VH5 Capital, LLC v. Jeremiah Rabe

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

VH5 CAPITAL, LLC, )
)
Plaintiff, )
)
v. ) C.A. No. 2020-0315-NAC
)
JEREMIAH RABE, )
)
Defendant. )

POST-TRIAL MEMORANDUM OPINION

Date Submitted: February 1, 2023
Date Decided: June 30, 2023

Thomas G. Macauley, MACAULEY LLC, Wilmington, Delaware; Counsel for
Plaintiff VH5 Capital, LLC.

David G. Holmes, CROSS & SIMON, LLC, Wilmington, Delaware; Counsel for
Defendant Jeremiah Rabe.

COOK, V.C.
In October 2017, a limited liability company called On Point Loyalty, LLC

(or “OPL” for short) was formed to provide consulting services to companies

operating airline loyalty programs. OPL had two members: Jeremiah Rabe, a long-

time executive in the airline loyalty business, and VH5 Capital, LLC, an entity solely

owned by a lawyer named Hugh Hill who also claimed to be the part-time general

counsel of OPL. OPL operated for less than six months, never earned any profit or

accumulated any assets, and was unilaterally dissolved by Rabe in April 2019 after

almost a year of inactivity. From its formation to its dissolution, Rabe and VH5

never observed any corporate formalities in operating OPL.

VH5 sued Rabe for breach of contract and breach of the implied covenant of

good faith and fair dealing. Both claims stem from Rabe’s unilateral dissolution of

OPL. This dispute boils down to whether a consistent failure to observe corporate

formalities absolves a member of liability for his continued failure to observe such

formalities in dissolving an LLC. Perhaps unsurprisingly, I conclude that Delaware

law will not countenance such policy.

Following trial, I enter judgment for VH5 on its breach of contract claim. That

said, I also conclude that VH5 failed to prove damages. In lieu of evidence or a

coherent theory of damages, VH5 relied on speculation and hand-waving. I

therefore award nominal damages in the amount of one dollar.
I. FACTUAL BACKGROUND

The trial record is limited. The parties introduced eighty-five joint exhibits

and four deposition transcripts. In addition, VH5 introduced twenty supplemental

exhibits at trial. Two fact witnesses—Hill and Rabe—testified live over the course

of two days of trial. These are the facts as the court finds them after trial.1

A. Parties

VH5 is a Delaware limited liability company having its principal place of

business in New York, New York.2 Hugh Hill is VH5’s sole member.3 Hill is an

attorney. 4 Hill describes himself as “an attorney, a banker, and a consultant.”5

Rabe is an individual currently residing in Texas.6 Rabe has been involved in

the airline industry for many years and has primarily focused on airline loyalty

programs.7

1
Joint trial exhibits are cited as “JX ___,” supplemental exhibits are cited as “SX ___,”
exhibits lodged with the Court are cited as “Lodged Ex. __,” trial testimony is cited as
“TT___ (Name),” and depositions are cited as “[Name] Dep. ___.”
2
VH5 Capital, LLC v. Jeremiah Rabe, C.A. No. 2020-0315-NAC, Docket (“Dkt.”) 78,
Pretrial Stipulation and Order (“Pre-trial Stip.”) at ¶ 1.
3
Id.
4
Id.
5
TT7:9–22 (Hill).
6
Pre-Trail Stip. at ¶ 2.
7
TT181:4–183:15 (Rabe) (stating that his first job following graduation from his MBA in
2005 was with Taca Airlines, where he eventually became the director of the loyalty
program for the airline).

2
B. Formation of OPL

While this dispute is one between Rabe and VH5 (as well as VH5’s sole owner

Hill), a central character in the background is Nathaniel Felsher. At the time Rabe

and Felsher met, Felsher was the head of aviation investment banking at Deutsche

Bank.8 Rabe and Felsher had a close personal and business relationship.9 As

described by Rabe on the original idea for OPL,

[Felsher and I] had actually traveled to Europe together to explore an
investment in a loyalty program of a European airline. That didn’t ultimately
turn into anything, but we kept on talking. We went to, like, venture
conferences together. And then, in 2017, towards the beginning, is when we
started thinking more about this concept of [OPL] and doing consulting.10

In March 2017, Rabe and Felsher prepared a PowerPoint presentation that captured

their “initial brainstorms” around OPL.11 This early presentation described OPL as

“a specialized financing company that invests in travel technology with a focus on

airline loyalty programs.”12

During the summer of 2017, Rabe and Felsher began to plan the business of

OPL in earnest. Rabe personally paid a freelance graphic designer to create a logo

8
TT13:11–17 (Hill).
9
Rabe described Felsher as “probably one of my closest friends at that point in my life[.]”
TT185:1–3 (Rabe).
10
TT184:10–23 (Rabe).
11
JX 2; TT186:20–187:16 (Rabe).
12
JX 2 at 2.

3
that could be used in connection with the business idea.13 Rabe also put together

more presentation discussion materials, and he and Felsher began approaching

companies looking for opportunities for future business.14 In addition, Rabe created

a domain and had a website set up for use by OPL.15

The website set up by Rabe resulted in a portentous exchange between Rabe

and Felsher. The website contained information on the business of OPL and

included Felsher as part of the team, along with his picture.16 Shortly after the

website was launched, Felsher sent the following text message to Rabe: “Love the

website. However can you take my profile down for the moment as I don’t want a

blatant conflict to arise with ac or sas.”17 Once Felsher’s information was taken off

the website, he sent Rabe the following text message: “Thank you. Just sent you an

email. The closer we get to a deal the more important it is that there are no

fingerprints for all of our all [sic] concerned but most importantly because I can get

sued.”18

13
TT187:17–188:10 (Rabe); JX 3.
14
TT188:18–189:7; JX 4; JX 5.
15
TT189:8–190:8, 193:3–5 (Rabe); JX 7; Ex. 1 to JX 83.
16
TT192:14–194:2 (Rabe); JX 7.
17
TT193:13–194:6 (Rabe); JX 8. The terms “ac” and “sas” appear to be references to Air
Canada and SAS, respectively, which may have been clients of Deutsche Bank at that time.
TT193:19–194:2 (Rabe).
18
JX 8.

4
In the fall of 2017, Rabe and Felsher decided that OPL should be formally

created as a business entity.19 Felsher sent a template LLC agreement that was the

“proposed operating agreement, the shareholder agreement between the two of us.”20

Rabe, given his many years of experience in the airline loyalty business, would be

responsible for the operations of OPL (e.g., creating presentations, bringing in

business). 21 Felsher, given his experience at Deutsche Bank, would be responsible

for potential investment banking services and other “CFO duties” (e.g., opening a

bank account, setting up the legal entity).22

In forming OPL as a business entity, Felsher was concerned with having his

“fingerprints” on any formal filings. While it was intended that Felsher would

eventually become a member of OPL, he needed someone to stand in his place at

OPL until he left Deutsche Bank.23 The person that played this role was Hill, who

19
See TT195:22–196:5 (Rabe) (“So we had had some preliminary discussions with some
potential leads or clients. And there was – I think there were NDAs that needed to be –
that I had kind of received a proposal for and needed to, obviously, sign as [OPL], because
up to that point we had just been, essentially, a PowerPoint. There wasn’t any entity behind
it.”).
20
TT194:7–18 (Rabe); JX 10.
21
TT190:19–191:7 (Rabe).
22
Id.
23
TT198:7–18 (Rabe) (“So Mr. Felsher said that he would not be able to sign the operating
agreement because he was still employed at Deutsche. And I don’t know exactly what his
contract said at Deutsche, but he didn’t feel that he would be able to – to sign it.”).

5
had been close friends with Felsher for many years. 24 Hill had also provided legal

services and advice to Felsher over the course of their friendship.25 Hill was not

involved in negotiating any elements of OPL’s business or structure; rather he served

two purposes: “[o]ne he had an operating agreement that [Rabe and Felsher] could

use; and, two, [] he could sign his name on [ ] Felsher’s behalf.” 26

Felsher and Rabe scrapped the operating agreement that Felsher originally

provided. Instead, Hill, who testified that he has significant experience advising

start-ups, drafted an LLC operating agreement for OPL (the “Operating

Agreement”).27 The provisions of the Operating Agreement and the circumstances

surrounding the formal creation of OPL show that VH5 was intended to serve only

as a stand-in for Felsher.

To begin, Felsher, not Hill or VH5, made the initial $1,000 capital

contribution to OPL.28 Hill testified at trial that Felsher made the capital contribution

24
TT10:12–20 (Hill).
25
TT10:21–11:1 (Hill) (“Q: Have you ever represented [Felsher] as a lawyer? A: I have
provided legal services to Nat. I have never represented him in the context of a court
proceeding or litigation. I’ve given him advice.”).
26
TT198:14–18 (Rabe).
27
TT7:18–22, TT82:12–16 (Hill); JX 18 (“Operating Agreement”); see also JX 19 (email
from Hill to Rabe and Felsher attaching a draft of the Operating Agreement). As already
noted, Hill is an attorney and has regularly represented Felsher. In addition, VH5, the
entity solely owned by Hill, was the entity that served as a stand-in for Felsher. It is unclear
whether, in drafting the Operating Agreement, Hill was entirely forthcoming with Rabe
about his prior dealings with Felsher.
28
JX 27.

