable legal expenses and costs associated therewith
(other than punitive or exemplary damages, unless, in each such case, such damages
are incurred as a result of a third party claim). 40
39F

The term “Liability” is defined separately in the PSA as:

any obligation, deficiency or liability of any kind or nature whatsoever, whether
asserted or unasserted, absolute or contingent, known or unknown, accrued or
unaccrued, liquidated or unliquidated, and whether due or to become due and
regardless of when asserted. 41 40F

38
Id. ¶ 39; see also Compl. Ex. A, § 7(b)(i).
39
Compl. Ex. A., § 7(b)(iii).
40
Id. ¶ 40; see also Compl. Ex. A, § 7(b)(i).
41
Id. ¶ 41; see also Compl. Ex. A, App. A.

6
ii. Representations and Warranties

The PSA also includes certain Representations and Warranties. 42 Under PSA Section
41F

4(h), SPS represented and warranted that “[SPS] has complied within the past three (3) years,

and is in compliance with, in each case, in all material respects, all applicable Laws applicable to

[SPS] … and is not aware of any allegation of non-compliance with any such law.” 43 42F

Additionally, under PSA Section 4 (v)(i), SPS represented and warranted that:

[d]uring the past five (5) years, none of [SPS] nor any of its equityholders (in
connection with or relating to the business of [SPS]), its officers, directors or
employees has, and to the Knowledge of [SPS], no agents or other Persons, while
acting for or on behalf of [SPS] have, directly or indirectly, violated any provision
of the U.S. Foreign Corrupt Practices Act of 1977 (as amended) or any other anti-
corruption, anti-money laundering or anti bribery Law (collectively, the “Anti-
Corruption Laws”). [SPS] does not have, and has not had, any direct or indirect
business or dealings in or with any Sanctioned Country, or with or for the benefit
of any Sanctioned Person. 44 43F

The PSA provided that “[Mr.] Fellerman is obligated to indemnify CAC against any Loss

incurred by CAC if [the representation and warranty contained in Section 4 (v)(i)] is violated.” 45
44F

iii. Notice Requirements

The PSA additionally describes the manner in which a party seeking indemnification

must notify the indemnifying party of a claim. 46 PSA Section 7(b)(vi) states that a party making
45F

an indemnification claim under Section 7(b):

[m]ust give the indemnifying Party (the “Indemnifying Party”) written notice of
such claim describing such claim and the nature and amount of the Loss, to the
extent that the nature and amount thereof are determinable at such time (a “Claim
Notice”) within forty five (45) days after the Indemnified Party receives notice from
a third party with respect to any matter which may give rise to a claim for
indemnification against the Indemnifying Party (a “Third Party Claim”) or
otherwise discovers the Liability, obligation or facts giving rise to such claim for

42
See id. ¶ 44.
43
Compl. Ex. A, § 4(h).
44
Compl. ¶ 44; see also Compl. Ex. A, § 4(v)(i).
45
Id. ¶ 45.
46
See id. ¶ 46.

7
indemnification…. The Indemnified Party shall cooperate with the Indemnifying
Party in all matters arising under this Section 7(b). 47 46F

However, the PSA does not provide for indefinite indemnification. 48 PSA Section 7(a)
47F

states that:

[n]o Party shall be entitled to recover for any Loss arising from or relating to a
breach or alleged breach of representations and warranties set forth in Sections 4,
5, or 6, unless written notice thereof is delivered to the other Parties on or prior to
the Applicable Limitation Date. For purposes of this Agreement, the term
“Applicable Limitation Date” shall be the date that is twenty-four (24) months after
the Closing Date…. 49 48F

Notwithstanding Section 7(a), the “Applicable Limitation Date 50” is subject to certain
49F

exceptions. 51 Section 7(a) further provides that:
50F

[i]n the event that (A) any breach or alleged breach of any representation or
warranty by [SPS] or a Stockholder results from any action or inaction of the [SPS]
or the Stockholders that constitutes fraud, intentional misrepresentation or willful
misconduct or (B) any breach or alleged breach of any representation or warranty
by [CAC] results from any action or inaction of [CAC] that constitutes fraud,
intentional misrepresentation or willful misconduct, such representation or
warranty shall survive the Closing and the consummation of the transactions
contemplated hereby (regardless of any investigation by or on behalf of the
damaged Party or the knowledge of any Party) and shall continue in full force and
effect without any time limitation with respect to such breach or alleged breach. 52 51F

iv. The Holdback Amount and Release Dates

The PSA requires the Holdback Amount to be paid in two tranches on the First Release

Date and the Second Release Date. 53 PSA Section 7(b)(xii) states:
52F

[o]n the date that is twelve (12) months following the Closing Date (the “First
Release Date”), or if such date is not a business day, the following business day,
[CAC] shall pay to each Stockholder such Stockholder’s Purchase Price Percentage
of [REDACTED] of the Holdback Amount that exceeds the sum of (I) all amounts

47
Id.; see also Compl. Ex. A, § 7(b)(vi).
48
See Compl. Ex. A, § 7(a).
49
Compl. ¶¶ 48-49; see also Compl. Ex. A, § 7(a).
50
The “Applicable Limitation Date” fell on January 16, 2024. January 13, 2024 (the twenty-four-month anniversary
of the Closing Date) was a Saturday. Monday, January 15, 2024, was a federal holiday.
51
Compl. ¶ 50.
52
Compl. Ex. A, § 7(a).
53
Compl. ¶ 52.

8
theretofore distributed or disbursed to the Buyer Group pursuant to this Section 7
and (II) the aggregate amount of Losses specified in any then unresolved good faith
indemnification claims made by the Buyer Group pursuant to this Section 7. On the
date that is twenty-four (24) months following the Closing Date (the “Second
Release Date”), or if such date is not a business day, the following business day,
[CAC] shall pay to each Stockholder such Stockholder’s Purchase Price Percentage
of the Holdback Amount that exceeds the sum of (I) all amounts theretofore
distributed or disbursed to Stockholders pursuant to the foregoing sentence, (II) all
amounts theretofore distributed or disbursed to the Buyer Group pursuant to this
Section 7 and (III) the aggregate amount of Losses specified in any then unresolved
good faith indemnification claims made by the Buyer Group pursuant to this
Section 7. To the extent that any amount has been reserved and withheld from
distribution from the Holdback Amount on the Second Release Date on account of
an unresolved claim for indemnification and, subsequent to the Second Release
Date, such claim is resolved, [CAC] shall immediately release (x) to the Buyer
Group the amount of Losses, if any, due in respect of such claim as finally
determined and (y) to each Stockholder such Stockholder’s Purchase Price
Percentage of an amount equal to the excess, if any, of the amount theretofore
reserved and withheld from distribution in respect to such claim over the payment,
if any, made pursuant to the foregoing clause (x). Notwithstanding anything to the
contrary contained in this Agreement, interest shall accrue at an annual rate of 3%
per year and shall become part of and be included in the Holdback Amount on the
portion that is unpaid until it is paid. 54 55
53F 54F