6
for Hill “on behalf of some work [he] had done for [Felsher] the prior summer.”29

Hill’s testimony on this point, however, was unconvincing, and he offered no

documentary evidence in support.30

The capital structure of OPL further supports the conclusion that VH5 was

merely a temporary stand-in for Felsher. Rabe held all the Class A units of OPL,

whereas VH5 held all the Class B units.31 Only holders of Class A units were entitled

to vote.32 However, the Class B units could be converted into Class A units when

transferred. 33 This convertible feature was so important that Hill, in an email to Rabe

and Felsher, felt the need to emphasize it: “Basically my LLC will hold 50%

economic, non-voting/control B shares. Those can be converted at the point of

transfer to A shares.”34 It is notable that this was the only specific provision of the

Operating Agreement highlighted by Hill. Having carefully considered the trial

29
TT18:7–10 (Hill).
30
See, e.g., TT86:18–23 (Hill) (“Q: Do you recall if there [were] any texts or emails
regarding this agreement between you and Mr. Felsher for him to pay the $1,000 on your
behalf? A: No.”).
31
Operating Agreement, Sch. A.
32
See Operating Agreement § 1.1 (“‘Class A Units’ means units of voting Membership
Interest . . . . ‘Class B Units’ means units of redeemable, non-voting, transferable
Membership Interest[.]”).
33
See Operating Agreement § 11.1(b)(i) (“Optional Conversion. Any Class B Units
transferred in accordance with this Section 11 may be converted, at the option of the
Transferee, into Class A Units of equivalent to the Proportionate Interest of the Class B
Units subject to Transfer. Such conversion shall require the express written consent of all
Holders of Class A Units.”) (emphasis in original).
34
JX 19 (emphasis added).

7
testimony and other evidence, I find that the only reasonable interpretation of this

email is that Hill was explaining the mechanics by which Felsher would eventually

step into VH5’s place and obtain voting Class A units (rather than non-voting Class

B units).

OPL was officially formed on October 25, 2017, when a Certificate of

Formation was filed with the Delaware Secretary of State.35

C. Relevant Provisions Of The OPL Operating Agreement

Rabe, VH5, and Hill never observed any of the formalities or procedures set

forth in the Operating Agreement in conducting the business of OPL. Nonetheless,

as this is ostensibly an action for breach of contract, I pause to set forth some of the

relevant provisions of the Operating Agreement.

Article Four of the Operating Agreement sets forth the authority of OPL’s

board of directors (the “Board”), the composition of the Board, and the procedures

for Board meetings. As a general matter, OPL’s Board was responsible for

managing OPL, and Board approval was required for any sale or disposition of all

of OPL’s assets:

Section 4.1 Authority of the Board.

(a) Except as otherwise provided in this Agreement, the business and affairs
of the Company shall be controlled, directed and managed exclusively
by [the Board]. . . .

35
JX 15.

8
(b) Without limiting the generality of the foregoing Section 4.1(a), no act
shall be taken, sum expended, decision made or obligation incurred by
the Company or any Member or any officer, including any Executive
Officer, or any affiliate of any of the foregoing with respect to any matter
within the scope of the following decisions (collectively the “Major
Decisions”), unless such Major Decision has been Approved 36 by the
Board:

(i) Agreeing to sell or otherwise dispose of all or substantially all of the
operating assets of the Company[.]

(c) Unless specifically provided otherwise herein, whenever the Board is
entitled to vote on any matter or exercise any power under this
Agreement, such matter shall be considered approved or consented to
upon the receipt of the affirmative approval or consent of more than Fifty
Percent (50%) of the Directors with each Director having one vote. . . .

(d) Notwithstanding the grant of authority to the Board in this Article Four,
the Board shall have no authority and shall not take, or cause the
Company to take, any action which requires for its authorization and/or
implementation, (i) the Approval or Consent of the Class A Members
under this Agreement, or (ii) the vote, Approval, or Consent of Class A
Members pursuant to the Act. 37

Section 4.2 of the Operating Agreement sets forth the composition of the Board and

provides as follows:

36
“The phrases ‘Approved by,’ ‘Approval of,’ ‘Consent of,’ ‘Deemed by,’ ‘Determined
by,’ or any equivalent, each mean, with respect to the Board, approval or consent as set
forth in Section 4.1(c) hereof, and, with respect to the Members, approval or consent as set
forth in Section 6.8 hereof.” Operating Agreement § 1.1. The reference to Section 6.8
appears to be a typo as the voting requirements for Class A members are set forth in Section
6.9, not Section 6.8. Under Section 6.9, a “matter shall be considered approved or
consented to upon the receipt of the affirmative approval or consent, either in writing or at
a meeting, of Class A Members holding more than Fifty percent (50%) of the Class A Units
then issued and outstanding which are entitled to vote.” Id. § 6.9.
37
Operating Agreement § 4.1.

9
The Board shall be composed of a minimum of three (3) Directors which shall
consist initially of Jeremiah Rabe, Hugh Hill, and one Director mutually
agreed upon by the Class A and Class B Members. The Board shall be elected
and removed by the majority of the Members pursuant to the terms of this
Agreement. At all times, a minimum of one (1) of the Directors elected by
the Members must also be a Class A Member. The number of Directors
constituting the entire Board may be increased or decreased from time to time
by the Approval of the Class A Members.38

Notably, at no point during OPL’s short existence was a third Director appointed. 39

Also relevant to the composition of the Board is Section 4.8, which states that

“[a]ny Director may be removed from the Board with or without cause by the

resolution of the Members acting at a meeting or through written Consent in

accordance with the terms of this Agreement.” 40

The final provision from Article Four relevant to this dispute is Section 4.7,

which provides in relevant part as follows:

4.7 Exclusivity of Duty to Company. Except as otherwise provided herein or
in any other agreement relating to the Company, no Director shall be required
to manage the Company as his or her sole and exclusive function and any such
Director may have other business interests and may engage in other activities
in addition to those relating to the Company. Neither the Company nor any
Member shall have any right, by virtue of this Agreement, to share or
participate in such other activities or to the income or proceeds derived
therefrom. Directors shall not incur any liability to the Company or to any of
the Members as a result of engaging in any other business or venture.41

38
Id. § 4.2.
39
TT21:18–23:4 (Hill).
40
Operating Agreement § 4.8.
41
Id. § 4.7.

10
In short, neither Rabe nor Hill, as Directors of OPL, were required to devote their

sole efforts to OPL and neither was required to share the income they derived from

other activities with the other.

The next article relevant to this dispute is Article Six, which contains

provisions concerning the Class A and Class B members. Section 6.2 sets forth the

powers of Class A members and provides in relevant part that “the Class A Members

shall have the right to elect and remove any Director at a meeting called for such

purpose.” 42 In addition, Article Six sets forth certain actions that specifically require

the approval of the Class A members:

Section 6.3 Actions Requiring Approval of the Class A Members.

(a) The following actions and decisions require, or may be taken or made
by, Approval of the Class A Members:

(1) Election and removal of directors of, or increasing or decreasing
the size of, the Board, pursuant to Section 4.2;

...

(5) Determination to dissolve, wind up and liquidate the Company,
pursuant to Section 9.2(a);

(6) Determination of assets to be sold under liquidation, pursuant to
Section 9.4[.]43

42
Id. § 6.2.
43
Id. § 6.3.

11
Article Nine of the Operating Agreement elaborates on the procedures for

liquidation of the Company and provides in relevant part as follows:

Section 9.2 Events Causing Dissolution. The Company shall be dissolved and
its affairs shall be wound up upon the occurrence of any of the following
events:

(a) at any time by a determination of the Board and the Approval of the Class
A Members to dissolve, wind up and liquidate the Company; [or]

(b) at any time by written unanimous consent of the Class B Members
delivered to the Company[.]44

Reading Sections 4.1, 6.3, and 9.2 together provides that a dissolution and

liquidation of OPL required approval of both the Board (i.e., Hill and Rabe) and the

Class A members (i.e., Rabe).

D. OPL Operates For Less Than A Year With Minimal Success

OPL was a consulting business where “the idea, at least, was to try to, you

know, bill out people’s time at a higher rate than what it was costing to pay the

consultants that were doing the work.”45 In connection with this business model,

OPL entered into agreements with freelance consultants. 46 The agreements that OPL

entered into with the freelance consultants could be terminated for convenience on

30 days’ written notice.47 Given this business model, the vast majority of the

44
Id. § 9.2.
45
TT183:13–184:9 (Rabe).
46
TT207:9–208:2 (Rabe).
47
TT208:3–9 (Rabe); JX 12. The agreements that OPL entered into with the various
freelance consultants did contain an exclusivity provision, which stated that “OPL and its
12
revenue that OPL generated was paid out to the freelance consultants with which

OPL contracted. While Rabe spent significant time working at OPL through May

2018, Hill, who claimed to be the “part-time general counsel” of OPL, did not do

any work for OPL after its organization. 48

Over the course of its existence, OPL had a total of three clients. 49 The first

client, Enjoy Gestion Limitada (“Enjoy”), was a client that Rabe brought into OPL

based on his prior work with them.50 Enjoy generated total revenue of $81,801.63

for OPL, and OPL incurred costs of $74,030.51 related to employing independent

consultants to handle the work with Enjoy, resulting in a gross profit of $7,771.12. 51

The second client was brought in by Evert de Boer, an independent consultant

that signed an agreement with OPL in early October 2017 to provide consulting

services.52 Rabe and de Boer knew and had worked with each other prior to the

affiliated entities . . . shall have a right of first refusal on all projects and investment
opportunities originated by you that you present to OPL.” JX 12. Rabe testified that he
“didn’t pay much attention to this clause, like in practice” because “[a]ll the consultants
had other things that they were working on.” TT340:9–12 (Rabe).
48
TT89:18–90:18 (Hill) (“Q: And what did you do as part-time general counsel? A: Well,
I wrote the operating agreement. I established a company. I advised on a number of
contracts. I helped establish the banking relationship for OPL. And then it was a very
short window there, six months, and I was on standby for what I thought was going to be
a lot more work as we grew the business.”).
49
TT208:10–15 (Rabe).
50
TT209:11–210:8 (Rabe).
51
JX 84.
52
JX 12.