3. Post-Closing Developments

On February 22, 2022, the court-appointed Receiver in the Civil Action threatened

litigation against Mr. Fellerman and SPS for [REDACTED]. 56 The Receiver presented, in
55F

relevant part, evidence that [REDACTED]. 57 [REDACTED]. 58
56F 57F

In April 2022, without any admission of liability, Mr. Fellerman “personally executed a

settlement agreement with the Receiver settling claims against Mr. Fellerman and SPS for

$4,200,000.” 59 CAC paid $600,000 as part of the settlement agreement. 60
58F 59F

54
Compl. Ex. A, § 7(b)(xii).
55
The “Second Release Date” fell on January 16, 2024. January 13, 2024 (the twenty-four-month anniversary of the
Closing Date) was a Saturday. Monday, January 15, 2024, was a federal holiday.
56
Answer at 53; see also Answer, Ex. 1.
57
See id.
58
See id.
59
See id. at 54.
60
See id.

9
However, on April 27, 2023, Mr. Fellerman and SPS’s former merchant clients were

criminally indicted on multiple federal charges of fraud and racketeering in a case captioned

United States v. Linden J. Fellerman, et al., No. 2:23-cr-200 (C.D. Cal) (the “Criminal

Action”). 61 In the Criminal Action, a federal grand jury found that Mr. Fellerman and his co-
60F

conspirators were “members and associates of a criminal” enterprise that had, for nearly seven

years, “engaged in, among other things, mail, wire, and bank fraud; identity theft; access device

fraud; and money laundering.” 62 Mr. Fellerman is currently awaiting trial in the Criminal
61F

Action. 63
62F

On May 3, 2022, Payliance terminated Mr. Fellerman’s employment with SPS. 64 63F

4. Indemnification Claims and CAC’s Subsequent Withholding of the Holdback
Amount

Due to CAC’s [REDACTED] settlement payment in the Civil Action, CAC asserted an

indemnification claim (the “First Claim”) against Mr. Fellerman pursuant to PSA Section 7(b)(i)

in April 2022. 65 Mr. Fellerman agreed he was liable and paid the First Claim. 66 The First Claim
64F 65F

is not in dispute in the instant action. 67 As a result of CAC’s settlement payment, the remaining
66F

Holdback Amount was reduced to [REDACTED] (the “Remaining Amount”). 68 Further, CAC 67F

did not release any of the Holdback Amount on the First Release Date because the

[REDACTED] exceeded the maximum amount then payable from the Holdback Amount. 69 6 F

61
Id.
62
Id.; see also Answer Ex. 2 ¶¶ 1, 8.
63
Id. at 57.
64
Compl. ¶ 19.
65
See Answer at 56.
66
Id.
67
Id.
68
Compl. ¶ 77.
69
See id. at ¶ 88.

10
Subsequent to the issuance of the indictment in the Criminal Action, CAC asserted a

second indemnification claim (the “Second Claim”) against Mr. Fellerman for [REDACTED]

pursuant to PSA Section 7(b)(i) on July 20, 2023. 70 The Second Claim sought indemnity for
69F

“Losses related to review and analysis of the DOJ’s subpoena, indi[ct]ment and other related

inquiries.” 71 “CAC also reserved ‘all rights including but not limited to its right to identify
70F

additional Losses relating to the claims identified above [resulting from the criminal action] and

to seek full satisfaction of the remaining amount of the Losses identified in this Claim

Notice.’” 72 Mr. Fellerman responded to the Second Claim and contended that claim did not
71F

provide sufficient information to make a determination as to whether a Loss had occurred under

the PSA. 73 72F

On January 16, 2024, the Remaining Amount became due pursuant to the Second Release

Date. 74 However, CAC did not release the Remaining Amount. 75
73F 74F

On February 12, 2024, CAC asserted a third indemnification claim (the “Third Claim”)

against Mr. Fellerman for [REDACTED] (the “Undisputed Amount”) 76. 77 In the Third Claim,
75F 76F

CAC stated that:

[It] has suffered Losses related to, among other things: (a) your criminal
prosecution in United States v. Linden J. Fellerman . . . and the related proceedings
(collectively, “the Prosecution”); and (b) other damages attributable to your
conduct underlying the Prosecution, including Losses, direct, indirect, incidental,
special or consequential and including lost profits, business interruptions and
diminution in value based on a multiple of earnings or similar financial measure,
including reasonable legal expenses and costs associated therewith the losses.

70
See Answer at 56.
71
Id.
72
Id.
73
Compl. ¶ 91.
74
Supra, n. 45.
75
Compl. ¶ 95.
76
Mr. Fellerman refers to this amount as the “Undisputed Amount” throughout his briefs. For clarity purposes, the
same language is used throughout this opinion. The “Undisputed Amount” constitutes the Remaining Amount
[REDACTED].
77
See Answer at 56.

11
[CAC] understand[s] that the Prosecution is ongoing, that no trial date has been set,
and that the Prosecution involves your actions while employed at [SPS]. Because
of the ongoing nature of these matters and because they continue to cause Losses
to [CAC], [it is] unable to ascertain the full extent of the Losses at this time. . . .
[and will therefore] retain the Holdback Amount in its entirety until it is able to
ascertain the full amount of the Losses[.] 78
77F

To date, Mr. Fellerman has not paid CAC for the Second and Third Claims and CAC has not

released the Remaining Amount. 79 78F

D. PROCEDURAL POSTURE

On April 4, 2024, Mr. Fellerman commenced the present action asserting claims of

breach of contract pursuant to PSA Section 7(b)(xii) and for indemnification under PSA Section

7(b)(iii). 80 On the breach of contract claim, Mr. Fellerman asserts that CAC’s failure to release
79F

the Remaining Amount as of the Second Release Date constitutes a breach of CAC’s obligations

under the PSA. 81 For the indemnification claim, Mr. Fellerman maintains that CAC’s purported
80F

breach of the PSA “triggers CAC’s indemnity obligation to [Mr. Fellerman] under Section

7(b)(iii).” 82 81F

On December 23, 2024, CAC filed the Answer and denied the claims asserted in the

Complaint. 83 Moreover, CAC asserted counterclaims for fraud and indemnification. 84 CAC
2F 83F

alleges that Mr. Fellerman committed fraud in relation to the negotiation and subsequent

execution of the PSA. 85 CAC argues that Mr. Fellerman’s false statements, as those statements
84F

relate to the representation and warranties section of the PSA, triggered Mr. Fellerman’s

78
Id. at 56-57.
79
See Compl. ¶ 95; See also Answer at 25.
80
See Compl. ¶¶ 32-37.
81
See id. ¶ 142.
82
Id. ¶ 151.
83
See Answer at 46-48.
84
See id. at 57-60.
85
See id. at 57.