13
formation of OPL. 53 De Boer had his own consulting business, FFP Investment and

Advisory Pte Ltd (“FFP”), that was based in Singapore and also worked in the airline

loyalty space.54 De Boer, through FFP, brought in Hawaiian Airlines based on de

Boer’s preexisting relationship with Hawaiian Airlines.55 The main reason that de

Boer worked with OPL on Hawaiian Airlines was because Hawaiian Airlines wanted

to enter the relevant agreement with a U.S. entity.56 Hawaiian Airlines generated

total revenue for OPL of $66,146.48, and OPL paid de Boer $65,646.48, resulting

in a gross profit of $500.57

Based on the evidence presented at trial, it seems that the only client that

anyone brought in during OPL’s formal legal existence was Ortelius Advisors.58

OPL billed Ortelius Advisors a total of $500 for a one-hour consultation, $250 of

which was paid to an OPL consultant. 59

Added up, OPL earned a total gross profit of $8,521.12. OPL incurred

insurance, administrative and travel expenses totaling $16,384.66, resulting in a net

53
TT210:12–211:18 (Rabe).
54
Id.
55
Id.
56
Id.
57
JX 84.
58
TT208:21–209:10 (Rabe).
59
Id.

14
loss of $7,863.54.60 The only assets OPL ever had during its existence were a small

amount of cash and accounts receivable, which ultimately went to cover expenses.61

Other than these assets, OPL had neither tangible assets nor intangible assets, as

Rabe never transferred the name, logo, or website he created prior to OPL’s formal

existence.62

Despite OPL’s lack of actual success, VH5 and Hill insist that OPL had both

a significant asset in the form of a report on the top 100 airline loyalty programs (the

“Market Report”) and, purportedly, a pipeline of contracts worth almost $250,000.63

Rabe prepared the Market Report and published it on the OPL website. 64 The

Market Report generated some inquiries, though none of the inquiries ever resulted

in either revenue or a formal consulting contract.65

60
JX 84. Rabe provided a detailed accounting of the flow of payments from clients to OPL
and then from OPL to consultants. See TT227:2–237:22 (Rabe); JX 35; JX 53; JX 54; JX
84.
61
TT212:9–19 (Rabe).
62
TT188:3–17, 224:18–225:17 (Rabe).
63
Dkt. 99 (“Pl.’s OB”) at 6–7; see infra Section I.E. for a discussion of the purported
“pipeline” of OPL clients.
64
TT269:12–271:5 (Rabe).
65
TT274:18–277:20 (Rabe); see also SX 7; SX 10; SX 12; SX 13; SX 14 (various inquiries
from the OPL website asking questions about the Market Report).

15
E. Aimia Recruits Rabe To Become CEO And De Boer Forms OPL
Singapore

In February 2018, Rabe was in discussions with a Canadian investment firm,

Mittleman Brothers LLC, to join the board of directors of Aimia. 66 Aimia’s primary

business line was called Aeroplan, which was Air Canada’s frequent flier program.67

At the time of the February 2018 discussions, Mittleman Brothers was the largest

shareholder of Aimia and was running an activist campaign to replace the Aimia

board of directors.68 Mittleman Brothers is controlled by two individuals:

Christopher Mittleman and Phil Mittleman. In addition to a position as a director,

Christopher Mittleman sought to convince Rabe to join as the CEO of Aimia.69 As

part of Christopher Mittleman’s pitch to Rabe to become CEO of Aimia, he stated

that “if Aimia acquiring [OPL] would make it easier, and the economic terms

reasonable, then doing an ‘acquihire’ to get a great CEO would also not be

unprecedented and something I would consider.”70 At this point, however,

Mittleman Brothers was only a large investor, and Christopher Mittleman was not

acting on behalf of Aimia. 71

66
TT213:8–214:7, 288:6–290:23 (Rabe); JX 29.
67
TT287:3–14 (Rabe).
68
TT213:8–24 (Rabe); JX 29.
69
TT291:18–293:13 (Rabe); JX 29.
70
JX 29.
71
TT292:5–10 (Rabe).

16
Aimia eventually made Rabe an offer to become CEO. In early May 2018,

Rabe spoke with Bill McEwan, who was the head of Aimia’s board HR committee,

about joining as CEO.72 On May 4, 2018, Aimia’s chief talent officer sent Rabe a

term sheet to join as CEO and copied McEwan and another director.73 Under the

term sheet, Rabe would receive a signing bonus of Can$1 million and total target

annual compensation of Can$3.375 million, as well as an annual perquisite of

Can$70,000. 74 It appears that this term sheet reflected Rabe’s actual compensation

when he eventually joined as CEO of Aimia.

Rabe testified that neither Christopher nor Phil Mittleman was involved in the

negotiation of Rabe’s compensation as CEO of Aimia.75 Counsel for VH5, however,

pressed Rabe on this point during cross-examination and noted that Phil Mittleman,

in a deposition for a separate lawsuit against Rabe related to his time at Aimia, stated

that he attributed significant value to OPL. 76

72
TT215:1–7, 368:24–369:1 (Rabe); JX 36.
73
TT214:8–215:7 (Rabe); JX 36.
74
TT285:11–286:14 (Rabe); JX 36. “Can$” refers to Canadian dollars. “$” without the
prefix “Can” refers to U.S. dollars. Rabe’s target annual compensation consisted of the
following: an annual base salary of Can$750,000; a short-term incentive program with a
target of 100% base salary; and a long-term incentive program with a target of 250% base
salary. TT285:11–286:14 (Rabe); JX 36.
75
TT215:8–11 (Rabe).
76
TT369:12–371:5 (Rabe); Lodged Ex. C (“Phil Mittleman Dep.”) 155:8–156:11.

17
There are multiple problems, however, with VH5’s reliance on Phil

Mittleman’s deposition testimony.77 First, as already noted, Phil Mittleman was

involved in the initial outreach to Rabe, but not the actual back-and-forth regarding

negotiation of Rabe’s compensation. Also, OPL is not mentioned at all in Rabe’s

term sheet with Aimia. Even beyond this, Phil Mittleman acknowledged in his

deposition that he, his brother Christopher, Aimia, and Rabe all believed at the time

of the negotiations in 2018 that Rabe would need to divest himself of an options

package for a company with which Rabe previously worked called LifeMiles.78

Most notably, in 2018, Rabe’s LifeMiles options were worth approximately $4.5

million. 79 Thus, far from attributing significant value to OPL, the more reasonable

explanation is that his compensation package reflected the parties’ expectation that

Rabe would take a significant haircut on his LifeMiles options if he joined Aimia.

77
I note that the parties have asserted no objection to my consideration of the deposition
transcript under evidentiary rules. In any event, I do not rely on the testimony for reasons
I describe herein.
78
Phil Dep. 37:3–38:11 (“I went back to Bill McEwan. I said there is [sic] two issues.
There is [OPL] and there is his stake in LifeMiles. Sounds like we could buy [OPL] to get
rid of that conflict and have it in-house, and I don’t know what the situation is with
LifeMiles. I asked Jeremy to see if he could keep the options, and Bill’s response was
‘Absolutely not. He cannot maintain the LifeMiles stake. It’s a humongous conflict of
interest and he has to divest himself of [OPL] one way or another.’”).
79
TT376:12–20 (Rabe); Phil Dep. 186:22–187:20. Apparently, Rabe did not ultimately
need to give up his LifeMiles options. TT376:1–11 (Rabe). VH5 seems to suggest that
this means the parties knew Rabe would not need to give up his LifeMiles options when
negotiating Rabe’s Aimia compensation package. VH5 failed to develop sufficient
evidence to support its speculation at trial, however.

18
Rabe joined Aimia in May 2018. Contemporaneous with joining Aimia, Rabe

emailed Hill about divesting himself from OPL. 80 In this email, Rabe stated that “I

am joining a new company and as part of my agreement with my employer I need to

divest my interest in [OPL].”81 Rabe asked Hill to “draft a very simple agreement

to sell the business to Evert de Boer.” 82 The following day, Hill responded “[o]f

course Jeremy,” and the two had a call that day. 83 During the call, Rabe informed

Hill that his interest in OPL would be transferred to de Boer for zero consideration,

which Hill agreed to, according to Rabe. 84 Rabe’s initial email noted that Felsher

was aware of this plan—Rabe testified that the reason for this was that he considered

Felsher to be the other owner of OPL even though the equity was nominally owned

by VH5.85

Hill never actually prepared the agreement to transfer Rabe’s interest in OPL

to de Boer. 86 After the initial conversation, Hill did not reach out to Rabe, and Rabe

followed up on the status of the transfer agreement on May 22. 87 After discussions

80
TT217:7–218:5 (Rabe); JX 40.
81
JX 40.
82
Id.
83
TT219:6–16 (Rabe); JX 40.
84
TT219:17–220:2 (Rabe).
85
TT220:7–11 (Rabe); JX 40.
86
TT26:8–24 (Hill).
87
TT222:9–223:1 (Rabe).

19
between Rabe and de Boer, however, they determined that it would be easier to

simply shut down OPL and transfer the assets to de Boer.88 On May 24, 2018, Rabe

informed Hill of the plan to shut down OPL and asked Hill to pause any further work

on the transfer agreement. 89 Notably, Hill did not respond to Rabe’s May 22 or May

24 emails—not through email, text, or phone call.90

88
TT223:2–224:9 (Rabe); see also JX 51 (email from de Boer stating that his accountant
said “the best way is to start a clean company in Singapore (On Point Loyalty Pte Ltd), and
then do a simple asset transfer deal from OPL LLC and close that down”).
89
JX 51.
90
TT240:12–18 (Rabe) (“Q: Now, between May 8, 2018, and January 16, 2019, had you
heard anything from Mr. Hill? A: No. Q: When I say heard from, do you recall getting
any calls from Mr. Hill? A: No. I didn’t get any calls from Mr. Hill. No emails, nothing.”).
Hill claims that he “put in a couple of phone calls” after Rabe’s May 24 email and that
Rabe did not respond to these calls. TT28:1–15 (Hill). Having viewed Hill’s testimony
during trial, and in the overall context of the evidence, I find that Hill’s testimony lacks
sufficient credibility on this point. When asked on cross-examination whether he attempted
to get any phone records to corroborate this assertion, Hill testified that “I don’t have
records that far back[,] I can’t do that.” TT63:7–9 (Hill). In a different context, this
response could be perfectly sensible. Hill’s assertion here, however, that I must just take
his word for it reflects a concerning pattern—namely, the all-too-convenient absence of
contemporaneous documents. See, e.g., TT68:20–69:4 (Hill) (“Q: So [Felsher] sent you
something. Did you produce that email in your production? A: I honestly don’t know.
My Gmail account is my personal account, and it’s full. So I periodically purge large
attachments from it. So if I couldn’t have found it, it was probably because of that, if I
didn’t produce it.”); TT117:4–11 (Hill) (“Q: But you didn’t produce those notes in this
litigation? A: I – I don’t keep records like that, sir. If I did, I would have produced them.”);
TT117:18–22 (Hill) (“Q: Have you produced any [evidence] that [you] started the
agreement? A: No. The computer that I was working on at the time was property of
Enclave Capital. And when it shut down, I didn’t have access to it anymore.”); TT127:5–
20 (Hill) (stating that he refused to produce certain communications with Felsher on the
basis of privilege even though counsel for VH5 never prepared a privilege log). Hill is an
attorney who should understand the importance of maintaining documents relevant to a
business relationship, particularly one that appeared headed toward litigation as early as
2019. The excuses for the lack of expected contemporaneous documents, proffered one
20
Consistent with his May 24 email, de Boer formed a new entity named On

Point Loyalty Singapore Pte Ltd. (“OPL Singapore”).91 Rabe subsequently

transferred to de Boer the login information for OPL’s PR NewsWire account, a

recruiting site that Rabe used to find consultants, and the “onpointloyalty.com”

domain that Rabe had registered prior to OPL’s formal existence. 92 Rabe has not

been involved with OPL Singapore.93 After de Boer formed OPL Singapore, Rabe

continued to receive payments to OPL’s bank account for work that OPL had

performed while Rabe was still involved in OPL, and Rabe made payments to

consultants that had worked on those projects for OPL. 94

At trial and in its briefing, VH5 focused on an April 28, 2018, email from

Rabe to Aimia’s chief talent officer. 95 In the email, Rabe set forth certain purported

after another, chipped away at Hill’s credibility at trial. And this is to say nothing of the
substance of Hill’s testimony, which I address throughout.
91
TT224:13–17 (Rabe); JX 79.
92
TT224:21–225:4 (Rabe).
93
TT259:18–260:5 (Rabe).
94
Compare JX 53 ($46,103.53 invoice to Enjoy dated June 9, 2018, for “Phase 2 Project
Completion”), with JX 54 (Rabe’s bank account statement reflecting receipt of payment
for this invoice on July 13, 2018, and payments to consultants that had worked on this
project totaling $45,405.53). The bank account in question is in the name of “Orange Flix
Inc.” which Rabe testified was an entity that he had created for freelance consulting work
and that he continued using for OPL. TT227:6–15 (Rabe). The fact that OPL did not even
have its own bank account further supports the conclusion that it was never a particularly
formalized entity.
95
JX 35.

21
financial information of OPL.96 Rabe stated that OPL had two projects in process

with “total revenue in the pipeline [of] $248,394.” 97 Rabe also stated in the email

that there were “a number of conversations in progress with other airlines around the

world which may turn into potential consulting or investment opportunities.”98 VH5

highlights that OPL Singapore appears to have continued working with certain of

the companies included in the “pipeline” after Rabe joined Aimia. 99

Considered in the context of the evidence presented at trial, I find it very

significant that, at the time Rabe sent his email, he was auditioning for Aimia’s CEO

position and the compensation that would come with it. While I believe that, if Rabe

had continued working on OPL, it might well have achieved significant revenues at

some point, the evidence presented at trial suggests that the numbers described above

had little actual substance. In addition, the projections are for revenue, not profits.

As already described, OPL’s business model involved money coming in the door in

the form of revenue and then mostly going promptly back out the door to pay the

freelance consultants who did the work.100

96
Id.
97
Id.
98
Id.
99
The clients were Aegean Airlines, Kenya Airways, and Singapore Airlines. Pl.’s OB at
18–19.
100
Indeed, as explained above, OPL ended its short existence with a net loss.

22
In any event, VH5 contends that any revenue that OPL Singapore earned from

these clients should properly be viewed as revenue belonging to and forgone by

OPL. 101 I do not find VH5’s focus on these OPL Singapore clients compelling.

While Rabe continued to be copied on certain correspondence through the summer

of 2018 for these clients, none of the documents provided at trial indicate that Rabe

actually did any work on behalf of these clients.102 In addition, VH5 did not offer

any evidence that OPL signed engagement letters with any of these companies or

received any revenue.

At best, the very limited evidence concerning post-May 2018 matters

presented by VH5 suggests OPL Singapore may have done some limited work for

one or more entities, but it is not at all clear whether such work was material or even

paid. In other words, while the limited evidence suggests that OPL Singapore did

some sort of unknown work for a handful of entities after Rabe left, the evidence

presented is largely just a peek at some meet-and-greets that might, or might not,

have panned out and a handful of scattered follow-on emails. Following trial, I have

101
Pl.’s OB at 15–20.
102
See, e.g., SX 1 (email from an employee of Aegean Airlines to Rabe complaining about
work by OPL Singapore, which Rabe forwarded to de Boer); SX 2 (email from de Boer
updating Rabe on current work that de Boer was doing with Aegean Airlines and other
potential clients); SX 14 (February 2019 email from de Boer to Rabe where de Boer states
that he would “tell [Rabe] anecdotes about Kenya Airways”); JX 44 (email exchange
between January 2018 and May 2018 where de Boer pitched Singapore Airlines on
consulting work with Rabe copied; final email reflects de Boer updating another OPL
consultant on Rabe’s departure from OPL).

23
no confidence that OPL Singapore was compensated in any material way for what

seems to have been essentially a one-man-band consulting outfit for air miles.

F. Rabe’s Relationship With Felsher Deteriorates

After Rabe joined Aimia in May 2018, he introduced Felsher to Phil

Mittleman, who was very impressed with Felsher and encouraged the Aimia board

to recruit him to join the company.103 Aimia hired Felsher in August 2018 to be its

president and chief strategy officer.104 But Felsher’s tenure at Aimia was short-lived.

Aimia terminated Felsher approximately three months later for reasons not disclosed

at trial. 105 Rabe testified that Felsher was very upset with Rabe over this termination

and, importantly, that it was devastating to their personal and professional

relationship.106

Significantly, on the same day that Aimia terminated Felsher, Felsher

contacted Hill for legal assistance. 107 Felsher then sued Aimia on January 29, 2019,

in the Superior Court of Justice in Ontario, Canada.108 Although Hill did not act as

Felsher’s litigation counsel, Hill provided other legal services to Felsher in

103
TT238:18–239:11 (Rabe).
104
TT239:12–17 (Rabe).
105
TT239:18–20 (Rabe).
106
TT239:24–240:11 (Rabe).
107
TT105:16–106:4 (Hill).
108
JX 64.

24
connection with his termination from Aimia through spring 2020.109 Felsher and

Aimia ultimately settled Felsher’s lawsuit in mid-February 2020.110

On January 16, 2019, approximately two weeks before Felsher filed his

lawsuit against Aimia, Hill sent Rabe a short, out-of-the-blue email asking about the

“year-end numbers for [OPL]” and stating “[a]s you may recall, VH5 is the 50%

owner and is therefore entitled to 50% of such profits (or losses).” 111 Absent from

Hill’s January 2019 email is any reference to Rabe’s May 24, 2018, email to Hill,

where Rabe informed Hill of his plan to close down OPL and transfer the assets to

de Boer. Rabe testified that he was “alarmed” and, as explained by Rabe, his alarm

seemed warranted:

So Hill was representing Felsher, who was recently terminated by Aimia. I
was the CEO of Aimia at the time. There were negotiations going on at that
time where Hill was representing Felsher in those negotiations. A lawsuit was
filed a week or two after this email, so a lawsuit was impending. And so it
was surprising to me that he didn’t disclose that conflict of interest, that he

109
TT106:5–109:24 (Hill). Hill was evasive on this point at trial. He initially testified that
he stopped providing legal advice to Felsher in connection with his termination from Aimia
at the end of January 2019. TT106:5–107:19 (Hill). However, he shortly thereafter
acknowledged that he provided Felsher legal advice in connection with a related
countersuit brought against Felsher in New York state court a few months later. TT106:20–
107:6 (Hill). And upon additional cross-examination, Hill finally acknowledged that he
had provided Felsher with legal advice up through either February or March 2020, which
is around the time that Felsher settled his lawsuit against Aimia. TT109:5–24 (Hill).
110
TT111:3–7 (Hill).
111
JX 61.

25
was getting a lot of money from Felsher to represent him, a lot more than
anything that he had been involved with at [OPL]. 112

Rabe forwarded Hill’s email to Aimia’s internal and external counsel, who drafted

Rabe’s response, which he sent on January 24, 2019. 113 This response stated that he

did not have “any clarity on year-end numbers” and noted that, “[a]s you know, the

company has not been active since I took on the role as CEO at Aimia in May.”114

Rabe then reached out to an accountant to assist with preparing OPL’s 2018

tax return.115 Consistent with the other financials produced by Rabe, this tax return

showed gross receipts of $148,448.116 The return showed total deductions of

$149,720, for a loss of $1,272.117 In addition, the return listed VH5 and Rabe as

112
TT248:13–249:2 (Rabe). Based on the testimony at trial and evidence put forth, it is
not entirely clear at what point Rabe became aware that Hill was advising Felsher in
connection with Felsher’s litigation against Aimia. Upon receiving the email, Rabe
immediately sent it to Aimia’s internal and external counsel because he was “surprise[ed]
to see . . . an email from opposing counsel that didn’t copy my lawyers or disclose what
his relationship – his conflict relative to [OPL].” TT247:20–249:2 (Rabe). Aimia’s
internal and external counsel drafted the response that Rabe ultimately sent in response to
Hill’s initial email. TT249:3–15 (Rabe). The most that I can conclude from the testimony
at trial is that Rabe was aware that Hill regularly provided Felsher with legal advice, though
Rabe was not fully aware of the extent to which Hill was advising Felsher in connection
with his litigation against Aimia.
113
TT249:7–15 (Rabe).
114
JX 61.
115
JX 66.
116
JX 65.
117
Id.