12
indemnification obligation under PSA Section 7(b)(i). 86 CAC contends that that Mr.
85F

Fellerman’s refusal to pay CAC for the Second Claim and Third Claim constitutes a breach of

Mr. Fellerman’s indemnification obligation under the PSA. 87 6F

On April 30, 2025, Mr. Fellerman filed the Motion. On June 18, 2025, CAC filed its

response to the Motion. On July 15, 2025, Mr. Fellerman filed his reply in further support of the

Motion. The Court heard oral arguments on the Motion on October 13, 2025, at which time the

matter was taken under advisement.

III. PARTIES’ CONTENTIONS

A. MR. FELLERMAN

First, Mr. Fellerman argues that CAC has not made a claim on the Undisputed Amount,

which must be released immediately. 88 Mr. Fellerman asserts that the mandatory language
87F

contained in PSA Section 7(b)(xii) requires the release of the Remaining Amount. 89 In support,88F

Mr. Fellerman maintains that (i) the Third Claim is untimely; 90 (ii) the Third Claim fails to
89F

provide reasonable notice of what CAC is seeking indemnification for; 91 and (iii) the Third
90F

Claim is “forward-looking” and thus, not contemplated by the PSA or permissible under

Delaware law. 92 91F

Mr. Fellerman’s second argument is related to the first argument. Mr. Fellerman alleges

that the Second Claim is insufficient under the terms of the PSA and, as such, CAC is not

entitled to retain the amount asserted in the Second Claim. 93 Specifically, Mr. Fellerman
92F

86
See id. at 59.
87
See id. at 59-60.
88
Plaintiff's Motion for Judgment on the Pleadings (“Pl. Mot.”) (D.I. No. 36) at 12.
89
See id.
90
Id. at 13.
91
Id. at 16.
92
Id. at 17.
93
Id. at 21.

13
maintains that the Second Claim “is not a proper claim because it fails to give reasonable notice

of the Losses for which CAC seeks indemnification.” 94 93F

Third, Mr. Fellerman contends that CAC has not stated a claim for fraud. 95 In support,
94F

Mr. Fellerman maintains that (i) the fraud claim is a “clear example of bootstrapping;” 96 and (ii) 95F

the damages pled could not have been caused by the allegedly fraudulent statement. 97 96F

Fourth, Mr. Fellerman argues that CAC has not stated a claim for indemnification and

that any such claim is unripe. 98 97F

Fifth, Mr. Fellerman claims that he is entitled to attorney’s fees and expenses under the

PSA as the prevailing party in this action. 99 98F

B. CAC

CAC argues that CAC has valid indemnifiable claims because of Mr. Fellerman’s

fraudulent conduct. 100 Specifically, CAC maintains that it has complied with all requirements
99F

for making indemnification claims under the PSA. 101 100F

Next, CAC asserts that Mr. Fellerman is liable to CAC for his fraudulent conduct. 102 101F

CAC contends that it has alleged sufficient facts demonstrating that Mr. Fellerman engaged in

fraud in relation to the negotiations and execution of the PSA. 103 102F

94
Id.
95
Id. at 22.
96
Id.
97
Id. at 24.
98
Id. at 25.
99
Id. at 27.
100
See Defendant’s Answering Brief in Response to Plaintiff’s Motion for Judgment on the Pleadings (“Def.
Opp’n”) (D.I. No. 41) at 12-13.
101
See id. at 18.
102
Id.
103
See id. at 22.

14
CAC then explains that Fellerman is not entitled to the Holdback Amount given CAC’s

indemnification and fraud claims. 104 CAC maintains that its timely and adequately pled claims
103F

for indemnification and fraud establish that CAC has not breached the PSA by failing to release

the Remaining Amount. 105 10 F

IV. STANDARD OF REVIEW

Under Chancery Rule 12(c), “[a]fter the pleadings are closed—but early enough not to

delay trial—a party may move for judgment on the pleadings.” 106 The Court will grant a motion
105F

for judgment on the pleadings “only when no material issue of fact exists and the movant is

entitled to judgment as a matter of law.” 107 “[I]n making this assessment, the Court ‘is required
106F

to view the facts pleaded and the inferences to be drawn from such facts in [the] light most

favorable to the non-moving party[;]’ and must consider ‘not only the complaint or

counterclaims, but also the answer, affirmative defenses, and any documents integral

thereto[.]’” 108
107F

V. DISCUSSION

A. MR. FELLERMAN’S CLAIMS

Under Delaware law, to establish a breach of contract claim, a party must prove (i) the

existence of a contract; (ii) the breach of an obligation imposed by the contract; and (iii) damages

that the plaintiff suffered as a result of the breach. 109 Delaware courts follow the objective
108F

theory of contracts, giving words “their plain meaning unless it appears that the parties intended

104
Id.
105
See id.
106
Ct. Ch. R. 12(c).
107
Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A.2d 1199, 1205 (Del. 1993) (citing
Warner Communications v.Chris-Craft Industries, Inc., 583 A.2d 962, 965 (Del. Ch. Sept. 7, 1989))
108
Matter of JCM 2001 Trust for Grandchildren FBO Robert C. Beyer, 2025 WL 750229 at *2 (Del. Ch. Mar. 7,
2025) (citation omitted).
109
Neurvana Medical, LLC v. Balt USA, LLC, 2020 WL 949917, at *15 (Del. Ch. Feb. 27, 2020) (citation omitted).

15
a special meaning.” 110 Additionally, when a plaintiff is seeking specific performance, the
109F

plaintiff is required to “demonstrate its entitlement to specific performance by clear and

convincing evidence.” 111 110F

Mr. Fellerman argues that CAC’s failure to release the Remaining Amount on January

16, 2024, constitutes a breach of the PSA. 112 Simply put, Mr. Fellerman’s position appears to be
111F

that, because both the Second Claim and Third Claim purportedly fail, CAC was not justified in

failing to release the Remaining Amount.

Conversely, CAC asserts that Second and Third Claims were adequate under the PSA. 113 112F

Thus, CAC maintains that it was entitled to retain the Remaining Amount and that its failure to

release the Remaining Amount does not constitute a breach of the PSA. 114 115 113F 114F

1. A material issue of fact exists as to whether CAC breached the PSA by failing to
release the amount asserted in the Second Claim.

i. Sufficiency of the Second Claim

Mr. Fellerman alleges that the Second Claim is insufficient under the terms of the PSA

and, as such, CAC is not entitled to retain the amount asserted in the Second Claim. 116 115F

Specifically, Mr. Fellerman maintains that the Second Claim “is not a proper claim because it

fails to give reasonable notice of the Losses for which CAC seeks indemnification.” 117 Thus, 116F

Mr. Fellerman claims that, because the Second Claim is insufficient, the [REDACTED] claimed

should have been released as part of the Remainder Amount. 118 117F

110
Id.
111
In re IBP S’Holders Litig., 789 A.2d 14, 52 (Del. Ch. June 18, 2001).
112
See Pl. Mot. at 1.
113
See Def. Opp’n at 22.
114
See id.
115
The Second Claim and the Third Claim will be analyzed separately.
116
See Pl. Mot. at 21.
117
Id.
118
See id. at 22.