26
each owning 50% of OPL.118 Finally, VH5 and Hugh Hill were listed as the tax

representative for OPL. 119

On February 21, 2019, Rabe sent Hill OPL’s tax return, and on March 4, 2019,

Rabe sent Hill OPL’s balance sheet, profit and loss statement, and other financial

information.120 The tax return and financial statements were prepared by a certified

public accountant (“CPA”) and consistently showed that OPL had a net loss in

2018. 121 On March 7, 2019, Hill sent Rabe the following email:

Jeremy, a number of significant concerns based on the attached. My
accountants need to know. First, is OPL still an operating business? I sent
you the google results of the search mentioning Mr. de Boer. What is going
on? Do I need to get my lawyers involved? Does you [sic] current employer,
Aimia, know about this? Should I call them? 122

Rabe did not respond to this email, but Hill’s threats to “get his lawyers involved”

and contact Aimia foreshadowed actions that Hill and Felsher would soon take to

pressure Rabe in retaliation for Felsher’s termination.

118
Id.
119
Id.
120
JX 62; JX 63; JX 65; JX 67.
121
TT354:6–10 (Rabe); JX 62; JX 63; JX 65; JX 66; JX 67.
122
JX 67.

27
G. Rabe Formally Dissolves OPL

On April 8, 2019, Rabe formally dissolved OPL. 123 The dissolution and final

franchise tax payment cost $1,020. 124 Rabe testified that this amount exceeded what

was in OPL’s bank account at the time, so he paid the remaining balance out of his

personal funds. 125 Rabe contends that he had received advice from counsel that VH5

was not a member of OPL. 126 Based on this, Rabe “formally resolved, as a sole

Class A Member and only unconflicted member of the Board of Directors of OPL .

. . with the power to remove other directors and decrease the number of people who

sit on the Board, to dissolve OPL and file a Certificate of Cancellation.”127 There is

no written Board resolution or consent supporting this purported resolution by

Rabe.128 In addition, Rabe did not provide any contemporaneous notice to VH5 of

the formal dissolution of OPL or of any Board action or meeting related to such

dissolution. 129

123
TT251:6–13 (Rabe); JX 71.
124
TT251:14–18 (Rabe); JX 71.
125
TT251:14–18 (Rabe).
126
TT250:18–251:5 (Rabe).
127
JX 83 ¶ 8.
128
TT352:23–353:11 (Rabe).
129
TT353:12–354:5 (Rabe).

28
H. Rabe Is Terminated From Aimia And Litigation Ensues

Rabe was terminated by Aimia on April 28, 2020. 130 On the exact same day

that Rabe was terminated from Aimia, VH5 filed its complaint against Rabe.131

Originally, Rabe was terminated without cause.132 However, Phil Mittleman

testified in his deposition that Felsher provided him with a copy of the complaint

and that Felsher made certain allegations concerning Rabe’s conduct. 133 Based on

these allegations and an investigation conducted by Phil Mittleman, Rabe’s

termination was turned into one for cause. 134 The impact of the change was that

Rabe was no longer entitled to a severance package worth millions of dollars.135

On November 12, 2020, Rabe sued Aimia, asserting claims related to his

termination for cause. 136 That litigation appears to be ongoing.

I. Procedural History

I pause to note some aspects of the procedural history concerning VH5’s

litigation of this action. Although I ultimately make no finding on this, these tactics

130
TT254:19–22 (Rabe).
131
Dkt. 1.
132
TT256:8–10 (Rabe).
133
TT256:21–257:4 (Rabe).
134
Id.
135
TT256:11–20 (Rabe).
136
JX 78.

29
bolster my concern that this litigation was brought by VH5 at the behest of Felsher

to harass Rabe and damage his reputation after their falling out.

First, in its amended complaint, VH5 brought claims for fraud (Count I),

breach of contract (Count II), and breach of the implied covenant of good faith and

fair dealing (the “implied covenant”) (Count III).137 Two weeks before trial, VH5

dropped its fraud claim via a footnote in its motion to strike Rabe’s affirmative

defenses.138 Fraud is a serious allegation. VH5’s allegation of fraud hung over Rabe

for over two years and undoubtedly had an impact on Rabe’s personal and

professional life. VH5’s tactic in maintaining its fraud claim but then dropping it—

via a footnote—on the eve of trial when put to its proof is concerning.

Second, during the pre-trial conference, VH5’s counsel acknowledged that it

was apparently unable to come up with evidence supporting its original damages

theory.139 Based on this, VH5 had to change its damages theory on, essentially, the

eve of trial. 140 In addition, VH5 filed a motion to extend the deadline for expert

discovery in May, which this Court granted. 141 Despite obtaining such an extension,

137
Dkt. 25 (“Amended Compl.”) ¶¶ 39–60.
138
Dkt. 63 ¶ 2 n.1.
139
Dkt. 105 (“Pre-Trial T/C”) at 6:21–7:10, 11:6–21.
140
Id.
141
Dkt. 53; Dkt. 56.

30
VH5 failed to obtain an expert and presented no expert testimony at trial in support

of its new damages theory. 142

Third and finally, on the Friday before the week of trial, VH5 filed an

“Emergency Motion to Adjourn Trial.”143 In that motion, VH5’s counsel claimed

that Rabe had withheld “key documents” and was engaging in “trial by ambush.”144

But in fact the basis for VH5’s need to adjourn trial was not any concealment by

Rabe and his counsel but rather VH5’s and its counsel’s failure to prosecute their

case in a diligent manner.145

Taken together, the facts revealed at trial and the litigation tactics pursued by

VH5 and its counsel give me serious concerns that much of this litigation was a

calculated attempt to continue Felsher’s pressure campaign on Rabe.

142
Dkt. 92 at 9:12–14.
143
Dkt. 85.
144
Id. ¶¶ 2–4.
145
Dkt. 92 at 3:4–4:1 (“THE COURT: . . . If I wanted to make sure that I had a complete
production of documents, and I had a concern that a party wasn’t, for whatever reason,
going to produce, I would aggressively follow up and engage in meet-and-confer processes
and go through the production. I’d serve subpoenas on third parties. If I was trying to get
email from someone at a company and at an investment bank, I would seek the discovery
from both the company and the investment bank to ensure I got a complete production.
That is all standard. Here, there were no subpoenas. There was no effort, seemingly, to
seek discovery from any third parties. The questions plaintiff has raised for the first time
today are all questions that would be great questions for the plaintiff to have asked in a
meet-and-confer discussion and, frankly, would have been fairly standard questions to ask
in a meet-and-confer discussion. But these are not questions that a party gets to raise,
absent truly extraordinary circumstances, just days before trial, long after the close of the
discovery cutoff.”).

31
II. ANALYSIS

This is superficially a claim for breach of contract and breach of the implied

covenant by one member of an LLC against another. But as the facts and procedural

history show, this litigation is more accurately viewed as retaliation by Felsher

against Rabe for Felsher’s termination from Aimia. There also appears to be some

background machinations by Felsher and potentially others to pressure Rabe in

connection with his ongoing lawsuit against Aimia in Canada. I highlight these

considerations at the outset because there is no other reason to understand why VH5

and Hill would engage in years of litigation over an essentially valueless entity like

OPL.

With that said, Rabe did breach the Operating Agreement when he dissolved

OPL. Rabe’s breach of the Operating Agreement was consistent with a long history

by both Rabe and Hill not observing any of the corporate formalities that this Court

expects of individuals operating a Delaware entity. But while Rabe is liable for

breach of contract, VH5 has failed to make any showing that it suffered damages

and so is entitled to only nominal damages.

Rabe has also sought fee shifting for alleged bad faith litigation tactics by

VH5. I have spent much of this memorandum opinion highlighting certain aspects

of VH5’s and Hill’s behavior in this litigation that have given me pause.

Furthermore, I have concerns that VH5 and Hill have used this Court and its limited

32
judicial resources as a tool for the untoward desire of harming Rabe’s personal and

professional life rather than seeking any sort of redress for harm. To be frank, I find

that it is a close call as to whether fee-shifting is appropriate here considering this

behavior. Nonetheless, VH5 has succeeded on its breach of contract claim, though

it is entitled to only nominal damages. I am therefore unable to find that Rabe is

entitled to the extraordinary remedy of fee-shifting.

A. VH5 Has Proven That Rabe Breached The Operating Agreement

In Count II of the Amended Complaint, VH5 claims that Rabe breached the

Operating Agreement by transferring OPL’s assets and dissolving OPL. As

explained below, even though VH5 appears to have been a nominal member of OPL

standing in for Felsher, it was nonetheless a member entitled to enforce the

Operating Agreement. VH5 has proven by a preponderance of the evidence that

Rabe breached the Operating Agreement when he dissolved OPL. VH5 has failed

to meet its burden to prove that Rabe transferred any assets of OPL.

To evaluate VH5’s breach of contract, the court must interpret the Operating

Agreement. “When engaging in that inquiry, the court ‘applies the same principles

that are used when construing and interpreting other contracts.’”146 “When

146
XRI Inv. Hldgs. LLC v. Holifield, 283 A.3d 581, 611 (Del. Ch. 2022) (quoting Godden
v. Franco, 2018 WL 3998431, at *8 (Del. Ch. Aug. 21, 2018)).