16
CAC asserts that the Second Claim is sufficient under the terms of the PSA and, thus,

CAC is entitled to retain the amount asserted in the Second Claim. 119 CAC’s position is that it
118F

has “provided sufficient detail to support its claims” pursuant to PSA Section 7(b)(vi). 120 In the 119F

Second Claim, CAC states that it had incurred [REDACTED] in costs for “[l]osses related to

review and analysis of the DOJ’s subpoena, indi[ct]ment and other related inquires” in the

Criminal Action. 121120F

In response, Mr. Fellerman maintains that “CAC’s barebones recitation does not provide

reasonable notice.” 122 Although admitting that the PSA “does not spell out a specific level of
121F

detail necessary,” Mr. Fellerman asserts that “the detail must still be reasonable.” 123 In support 122F

of this argument, Mr. Fellerman relies upon a proposition set forth in Liberty Property Ltd.

Partnership v. 25 Massachusetts Ave. Property LLC. 124 Mr. Fellerman asserts that the implied
123F

covenant of good faith and fair dealing “dictates that issues not specifically addressed in a

contract will be addressed in accordance with standards of ‘decency, fairness or

reasonableness.’” 125 124F

Here, PSA Section 7(b)(vi) provides how a party seeking indemnification must notify the

indemnifying party of a claim. Section 7(b)(vi), in relevant part, states that a party seeking

indemnification “must give the indemnifying Party (the “Indemnifying Party”) written notice of

such claim describing such claim and the nature and amount of the Loss, to the extent that the

nature and amount thereof are determinable at such time….” 126 125F

119
See Def. Opp’n at 14-18.
120
Id. at 15.
121
Id. at 9.
122
Pl. Mot. at 21; see also Plaintiff’s Reply Brief in Further Support of Plaintiff's Motion for Judgment on the
Pleadings (“Pl. Reply”) (D.I. No. 45) at 22.
123
Id.
124
See id.
125
Id.
126
Compl. Ex. A, § 7(b)(vi).

17
As a preliminary matter, Mr. Fellerman is correct in his admission that Section 7(b)(vi)

does not describe the level of detail necessary to provide notice for an indemnification claim

under the PSA. Thus, Mr. Fellerman’s argument that the implied covenant of good faith and fair

dealing requires reasonable notice to be provided is applicable.

Notwithstanding, a material issue of fact exists as to whether the Second Claim provided

reasonable detail. The Second Claim, on its face, appears to have complied with Section

7(b)(vi)’s notice requirement. CAC’s assertion that it has incurred [REDACTED] in costs

provides Mr. Fellerman with notice of the amount of the Loss. Likewise, CAC’s allegation that

the Loss arises from the “review and analysis” of documents related to the Criminal Action

provides Mr. Fellerman with notice of the nature of the loss.

However, although the Second Claim seemingly complies with Section 7(b)(vi)’s notice

requirement, the Second Claim appears somewhat vague. In the Second Claim, CAC did not

provide a computation as to how CAC arrived at the [REDACTED] amount. Similarly, CAC

failed to provide any details concerning the review and analysis of documents related to the

Criminal Action.

Taking CAC’s apparent compliance with Section 7(b)(vi) in conjunction with the vague

nature of the Second Claim, a material issue of fact exists as to whether CAC provided

reasonable notice regarding the Second Claim. Reasonableness “is a question of fact” that is

ordinarily “determined by the finder of fact.” 127 Because the Second Claim seemingly complies
126F

with Section 7(b)(vi), the Court is unable to conclude that the Second Claim failed to provide

Mr. Fellerman with “reasonable” notice as a matter of law.

127
Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A.2d 1199, 1206 (Del. 1993)
(citation omitted).

18
ii. CAC’s Failure to Release the Amount Claimed in the Second Claim on the
Second Release Date

Mr. Fellerman asserts that CAC “should have released the [amount claimed in the Second

Claim] on the Second Release Date.” 128 Mr. Fellerman relies upon PSA Section 7(b)(xii). As
127F

relevant here, Section 7(b)(xii) states:

[o]n the date that is twenty-four (24) months following the Closing Date (the
“Second Release Date”), or if such date is not a business day, the following business
day, [CAC] shall pay to each Stockholder such Stockholder’s Purchase Price
Percentage of the Holdback Amount that exceeds the sum of (I) all amounts
theretofore distributed or disbursed to Stockholders pursuant to the foregoing
sentence, (II) all amounts theretofore distributed or disbursed to the Buyer Group
pursuant to this Section 7 and (III) the aggregate amount of Losses specified in any
then unresolved good faith indemnification claims made by the Buyer Group
pursuant to this Section 7. 129128F

CAC claims that, because the Second Claim is valid and timely asserted, it is “entitled to

retain” the amount claimed in the Second Claim. 130 129F

A plain reading of the contractual language advanced by Mr. Fellerman would seem to

indicate that, even if the Second Claim is valid and timely, CAC was not entitled to retain the

amount asserted in the Second Claim past the Second Release Date. Specifically, Section

7(b)(xii) states that, on the Second Release Date, CAC “shall pay to [Mr. Fellerman] … the

aggregate amount of Losses specified in any then unresolved good faith indemnification claims

made by [CAC] pursuant to” Section 7. 131 130F

However, Section 7(b)(xii) does not end there. Section 7(b)(xii) further states that:

[t]o the extent that any amount has been reserved and withheld from
distribution from the Holdback Amount on the Second Release Date on
account of an unresolved claim for indemnification and, subsequent to the
Second Release Date, such claim is resolved, Buyer shall immediately
release (x) to the Buyer Group the amount of Losses, if any, due in respect

128
Pl. Mot. at 7.
129
Compl. Ex. A, § 7(b)(xii) (emphasis added).
130
Def. Opp’n at 22.
131
Compl. Ex. A, § 7(b)(xii).

19
of such claim as finally determined and (y) to each Stockholder such
Stockholder’s Purchase Price Percentage of an amount equal to the excess,
if any, of the amount theretofore reserved and withheld from distribution in
respect to such claim over the payment, if any, made pursuant to the
foregoing clause (x). 132
131F

Section 7(b)(xii) establishes that the parties contemplated a situation where, as here, an

unresolved indemnification claim survived the Second Release Date. Section 7(b)(xii) allows

CAC to reserve and withhold the amount asserted in the Second Claim past the Second Release

Date until such claim is resolved. So long as the Second Claim is valid, CAC was entitled to

retain the amount stated in the Second Claim past the Second Release Date.

There is a material issue of fact as to the validity of the Second Claim. Accordingly, the

Court finds that a material issue of fact also exists as to whether CAC breached the PSA by

failing to release the amount asserted in the Second Claim.

Accordingly, the Motion is DENIED with respect to the Second Claim.

2. A material issue of fact exists as to whether CAC breached the PSA by failing to
release the amount asserted in the Third Claim.

Mr. Fellerman asserts that the Third Claim fails as CAC has not made a claim on the

Undisputed Amount. 133 In support, Mr. Fellerman argues that (i) the Third Claim is untimely;
13 F

(ii) the Third Claim fails to provide reasonable notice of what CAC is seeking indemnification

for; and (iii) the Third Claim is “forward-looking,” and thus, not contemplated by the PSA or

permissible under Delaware law. 134 Mr. Fellerman emphasizes that CAC is in “plain violation”
133F

of the PSA by failing to release the amount asserted in the Third Claim. 135
134F

132
Id.
133
Pl. Mot. at 12.
134
See id. at 13-21.
135
Id. at 2.

20
CAC states that the Third Claim is valid. 136 CAC maintains that (i) the Third Claim is
135F

timely and (ii) it has provided sufficient detail to support the Third Claim. 137 CAC also posits
136F

that it was entitled to retain the Undisputed Amount as its contractual duties were discharged

when Mr. Fellerman materially breached the PSA. 138 Additionally, CAC asserts that the
137F

doctrine of unclean hands bars Mr. Fellerman’s breach of contract claim. 139 138F

Mr. Fellerman responds that CAC’s argument regarding his alleged breach fails for two

reasons. First, Mr. Fellerman contends that he did not commit a material breach that excused

CAC’s performance under the PSA. 140 Second, Mr. Fellerman asserts that, even if he did
139F

materially breach the PSA, CAC’s options did not include “self-help.” 141 Thus, it is Mr.
140F

Fellerman’s position that, even “if CAC believed [Mr.] Fellerman had committed a total breach

such that would excuse [its] future performance,” CAC should have released the Undisputed

Amount and sued for breach of contract. 142 Mr. Fellerman did not respond to CAC’s unclean
141F

hands argument.

i. Timeliness of the Third Claim

The first of Mr. Fellerman’s arguments is that the Third Claim is untimely. 143 Mr. 142F

Fellerman provides that the Third Claim is not valid because the Third Claim was not made until

after the Second Release Date and corresponding Applicable Limitations Date. 144 Specifically,
143F

Mr. Fellerman alleges that a finding that the Third Claim was timely made would “retroactively

136
Def. Opp’n at 13.
137
See id. at 15-18.
138
See id. at 24-25.
139
See id. at 22-23.
140
Pl. Reply at 17.
141
Id. at 14.
142
Id. at 16.
143
Pl. Mot. at 13.
144
See id.

21
excuse [CAC’s] breach” and “would render the Second Release Date … meaningless.” 145 In 144F

support, Mr. Fellerman relies upon PSA Section 7(b)(xii). Section 7(b)(xii), in relevant part,

states:

[o]n the date that is twenty-four (24) months following the Closing Date (the
“Second Release Date”), or if such date is not a business day, the following business
day, [CAC] shall pay to each Stockholder such Stockholder’s Purchase Price
Percentage of the Holdback Amount that exceeds the sum of (I) all amounts
theretofore distributed or disbursed to Stockholders pursuant to the foregoing
sentence, (II) all amounts theretofore distributed or disbursed to the Buyer Group
pursuant to this Section 7 and (III) the aggregate amount of Losses specified in any
then unresolved good faith indemnification claims made by the Buyer Group
pursuant to this Section 7. 146
145F

CAC stresses that the Third Claim was timely asserted. 147 CAC maintains that the
146F

language contained in Section 7(a) supports a conclusion that the Third Claim was timely

asserted, even though the Third Claim was asserted after the Second Release Date. 148 Section
147F

7(a) states:

[i]n the event that (A) any breach or alleged breach of any representation or
warranty by [SPS] or a Stockholder results from any action or inaction of the [SPS]
or the Stockholders that constitutes fraud, intentional misrepresentation or willful
misconduct or (B) any breach or alleged breach of any representation or warranty
by [CAC] results from any action or inaction of [CAC] that constitutes fraud,
intentional misrepresentation or willful misconduct, such representation or
warranty shall survive the Closing and the consummation of the transactions
contemplated hereby (regardless of any investigation by or on behalf of the
damaged Party or the knowledge of any Party) and shall continue in full force and
effect without any time limitation with respect to such breach or alleged breach. 149148F

Delaware courts must “read a contract as a whole and … give each provision and term

effect, so as not to render any part of the contract mere surplusage.” 150 Mr. Fellerman asks the
149F

145
Id.
146
Compl. Ex. A, § 7(b)(xii).
147
Def. Opp’n at 15.
148
See id.
149
Compl. Ex. A, § 7(a).
150
Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010).

22
Court to find in his favor on the issue of timeliness based upon the language contained in Section

7(b)(xii) while seemingly ignoring Section 7(a).

While Mr. Fellerman is correct that the Third Claim is untimely under Section 7(b)(xii),

Section 7(a) carves out exceptions to the Applicable Limitations Date contained in Section

7(b)(xii). Section 7(a) provides that indemnification claims arising from “any breach or alleged

breach of any representation or warranty by … SPS or [Mr. Fellerman] that constitutes fraud,

intentional misrepresentation or willful misconduct … shall continue in full force and effect

without any time limitation with respect to such breach or alleged breach.” 151 Because the Third
150F

Claim is an indemnification claim based upon an alleged breach of the representations and

warranties resulting from Mr. Fellerman’s purported fraudulent conduct, the fraud exception

contained in Section 7(a) appears to apply. As such, the time limitation contained in Section

7(b)(xii) is inapplicable and the Third Claim continues “in full force and effect without any time

limitation.”

Therefore, at this stage of the proceedings, the Court finds that the Third Claim was

timely asserted.

ii. Sufficiency of the Third Claim

The second of Mr. Fellerman’s arguments is that the Third Claim fails to provide

reasonable notice. 152 Mr. Fellerman advances essentially the same arguments that were made
151F

regarding the reasonableness of the notice in the Second Claim. The difference, as argued by

Mr. Fellerman, is that the Third Claim is even more vague than the Second Claim. Mr.