33
interpreting a contract, the role of a court is to effectuate the parties’ intent.” 147 The

party seeking enforcement of a contract “bears the burden to prove his breach of

contract claim by a preponderance of the evidence.”148 “Under Delaware law, the

elements of a breach of contract claim are: (1) a contractual obligation; (2) a breach

of that obligation by the defendant; and (3) a resulting damage to the plaintiff.” 149

VH5 Has Standing To Sue For Breach Of Contract

Rabe does not dispute that the Operating Agreement was an enforceable

contract. Rather, Rabe argues that VH5 was not a party to the Operating Agreement

because Felsher, not VH5, made the initial capital contribution. 150 Rabe contends

that, on this basis alone, VH5 was not a member and has no standing to sue for

breach of contract. 151

As already noted, it appears that VH5 served merely as a stand-in for Felsher

and that the parties intended that Felsher would take over VH5’s membership

interest once he was no longer conflicted through his position at Deutsche Bank.

Furthermore, I find it concerning that Hill, an attorney, seemingly orchestrated

147
Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006).
148
Zimmerman v. Crothall, 62 A.3d 676, 691 (Del. Ch. 2013).
149
H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. 2003).
150
Dkt. 97 (“Def.’s OB”) at 36; Dkt. 100 (“Def.’s AB”) at 31–34.
151
Def.’s OB at 36; Def.’s AB at 31–34.

34
VH5’s role in OPL using an LLC agreement drafted by Hill, and Rabe, a non-

attorney, was not represented by legal counsel or advised by Hill to obtain counsel.

Nonetheless, Rabe’s argument is belied by the fact that VH5 was listed as a

member in the Operating Agreement and that VH5 was a signatory to the Operating

Agreement. Furthermore, it is hard to square Rabe’s current argument with OPL’s

2018 tax return, prepared at Rabe’s direction, which listed VH5 as a member and

identified VH5 and Hill as OPL’s tax matters partners. Thus, though the parties

apparently intended that Felsher would eventually replace VH5, it is nonetheless the

case that VH5 was a member of OPL and has standing to sue for breach of the

Operating Agreement.

VH5 Has Not Proven That Rabe Transferred Any Of OPL’s Assets
In Breach Of The Operating Agreement

VH5 contends that Rabe breached the Operating Agreement by transferring

the following “assets” to OPL Singapore: (a) OPL’s business relationships and

consulting contracts; (b) the Market Report prepared by Rabe; and (c) OPL’s website

login information.152 VH5 argues that Rabe did not receive either Board approval

or VH5’s consent to transfer any of these assets and, as such, Rabe breached the

152
Pl.’s OB at 36–39.

35
Operating Agreement. 153 As explained below, VH5 has failed to meet its burden

that Rabe transferred any of OPL’s assets in breach of the Operating Agreement.

a. VH5 Fails To Prove That Rabe Transferred OPL’s Business
Relationships And Consulting Agreements To OPL
Singapore

After Rabe started his role at Aimia and ceased his involvement with OPL, de

Boer, through OPL Singapore, continued to do work for Hawaiian Airlines and

Enjoy. VH5 argues that Rabe essentially transferred these business relationships to

de Boer and OPL Singapore without any consideration.154 VH5 further argues that

Rabe transferred the contracts between OPL and its consultants to OPL Singapore

without consideration. 155 Finally, VH5 contends that there was an existing

“pipeline” of potential OPL clients that Rabe transferred to OPL Singapore, again

without consideration. 156

VH5 has failed to prove by a preponderance of the evidence that any of these

“assets” were transferred to de Boer. Concerning OPL’s relationships with

Hawaiian Airlines and Enjoy, VH5’s sole basis for arguing that “OPL continued to

do work for” these companies is that the OPL bank account continued to receive

153
Id. at 39–42.
154
Pl.’s OB at 37.
155
Id. at 37–38.
156
Id. at 37.

36
payments from these companies between June and October 2018.157 During that

period, OPL received payments from Hawaiian Airlines and Enjoy and then paid

consultants, including de Boer, for the work they performed for these contracts. 158

But a review of OPL’s bank account statements and related invoices shows

that the funds received and paid out by OPL during that period concerned work that

OPL had performed during Spring 2018 when Rabe was still running OPL.

Furthermore, OPL’s business model was not particularly profitable, so it earned a

minimal amount of gross profit from these contracts.159 VH5 has not claimed that

the payments made to these independent consultants were improper. Furthermore,

VH5 has not claimed that the cash that remained in OPL’s bank account was

transferred to OPL Singapore. Thus, VH5 has failed to put forward any evidence

that OPL’s relationships with Hawaiian and Enjoy, or the money earned from these

relationships, was ever transferred to OPL Singapore.

VH5’s claims regarding the consulting contracts and “pipeline” are even

thinner reeds that break upon minimal scrutiny. Concerning the consulting

contracts, VH5’s entire argument is premised on the exclusivity provisions

157
Id.
158
JX 54.
159
OPL’s bank account statements reflect that OPL received payments from Enjoy and
Hawaiian totaling $147,448 and paid its independent consultants a total of $139,754,
resulting in a gross profit to OPL of $7,694. This amount does not include any other
expenses that OPL may have incurred.

37
contained in those contracts. 160 But VH5 has put forth no evidence that these

consulting contracts were transferred or assigned to OPL Singapore, and Rabe

explicitly denied sending the consulting contracts to de Boer. 161 Thus, VH5 has

failed to prove by a preponderance of the evidence that these consulting contracts

were ever transferred to OPL Singapore.162

Finally, concerning OPL’s “pipeline” of work with Singapore Airlines,

Aegean Airlines, and Kenya Airways, VH5 focuses on a handful of emails on which

Rabe was either copied or minimally involved and Rabe’s email to Aimia in May

2018 where he noted this purported “pipeline” of clients.163 But VH5 has failed to

put forward any proof that OPL had any contracts with these entities. Furthermore,

VH5 has not offered any evidence that OPL ever received any revenue from these

companies. In addition, to the extent Rabe referenced these potential clients to

Aimia, his statements are better viewed as optimistic self-promotion intended to

assist Rabe in negotiating his compensation package. 164 VH5 has failed to prove

160
Pl.’s OB at 37.
161
TT338:13–20 (Rabe).
162
I also find it relevant that the consulting contracts could be terminated by either party
for any reason on thirty-days’ notice, which significantly diminishes any bite the
exclusivity provision contained in those contacts may have had.
163
Dkt. 101 (“Pl.’s AB”) at 11–12.
164
And even then, these statements are most generously interpreted as optimistic
projections for a company that had been in existence for only a few months, obtained only
one client, and failed to turn any profit. As a valuation metric, these statements do not
support anything meaningful.

38
that there were any existing OPL relationships with these companies that could have

been transferred by Rabe in the first place.

b. VH5 Fails To Prove That Rabe Transferred The Market
Report To OPL Singapore

VH5’s arguments concerning the Market Report are, frankly, challenging to

comprehend. It appears that the crux of its argument is that OPL Singapore issued

an updated version of the Market Report in 2020 that bore similarities to the Market

Report prepared in 2017.165 However, as established at trial, de Boer played a role

in drafting the Market Report in 2017 and was himself an experienced consultant in

the airline loyalty industry. 166 Thus, de Boer would appear to have been sufficiently

capable to create a new version of the Market Report in 2020. In addition, VH5 has

not put forth any evidence that the original Market Report was ever transferred to de

Boer (or what that would even mean, since the Market Report was publicly

available). Therefore, VH5’s argument that Rabe transferred the Market Report to

OPL Singapore fails.

165
Pl.’s AB at 13–14.
166
See, e.g., TT270:4–14 (Rabe) (“Q: You took the lead in drafting the report; right? A: I
was the lead drafter, yeah. Q: You had others help you with the report? A: That’s correct.
Q: With the research? A: That’s correct, and drafting, yeah. Q: And drafting. And that
would be Evert de Boer; right? A: Yes.”).

39
c. Rabe Was Free To Transfer The Website Since It Was His
Property

Finally, VH5 argues that Rabe transferred the website to OPL Singapore for

no consideration. 167 VH5’s argument on this point takes up all of two sentences in

its post-trial briefing.168 At trial, it was clearly established that Rabe created the OPL

website before OPL was ever officially formed.169 VH5 has put forward no evidence

that Rabe ever transferred the website to OPL after its formation. VH5 has not

argued that the Operating Agreement otherwise restricted Rabe from transferring

this website, which was his own personal property. Thus, VH5 has failed to meet

its burden to prove that Rabe was not authorized to transfer the website to OPL

Singapore.

Rabe Breached The Operating Agreement By Cancelling OPL

VH5 argues that Rabe’s cancellation of OPL breached three separate

provisions of the Operating Agreement.170 First, VH5 argues that Rabe breached

Section 9.2 of the Operating Agreement by “dissolv[ing], wind[ing] up and

liquidat[ing] the Company” without Board approval.171 Second, VH5 argues that

Rabe breached Section 9.3 of the Operating Agreement by failing to provide a

167
Pl.’s OB at 38.
168
Id.
169
TT189:8–190:8 (Rabe); Ex. 1 to JX 83.
170
Pl.’s OB at 45–47.
171
Id. at 45.

40
“Notice of Dissolution” to VH5 or otherwise informing VH5 of OPL’s

dissolution. 172 Third, VH5 contends that Rabe breached Section 9.4 of the Operating

Agreement by failing to (a) obtain a statement from a CPA setting forth OPL’s assets

and liabilities on the date of dissolution and (b) determine the fair market value of

OPL’s assets.173

In response, Rabe argues that, as the only Class A Member of OPL, he had

authority to unilaterally remove Hill as a Director.174 Rabe contends that, “after

consultation with legal counsel, he acted as sole Class A Member and a one-member

Board in taking the actions he took with regard to winding up and dissolving

OPL.” 175 Rabe further argues that Hill was not a valid Board member and, as such,

Rabe had a right to take these actions as the functional Board. 176 Concerning VH5’s

contention that Rabe failed to provide a “Notice of Dissolution,” Rabe argues that

his email in May 2018 that he was shutting down OPL provided such notice (even

though OPL was not formally shut down until almost a year later). 177 Finally, Rabe

172
Id. at 46.
173
Id.
174
Def.’s OB at 37.
175
Id. at 37–38.
176
Id. at 38.
177
Id.

41
argues that OPL’s 2018 year-end financial statements provided to Hill satisfied

Section 9.4 since OPL was inactive for the entirety of 2019 until its dissolution.178

Determining whether Rabe in fact breached the Operating Agreement is

challenging because at no point did either Rabe or Hill observe any of the typical

formalities in operating OPL that this Court expects. For example, a third member

of the Board was never appointed, even though Section 4.2 of the Operating

Agreement requires that the Board be composed of three Directors, including “one

Director mutually agreed upon by the Class A and Class B Members.”179

Furthermore, the OPL Board never held a single meeting. Hill arguably faces greater

blame for the failure to observe corporate formalities, given that he is a lawyer, he

drafted the Operating Agreement, and he claimed that he was the part-time general

counsel of OPL. 180

Nonetheless, Delaware is a pro-contractarian state, and “Delaware upholds

the freedom of contract and enforces as a matter of fundamental public policy the

voluntary agreements of sophisticated parties.”181 Rabe has not argued that there is

some other consideration that should override this fundamental public policy here.