Fellerman asserts that there are “not even barebones details” of the losses CAC may have

151
Compl. Ex. A, § 7(a).
152
Pl. Mot. at 16.

23
incurred. 153 Conversely, Mr. Fellerman claims that there “is just the vague, catch-all statement
152F

that there may be Losses ‘related to, among other things’ the Indictment ‘and the related

proceedings,’ and other damages attributable to [Mr. Fellerman’s] conduct underlying [the

Indictment and the related proceedings].” 154
153F

As it does with the Second Claim, CAC states that it has provided sufficient detail to

support the Third Claim. 155 CAC maintains that it adequately described both the amount and
15 F

nature of the loss. 156
155F

As stated above, PSA Section 7(b)(vi) describes the manner in which a party seeking

indemnification must notify the indemnifying party of a claim. Section 7(b)(vi), in relevant part,

states that a party seeking indemnification “must give the indemnifying Party (the “Indemnifying

Party”) written notice of such claim describing such claim and the nature and amount of the

Loss, to the extent that the nature and amount thereof are determinable at such time….” 157 156F

Here, the fact that the Third Claim is purportedly even more vague than the Second

Claim does not change the analysis as to Mr. Fellerman’s reasonableness argument. In the Third

Claim, CAC stated that:

[It] has suffered Losses related to, among other things: (a) your criminal
prosecution in United States v. Linden J. Fellerman . . . and the related proceedings
(collectively, “the Prosecution”); and (b) other damages attributable to your
conduct underlying the Prosecution, including Losses, direct, indirect, incidental,
special or consequential and including lost profits, business interruptions and
diminution in value based on a multiple of earnings or similar financial measure,
including reasonable legal expenses and costs associated therewith the losses.
[CAC] understand[s] that the Prosecution is ongoing, that no trial date has been set,
and that the Prosecution involves your actions while employed at [SPS]. Because
of the ongoing nature of these matters and because they continue to cause Losses
to [CAC], [it is] unable to ascertain the full extent of the Losses at this time. . . .

153
Id.
154
Id. at 17.
155
Def. Opp’n at 15-16.
156
See id. at 17.
157
Compl. Ex. A, § 7(b)(vi).

24
[and will therefore] retain the Holdback Amount in its entirety until it is able to
ascertain the full amount of the Losses[.] 158
157F

Like the Second Claim, the Third Claim appears to have complied with Section 7(b)(vi)’s notice

requirement. CAC’s allegation that it suffered lost profits, business interruptions, and

diminution in value because of Mr. Fellerman’s alleged criminal conduct provided Mr.

Fellerman with notice of the nature of the loss.

Further, although CAC did not quantify the exact amount of the loss, CAC’s statement

that it will “retain the Holdback Amount in its entirety until it is able to ascertain the full amount

of the Losses” seemingly complies with Section 7(b)(vi)’s “amount requirement.” Section

7(b)(vi) contemplates a situation where the amount of the loss is not readily ascertainable at the

time an indemnification claim is made. Specifically, Section 7(b)(vi) states that the nature and

amount of the Loss should be described “to the extent that the nature and amount thereof are

determinable at such time….” It follows that, although vague, CAC’s Third Claim arguably

complies with Section 7(b)(vi)’s notice requirement.

Therefore, at this stage, the Court finds that a material issue of fact exists as to whether

CAC provided reasonable notice regarding the Third Claim. Like the Second Claim, the Court is

unable to conclude that the Third Claim failed to provide Mr. Fellerman with “reasonable” notice

as a matter of law because the Third Claim seemingly complies with Section 7(b)(vi).

iii. Permissibility of the Third Claim

Mr. Fellerman’s third argument is that the Third Claim is “forward-looking,” and thus,

not contemplated by the PSA or permissible under Delaware law. 159 Mr. Fellerman asserts that
158F

PSA Section 7(a) provides that “no party is entitled to recover for any Losses unless notice is

158
Answer at 56-57.
159
Pl. Mot. at 17.

25
delivered on or prior to the Applicable Limitation Date.” 160 Mr. Fellerman claims that “if notice
159F

must be delivered by the Applicable Limitation Date,” it follows that “the Loss must occur on or

prior to the Applicable Limitation Date.” 161 Thus, it is Mr. Fellerman’s position that the PSA
160F

does not contemplate the Third Claim for “ongoing losses.” 162 161F

Mr. Fellerman cites two Delaware cases that purportedly stand for the proposition that

Delaware courts have previously rejected “placeholder or relation back” theories in the context

of indemnification notices.

In LPPAS Representative, LLC v. ATH Holding Company, LLC, Highland Acquisition

Holdings, LLC (“Highland”), acquired Pasteur Entities and HealthSun Entities. 163 Highland was162F

subsequently acquired by Anthem. 164 The sellers agreed to place $100,000,000 in escrow as
163F

security for the buyer’s indemnification claims, with the funds to be released over the next four

years. 165 The purchase agreement allowed for indemnification for material misrepresentations
164F

or inaccuracies in representations and warranties. 166 Following the execution of the purchase
165F

agreement, Anthem made two indemnification claims, which were undisputed. 167 Anthem then
166F

made a third claim based upon a Department of Justice investigation for false reporting of

insurance coding errors. 168 The Department of Justice then filed a complaint without naming as
167F

parties the entities acquired from the sellers, which eliminated the basis for indemnification. 169 168F

Anthem then conducted its own investigation that led to the conclusion that the sellers had

160
Id.
161
Id.
162
See id.
163
LPPAS Representative, LLC v. ATH Holding Company, LLC, 2020 WL 7706937, at *2 (Del. Ch. Dec. 29, 2020).
164
See id.
165
Id. at *1.
166
Id.
167
See id.
168
See id.
169
See id. at *4.

26
engaged in fraudulent and improper coding practices. 170 Subsequent to the running of the
169F

applicable release date, Anthem a made fourth, untimely indemnification claim and refused to

release the remaining escrow funds. 171 In the lawsuit that followed, Anthem, acknowledging
170F

that the fourth claim was untimely, argued that the fourth claim “relat[ed] back” to before the

running of the applicable release date. 172 The court found that the relation-back argument ran
171F

contrary to the contract. 173 Additionally, the court found that the relation-back argument ran
172F

contrary to Delaware law in which courts have held that indemnitees may not assert “placeholder

claims against escrow funds for which details are provided only after the due date for those

claims have expired.” 174173F

In Winshall v. Viacom International, Inc., a buyer made three timely but unsuccessful

indemnification claims. 175 Following the passage of the applicable notice deadline, the buyer
174F

made a fourth, untimely indemnification claim. 176 The buyer claimed that its earlier notices had
175F

“‘reserved its rights to seek indemnification for any other claims or matters.’” 177 The court
176F

disagreed, holding that allowing the purchaser to ignore the contractual deadline and make late

claims would “constitute a unilateral rewriting of the contract and is impermissible.” 178 177F

Both cases are nearly indistinguishable to the instant facts. However, both cases have

one crucial distinguishable characteristic – the indemnification claims at issue in LPPAS and

Winshall were untimely. Here, the Third Claim is timely for the reasons discussed above.

Moreover, because the Third Claim is timely, CAC need not and does not argue that the Third

170
See id. at *5.
171
See id.
172
See id. at *5.
173
See id. at *8.
174
Id.
175
See Winshall v. Viacom Intern. Inc., 2012 WL 6200271, at *8 (Del. Ch. Dec. 12, 2012).
176
See id.
177
Id. at *3.
178
Id. at *8.