178
Id.
179
Operating Agreement § 4.2.
180
I note that, at trial, Hill tried to portray himself as a relatively sophisticated attorney
experienced with advising start-up entities and, at the same time, an unsuspecting rube who
was taken advantage of by Rabe. Not surprisingly, Hill’s testimony lacked credibility.
181
NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1, 35 (Del. Ch. 2009).

42
Rather, Rabe contends that he complied with the Operating Agreement by taking

actions as a one-member Board and that he was authorized to do so. A review of the

relevant provisions of the Operating Agreement shows that he was not so authorized.

Rabe’s conclusory statement that Hill was not a “valid” member of the Board

is not supported by the Operating Agreement, which expressly lists Hill as a

Director.182 As outlined below, Rabe had the authority to remove Hill as a Director.

With that said, Rabe produced no evidence that he removed Hill from the Board or

followed the prescribed procedures for dissolving OPL. Given this, Rabe breached

the Operating Agreement when he dissolved OPL.

a. The Operating Agreement Is Ambiguous As To When A
Director May Be Removed

The Operating Agreement is ambiguous as to whether Rabe, as the sole Class

A Member, had authority to unilaterally remove Hill as a Director and reduce the

size of the Board. “[A] contract is ambiguous only when the provisions in

controversy are reasonably or fairly susceptible of different interpretations or may

have two different meanings.”183 “By contrast a contract is unambiguous when ‘the

182
Operating Agreement § 4.2.
Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196 (Del.
183

1992).

43
plain, common, and ordinary meaning of the words lends itself to only one

reasonable interpretation.’”184

Looking to the Operating Agreement, Section 4.8 states that a Director may

be removed from the Board without cause by resolution of all the members (i.e., both

Class A and Class B Members).185 However, Sections 6.2 and 6.3 state that the Class

A Members, acting alone, may remove any Director and reduce the size of the

Board. 186 These provisions are in conflict and have two different meanings. Thus,

the Operating Agreement is ambiguous on the questions of whether Rabe, as the sole

Class A Member, had the authority to remove Hill as a Director and reduce the size

of the Board.

184
Florida Chem. Co., LLC v. Flotek Indus., Inc., 262 A.3d 1066, 1080 (Del. Ch. 2021).
185
See Operating Agreement § 4.8 (“Any Director may be removed from the Board with
or without cause by the resolution of the Members acting at a meeting through written
consent in accordance with the terms of this Agreement.”).
186
See id. § 6.2 (“The Class A Members shall have the approval and consent rights as
described in this Agreement and as provided for members under the Act and the Class A
Members shall have the right to elect and remove any Director at a meeting called for such
purpose.”); id. § 6.3 (“The following actions and decisions require, or may be taken or
made by, Approval of the Class A Members: (1) Election and removal of directors of, or
increasing or decreasing the size of, the Board, pursuant to Section 4.2; . . . (4) Expulsion
or removal of a Director, pursuant to Section 4.8[.]”).

44
b. Application Of The Rule Of Contra Proferentem Is
Appropriate In Interpreting The Operating Agreement’s
Ambiguous Provisions

“Where a contract is ambiguous, ‘the interpreting court must look beyond the

language of the contract to ascertain the parties’ intentions.’”187 “[T]he rule of

contra proferentem is one of last resort, such that a court will not apply it if a problem

in construction can be resolved by applying more favored rules of construction.”188

“Nevertheless, resort to the rule is appropriate ‘in cases of standardized contracts

and in cases where the drafting party has the stronger bargaining position[.]”189

Under the rule of contra proferentem, this Court will “constru[e] the ambiguous

contract terms against the drafter[.]”190

VH5 argues that I should apply the rule of contractual interpretation that the

“specific” language of Section 4.8 should control over the “general” language of

Sections 6.2 and 6.3.191 However, this is not a case where the “specific/general” rule

187
Salamone v. Gorman, 106 A.3d 354, 369 (Del. 2014) (quoting GMG Capital Inv., LLC
v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 780 (Del. 2012)).
188
E.I. du Pont de Nemours and Co., Inc. v. Shell Oil Co., 498 A.2d 1108, 1114 (Del.
1985).
189
Zimmerman v. Crothall, 62 A.3d 676, 698 (Del. 2013).
190
Id.; see also RESTATEMENT (SECOND) OF CONTRACTS § 206 (“In choosing among the
reasonable meanings of a promise or agreement or a term thereof, that meaning is generally
preferred which operates against the party who supplies the words or from whom a writing
otherwise proceeds.”).
191
Pl.’s AB at 17; see also DCV Hldgs., Inc. v. ConAgra, Inc., 889 A.2d 954, 961 (Del.
2005) (“Specific language in a contract controls over general language, and where specific
45
of contractual interpretation is applicable—it cannot be said that the language in

Section 4.8 is more specific than that in Sections 6.2 and 6.3. Rather, they deal with

the exact same issue and are in direct conflict.

Given the unique circumstances of this case, I conclude that application of the

rule of contra proferentem is appropriate.192 Here, Hill, a lawyer, was an interested

party in the transaction through his ownership of VH5 and also drafted the Operating

Agreement. In contrast, Rabe, a non-lawyer, was not represented by counsel and,

based on testimony at trial and the evidence submitted, did not attempt to negotiate

any of the Operating Agreement’s provisions. Further adding to the unique nature

of this dispute, VH5 was apparently acting merely as a stand-in investor for Felsher,

a long-time client and close friend of Hill. Given these considerations, it is likely

that Hill “provide[d] more carefully for the protection of his [and Felsher’s] own

interests than for those of the other party” and that he was “more likely than the other

party to have reason to know of uncertainties of meaning.” 193

and general provisions conflict, the specific provision ordinarily qualifies the meaning of
the general one.”).
192
Even if I were to adopt VH5's interpretation of the Operating Agreement and conclude
that Rabe did not have the power to unilaterally remove Hill as a director and reduce the
size of the Board, this interpretation would not be dispositive as I ultimately conclude that
Rabe did not follow the requisite steps to take these actions. Thus, under either
interpretation of the Operating Agreement, VH5 would succeed on its breach of contract
claim.
193
RESTATEMENT (SECOND) CONTRACTS § 206.

46
Applying the rule of contra proferentem, I conclude that Rabe, as the sole

Class A Member, had the power to remove Hill as a Director and to reduce the size

of the Board.

c. Assuming Rabe Had The Power To Remove Hill, Rabe Put
Forward No Evidence That He Actually Did So And Thus
Breached The Operating Agreement When He Dissolved
OPL

Rabe contends that “after consultation with legal counsel, he acted as sole

Class A Member and a one-member Board in taking the actions he took with regard

to winding up and dissolving OPL.”194 The problem with Rabe’s argument is that

there is no documentary evidence that he took these actions—all that has been put

forth in support of this argument is Rabe’s testimony.195 Indeed, Rabe

acknowledged at trial that there was no written Board resolution or written consent

reflecting these actions.196

As noted, Rabe and Hill never observed any sort of formalities in operating

OPL. But these past failures to adhere to corporate formalities did not give Rabe

license to ignore corporate formalities in the future. This is particularly the case in

taking extraordinary actions like removing a director and dissolving the entity.

Having held trial on this topic, it appears that it is far more likely that Rabe did not

194
Def.’s OB at 37–38.
195
TT250:22–251:5, 352:6–19 (Rabe).
196
TT352:6–354:5 (Rabe).

47
formally “resolve” to take any of these actions. Rather, it seems that Rabe viewed

OPL as an entity that had no value, opted to dissolve it since it was more trouble

than it was worth, and did not observe any formalities in doing so.

As I will explain in more detail below, Rabe is correct that OPL had no value.

With that said, the pro-contractarian public policy of Delaware demands that Rabe

comply with the Operating Agreement in taking the actions he took in dissolving

OPL. His failure to do so constitutes a breach of the Operating Agreement.

d. Rabe Further Breached The Operating Agreement By
Failing To Provide Notice Or An Accounting To VH5 Upon
OPL’s Dissolution

Section 9.3 of the Operating Agreement requires that the person winding up

OPL provide notice to all members. 197 Section 9.4 requires, among other things, that

each member of OPL be provided with a statement prepared by a CPA setting forth

the assets and liabilities of OPL as of the date of dissolution. 198 VH5 argues that

Rabe failed to either provide notice or a statement of assets and liabilities. 199

197
Operating Agreement § 9.3.
198
Id. § 9.4. Section 9.4 also requires that, “[t]o the extent that the Members determine
that any or all of the assets of the Company shall be sold in liquidation, the Liquidating
Trustee, as promptly as possible, shall determine the Fair Market Value of the assets and
such assets shall be sold[.]” VH5 alleges that Rabe failed to comply with this requirement.
Pl.’s OB at 46. However, OPL had no value and no assets at liquidation, so there were no
assets to be sold.
199
Pl.’s OB at 46–47.