27
Claim relates back to the Second Release Date. As such, Mr. Fellerman’s argument that the

Third Claim is an impermissible “placeholder” claim fails.

Therefore, the Court finds that the Third Claim is permissible under Delaware law.

iv. CAC’s Failure to Release the Amount Claimed in the Third Claim on the
Second Release Date

Mr. Fellerman asserts that CAC “should have released the [amount claimed in the Third

Claim] on the Second Release Date.” 179 In support, Mr. Fellerman relies upon the same
178F

argument made in Section (V)(A)(1)(ii) of this opinion.

CAC claims that, because the Third Claim is valid and timely asserted, it is “entitled to

retain” the amount claimed in the Third Claim.

As discussed above, because there is a material issue of fact as to the validity of the Third

Claim, the Court finds that a material issue of fact also exists as to whether CAC breached the

PSA by failing to release the amount asserted in the Third Claim.

Accordingly, the Motion is DENIED with respect to the Third Claim.

B. CAC’S COUNTERCLAIMS

1. CAC has stated a claim for fraud.

Under Delaware law, to state a claim for fraud the pleading party must allege: (i) a false

representation, usually one of fact; (ii) the defendant's knowledge or belief that the representation

was false, or was made with reckless indifference to the truth; (iii) an intent to induce the

plaintiff to act or to refrain from acting; (iv) the plaintiff's action or inaction taken in justifiable

reliance upon the representation; and (v) damage to the plaintiff as a result of such reliance. 180 179F

179
Pl. Mot. at 7.
180
Hauspie v. Stonington Partners, Inc., 945 A.2d 584, 586 (Del. 2008).

28
Chancery Rule 9(b) provides that, when pleading fraud, “the circumstances constituting

fraud must be pled with particularity.” 181 This requirement includes the “time, place, contents
180F

[,] and speaker.” 182 However, “[m]alice, intent, knowledge and other condition of mind of a
181F

person may be averred to generally.” 183 182F

i. CAC’s fraud counterclaim is not impermissibly bootstrapped.

Mr. Fellerman asserts that CAC’s fraud claim is a “clear example of bootstrapping

because the obligation allegedly breached arises solely under the contract.” 184 Specifically, Mr.
183F

Fellerman claims that because CAC’s fraud claim arises out of false statements made in

connection with the representations and warranties provision, such a claim is impermissible

under Delaware law. 185 184F

Mr. Fellerman relies upon Transdev On Demand, Inc. v. Blackstreet Investment Holdings,

LLC and MicroStrategy Inc. v. Acacia Research Corp. In Transdev, a buyer alleged that the

seller fraudulently induced it to enter into a sale based upon false statements made in connection

with certain financial disclosures. 186 On that basis, the buyer brought claims for breach of
185F

contract, specific performance, and fraud. 187 The court dismissed the buyer’s fraud claim
1 6F

finding that the claim arose “solely by contract.” 188 187F

181
Id. at 587-88 (citing Ct. Ch. R. 9(b)).
182
Pinnacle IV, L.P. v. CyberLabs AI Holdings Ltd.I, 2024 WL 3252672, at *4 (Del. Super. July 1, 2024).
183
Hauspie, 945 A.2d at 588.
184
Pl. Mot. at 22.
185
See id. at 23.
186
Transdev On Demand, Inc. v. Blackstreet Investment Holdings, LLC, 2020 WL 7027538, at *1 (Del. Ch. Nov. 30,
2020).
187
Id.
188
Id. at *6.

29
In MicroStrategy, the court found that false representations and warranties under a

contract could not be the basis of a fraud claim. 189 The court reasoned that fraud requires a
188F

misrepresentation beyond the representations made under the contract. 190
189F

In response, CAC argues that “the anti-bootstrapping rule does not apply to CAC’s fraud

claim.” 191 CAC relies upon Levy Family Investors, LLC v. Oars + Alps LLC. 192
190F 191F

In Levy, the court found that the bootstrapping rule “does not prevent a fraud claim

against defendants who knew [contractual obligations] were false and yet made them

anyway.” 193 Additionally, the Levy court found that the bootstrapping rule does not prevent a
192F

party from bringing a fraud claim if “the conduct occurs prior to the execution of the contract

and thus with the goal of inducing plaintiff’s signature and willingness to close the

transaction[.]” 194 193F

At this stage, Mr. Fellerman’s bootstrapping argument fails. In its Counterclaim for

fraud, CAC stated that Mr. Fellerman made false representations and warranties under PSA

Section 4(h) and PSA Section 4(v). CAC asserted that “[Mr.] Fellerman represented and

warranted that … ‘[SPS] has complied within the past three (3) years, and is in compliance with

… in all material respects, all applicable laws applicable to SPS.” Additionally, CAC alleged

that “[d]uring the past five (5) years, none of … [SPS’s] equity holders … its officers, directors

or employees … while acting for or on behalf of [SPS] have, directly or indirectly, violated any

… anti-corruption, anti-money laundering or anti-bribery Law[.]”

189
See id. at 17.
190
See id.
191
Def. Opp’n at 19.
192
2022 WL 245543 (Del. Ch. Jan. 27, 2022).
193
Id., at *8.
194
Id.

30
While Mr. Fellerman is correct that the aforementioned allegation arises from a false

statement made in connection with the representations and warranties provision, CAC also

alleged false representations made prior to the execution of the PSA. CAC pled that Mr.

Fellerman “lied repeatedly to CAC about his and SPS’s involvement in the criminal scheme

before CAC executed the PSA to purchase SPS.” 195 To support this allegation, CAC pled a
194F

myriad of facts showing that Mr. Fellerman made false statements throughout the negotiation

process. For example, CAC pled that when the Department of Justice initiated the Civil Action,

Mr. Fellerman only disclosed to CAC that some of SPS’s clients were subject to the Civil Action

and that SPS was an unknowing victim. 196195F

Therefore, because CAC also pled that false representations were made prior to the

execution of the PSA, the Court finds that CAC’s fraud Counterclaim is not impermissibly

bootstrapped to its breach of contract claim.

ii. CAC has sufficiently pled fraud.

Mr. Fellerman further claims that even if the bootstrapping argument is rejected, “the

damages that CAC has pled could not have been caused by the allegedly fraudulent

statement.” 197 Mr. Fellerman asserts that, because the alleged false statements arise from the
196F

representations and warranties (and thus, could not have been made until the time of Closing),

such false statements could not have induced CAC to enter into the contract. 198
197F

CAC asserts that “the representations in the [PSA] are not the only lies Mr. Fellerman

told CAC to induce CAC into purchasing his company.” 199 CAC claims that “when the Civil
198F

195
Answer at 58.
196
Id. at 51-52.
197
Pl. Mot. at 24.
198
See id.
199
Def. Opp’n at 21.

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Action initially arose during their negotiations, Mr. Fellerman misled CAC into believing SPS

was an unknowing victim of the fraudulent scheme to ensure negotiations with CAC continued

uninterrupted, which they did to CAC’s detriment.” 200 199F

CAC does not solely rely upon the false statements made in connection with the

representation and warranties provision. As noted above, CAC’s allegations also rely upon false

statements that were made throughout the negotiation process. As such, CAC has pled facts

sufficient to support a finding that Mr. Fellerman’s alleged false statements made throughout the

negotiation process were intended to, and in fact, did induce CAC into executing the PSA.

Therefore, the Court finds that CAC has sufficiently pled fraud.

Accordingly, the Motion is DENIED with respect to CAC’s fraud claim.

2. CAC has stated ripe claims for indemnification.

Under Delaware law, “[w]henever it appears by suggestion of the parties or otherwise

that the Court lacks subject matter jurisdiction over a claim, the Court must dismiss that

claim.” 201 Ripeness is a jurisdictional question and Delaware courts lack subject matter
200F

jurisdiction when a claim is unripe. 202 “A case is ripe for judicial review when the dispute has
201F

matured to the point where the plaintiff has suffered or will imminently suffer an injury.” 203 202F

Mr. Fellerman argues that the Second and Third Claims fail for the reasons set forth in

Section A of this opinion. 204 Additionally, Mr. Fellerman asserts that even if the Third Claim
203F

for indemnification is valid, the Third Claim fails as it is unripe. 205 206 Mr. Fellerman maintains
20 F 205F

200
Id. at 21-22.
201
Lima USA, Inc. v. Mahfouz, 2021 WL 5774394, at *6 (Del. Super. Aug. 31, 2021).
202
See id. at *2.
203
Town of Cheswold v. Central Delaware Business Park, 188 A.3d 810, 816 (Del. 2018) (citation omitted).
204
Pl. Mot. at 25.
205
Id.
206
As explained above, Mr. Fellerman’s arguments as to the Second and Third Claims fail. Thus, the analysis of this
issue will only address Mr. Fellerman’s ripeness argument as to the Third Claim.

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that the Third Claim does not “assert alleged Losses that had happened” by the time the Third

Claim was made. 207 Conversely, Mr. Fellerman posits that the Third Claim “describes losses as
206F

‘ongoing’ and not yet ascertained.” 208 207F

Mr. Fellerman relies upon Horton v. Organogenesis Inc., in which the court dismissed an

indemnification claim as unripe where the indemnitee had not yet incurred costs. 209 208F

CAC does not address Mr. Fellerman’s ripeness argument in its reply brief.

The language in the Third Claim is dipositive. However, the ripeness argument does not

address language contained in the Third Claim. Specifically, the Third Claim states that CAC

had already incurred losses. The Third Claim states:

[CAC] has suffered Losses related to, among other things: (a) your criminal
prosecution in United States v. Linden J. Fellerman . . . and the related proceedings
(collectively, “the Prosecution”); and (b) other damages attributable to your
conduct underlying the Prosecution, including Losses, direct, indirect, incidental,
special or consequential and including lost profits, business interruptions and
diminution in value based on a multiple of earnings or similar financial measure,
including reasonable legal expenses and costs associated therewith the losses.
[CAC] understand[s] that the Prosecution is ongoing, that no trial date has been set,
and that the Prosecution involves your actions while employed at [SPS]. Because
of the ongoing nature of these matters and because they continue to cause Losses
to [CAC], [it is] unable to ascertain the full extent of the Losses at this time. . . .
[and will therefore] retain the Holdback Amount in its entirety until it is able to
ascertain the full amount of the Losses[.] 210 209F

The mere fact that CAC is currently unable to quantify the losses does not mean that the Third

Claim is unripe merely because it is unliquidated. The Third Claim makes clear that CAC has

already suffered losses related to the Criminal Action, even though the full extent of those losses

is undeterminable at the present time. The Third Claim states that CAC “has suffered Losses”

and will “continue” to incur Losses.

207
Pl. Reply at 30.
208
Id. at 30-31.
209
See Horton v. Organogenesis Inc., 2019 WL 3284737, at *4-5 (Del. Ch. July 22, 2019).
210
Answer at 56-57.

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Therefore, because CAC has alleged that it has already suffered Losses related to the

Criminal Action, the Court finds that CAC’s indemnification claim concerning the Third Claim

is ripe for judicial adjudication.

Accordingly, the Motion is DENIED with respect to CAC’s indemnification claims.

C. MR. FELLERMAN IS NOT ENTITLED TO ATTORNEY’S FEES AND EXPENSES IN
CONNECTION WITH THE MOTION.

Delaware law dictates that the default rule for fee-shifting is the American Rule. 211
210F

Under the American Rule, “litigants are generally responsible for paying their own litigation

costs.” 212 However, Delaware courts have found that “a fee-shifting provision in an enforceable
211F

contract provides a clear exception to the default American Rule.” 213 212F

Mr. Fellerman argues that he is entitled to attorney’s fees and expenses under the PSA if

he prevails in this action. 214 Mr. Fellerman cites to PSA Section 9(1). Section 9(1) provides that
213F

“[i]f any Party brings an action to enforce its rights under [the PSA], the prevailing party shall be

entitled to recover its costs and expenses, including reasonable legal fees, incurred in connection

with such action, including any appeal of such action.” 215 214F

CAC does not dispute that Mr. Fellerman is entitled to attorney’s fees and expenses under

the PSA if Mr. Fellerman prevails in this action. 216 215F

Mr. Fellerman is correct that Section 9(1) provides an exception to the default American

Rule and entitles him to reasonable attorney’s fees and expenses if he prevails in the instant

211
See Avgiris Brothers, LLC v. Bouikidis, 2023 WL 7137104, at *2 (Del. Ch. Oct. 31, 2023) (citation omitted).
212
DeMatteis v. RiseDelaware, Inc., 315 A.3d 499, 508 (Del. 2024) (citing Mahani v. Edix Media Group, Inc., 935
A.2d 242, 245 (Del. 2007)).
213
Manti Holdings, LLC v. Authentix Acquisition Company, Inc., 2020 WL 4596838, at *4 (Del. Ch. Aug. 11, 2020).
214
Pl. Mot. at 27.
215
Compl. Ex. A, § 9(1).
216
Def. Opp’n at 25.

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action. However, Mr. Fellerman has not prevailed on the Motion. Therefore, the Court finds

that Mr. Fellerman is not entitled to attorney’s fees and expenses in connection with the Motion.

Accordingly, the Motion is DENIED with respect to Mr. Fellerman’s entitlement to

attorney’s fees and expenses.

VI. CONCLUSION

For the reasons set forth above, the Court DENIES the Motion.

IT IS SO ORDERED.

December 16, 2025
Wilmington, Delaware

/s/ Eric M. Davis
Eric M. Davis, President Judge

cc: File&ServeXpress

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