48
Concerning notice, Rabe argues that the email he sent in May 2018 provided

such notice. 200 However, the email relied upon by Rabe does not constitute effective

notice for two reasons. First, this email was sent almost one year prior to Rabe

dissolving OPL. Second, and more significantly, the email is equivocal as to

whether Rabe planned to shut down OPL. Rabe wrote to Hill that “[i]n speaking

with Evert we were thinking it might be easier to just close down [OPL] and have

him start a new company with the same name in another jurisdiction.” 201 Rabe then

asked Hill to “pause the elaboration of the transfer agreement” originally requested

by Rabe.202 A statement that it “might be easier,” combined with Rabe’s request

that Hill “pause” working on an agreement to transfer Rabe’s interest in OPL, is not

an unequivocal notice to VH5 that Rabe was dissolving OPL. Thus, this email does

not satisfy the notice requirement under Section 9.3.

Concerning Section 9.4’s requirement, Rabe argues that the 2018 year-end

financial statements that Rabe provided Hill on March 4, 2019, satisfied this

requirement.203 Section 9.4 clearly requires that the CPA-prepared financial

statements be as of the date of dissolution.204 Rabe argues that complying with this

200
Def.’s OB at 38.
201
JX 51.
202
Id.
203
Def.’s OB at 38; see also JX 62; JX 67.
204
Operating Agreement § 9.4.

49
formality was not necessary since OPL was not active in 2019 and there were no

changes to assets and liabilities between the 2018 year-end financial statements and

the date of dissolution. 205 While it may be the case that there were no changes in the

financial statements, adopting Rabe’s argument here would directly contravene the

clear requirement set forth in Section 9.4. Therefore, Rabe’s failure to provide VH5

with CPA-prepared financial statements as of the date of dissolution breached the

Operating Agreement.

Rabe’s Affirmative Defenses Of Waiver And Estoppel Fail

Rabe asserts two affirmative defenses to VH5’s breach of contract claim:

waiver and estoppel by acquiescence. 206 The party asserting an affirmative defense

of waiver or estoppel by acquiescence bears the burden of proving the defense by a

preponderance of the evidence.207

Concerning waiver, “[i]t is well settled in Delaware that contractual

requirements or conditions may be waived.” 208 Delaware’s standard for proving

waiver is ‘quite exacting.’”209 “Waiver is the voluntary and intentional

205
Def.’s OB at 38.
206
VH5 has not argued that Rabe’s affirmative defenses cannot be asserted against VH5’s
claims. I ultimately conclude that Rabe has failed to prove his affirmative defenses. Thus,
I need not reach the question of whether these affirmative defenses are available as a matter
of law.
207
In re Coinmint, LLC, 261 A.3d 867, 894–95 (Del. Ch. 2021).
208
AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 444 (Del. 2005).
209
Coinmint, 261 A.3d at 893.

50
relinquishment of a known right.”210 “It implies knowledge of all material facts and

an intent to waive, together with a willingness to refrain from enforcing those

contractual rights.”211

“Unlike waiver, ‘estoppel depends on what a party caused another to do, and

involves an element of reliance.’” 212 “Estoppel is the effect of the voluntary conduct

of a party whereby he is absolutely precluded from asserting rights which might

perhaps have otherwise existed, as against another person, who has in good faith

relied upon such conduct, and has been led thereby to change his position for the

worse.”213

“The doctrine of acquiescence effectively works an estoppel: where a plaintiff

has remained silent with knowledge of her rights, and the defendant has knowledge

of the plaintiff’s silence and relies on that silence to the defendant’s detriment, the

plaintiff will be estopped from seeking protection of those rights.” 214 VH5 will be

deemed to have acquiesced where it:

210
AeroGlobal, 871 A.2d at 444.
211
Id.
212
Coinmint, 261 A.3d at 894 (quoting Roam-Tel P’rs v. AT&T Mobility Wireless
Operations Hldgs., Inc., 2010 WL 5276991, at *9 (Del. Ch. Dec. 17, 2010)).
213
Kahn v. Household Acq. Corp., 591 A.2d 166, 176 (Del. 1991) (alterations and internal
quotation marks omitted) (quoting 3 J. Pomeroy, Equity Jurisprudence § 804, at 189
(1941)).
214
Lehman Bros. Hldgs. Inc. v. Spanish Broad. Sys., Inc., 2014 WL 718430, at *9 (Del.
Ch. Feb. 25, 2014).

51
has full knowledge of [its] rights and the material facts and (1) remains
inactive for a considerable time; or (2) freely does what amounts to
recognition of the complained of act; or (3) acts in a manner inconsistent with
the subsequent repudiation, which leads the other party to believe the act has
been approved.215

“The party invoking the defense of acquiescence must prove that the party asserting

the claim ‘by words or deed, has acknowledged the legitimacy of the defendants’

conduct.’”216 “The defense of acquiescence turns on the objective manifestations of

the plaintiff’s conduct.”217 “For the defense of acquiescence to apply, conscious

intent to approve the act is not required, nor is a change of position or resulting

prejudice.”218

Rabe argues that his email exchanges and phone conversations with Hill in

May 2018 support his defense of either waiver or estoppel by acquiescence. 219 Rabe

argues that during the May 8 phone call “Hill assented to the transfer of OPL for no

consideration” and that Rabe made clear on May 24, 2018, Rabe’s “chosen path to

shut down OPL.”220 Rabe notes that Hill, as an attorney and the professed part-time

general counsel of OPL, was well aware of his rights under the Operating Agreement

215
Klaassen v. Allegro Dev. Corp., 106 A.3d 1035, 1047 (Del. 2014).
216
XRI Inv. Hldgs. LLC v. Holifield, 283 A.3d 581, 623 (Del. Ch. 2022) (quoting Clements
v. Rogers, 790 A.2d 1222, 1238 n.46 (Del. Ch. 2001)).
217
Id.
218
Klaassen, 106 A.3d at 1047 (footnote omitted).
219
Def.’s OB at 47–49.
220
Id. at 48.

52
but did not provide any warning that he objected to Rabe’s plans. 221 Rabe also points

to his January 2019 exchange with Hill where he stated that “the company has not

been active” since May 2018 and that they “should discuss what the future plan

should be for [OPL].” 222

These communications between Rabe and Hill do not support Rabe’s

affirmative defenses. As noted, the standard for proving waiver is exacting. All that

Rabe has put forth in support of his waiver defense is that Hill agreed to draft a sale

agreement and that OPL had little to no operations during the bulk of 2018 through

2019. None of the statements by Hill support the conclusion that he “voluntarily and

intentionally relinquished” his rights under the Operating Agreement related to the

dissolution of OPL.

Concerning estoppel by acquiescence, the statements relied upon by Rabe are

insufficient to support the conclusion that Hill, either by word or deed,

acknowledged the legitimacy of Rabe’s conduct. Despite Rabe’s insistence, Hill’s

agreement to prepare a sale agreement that would transfer Rabe’s interest in OPL

for little or no consideration does not represent an acknowledgment by Hill that Rabe

could dissolve OPL. Rabe further argues that Hill’s silence between May 2018 and

January 2019, after Rabe had told Hill that his plan for OPL had changed to a

221
Id.
222
Id. (citing JX 61).

53
dissolution, supports Rabe’s defense of acquiescence. But this argument fails to

account for the fact that Rabe did not actually dissolve OPL until April 2019.

Between January 2019 and April 2019, Hill sent Rabe several emails, none of which

could be interpreted as acquiescing to dissolution of OPL.

Therefore, in light of these considerations, Rabe has failed to meet his burden

to prove either of his affirmative defenses by a preponderance of the evidence.

VH5 Fails To Prove Damages

“A plaintiff bears the burden of proving damages by a preponderance of the

evidence.”223 “The law does not require certainty in the award of damages where a

wrong has been proven and injury established.” 224 “Nevertheless, when acting as

the fact finder, this Court may not set damages based on mere ‘speculation or

conjecture’ where a plaintiff fails adequately to prove damages.’” 225

“Even if compensatory damages cannot be or have not been demonstrated, the

breach of a contractual obligation often warrants an award of nominal damages.”226

“Nominal damages are ‘not given as an equivalent for the wrong, but rather merely

Maverick Therapeutics, Inc. v. Harpoon Therapeutics, Inc., 2021 WL 1592473, at *10
223

(Del. Ch. Apr. 23, 2021).
224
Del. Exp. Shuttle, Inc. v. Older, 2002 WL 31458243, at *15 (Del. Ch. Oct. 23, 2002).
225
eCommerce Indus., Inc. v. MWA Intelligence, Inc., 2013 WL 5621678, at *42 (Del. Ch.
Sept. 30, 2013) (quoting Medek v. Medek, 2009 WL 2005365, at *12 n.78 (Del. Ch. July
1, 2009)).
226
Ivize of Milwaukee, LLC v. Compex Litig. Support, LLC, 2009 WL 11111179, at *12
(Del. Ch. Apr. 27, 2009).

54
in recognition of a technical injury by way of declaring the rights of the plaintiff.

Nominal damages are usually assessed in a trivial amount, selected simply for the

purpose of declaring an infraction of the plaintiff’s rights and the commission of a

wrong.’”227

VH5’s original damages theory was based on Rabe’s alleged transfer of

OPL’s assets to OPL Singapore and de Boer. 228 But to the extent OPL had any assets

at the time that de Boer created OPL Singapore, none of OPL’s assets were

transferred to OPL Singapore.229 Apparently VH5 recognized that this was a flawed

theory of damages, since it acknowledged during the pre-trial conference that it was

unable to come up with evidence supporting its original theory.230

During the pre-trial teleconference, VH5’s counsel attributed this to its

inability to obtain documents from de Boer. 231 But after pressing VH5’s counsel

during this teleconference, it became clear that VH5’s counsel never subpoenaed de

Boer and did not even try to obtain these documents until shortly before trial was to

227
Id. (quoting Penn Mart Supermarkets, Inc. v. New Castle Shopping LLC, 2005 WL
3502054, at *15 (Del. Ch. Dec. 15, 2005)).
228
Dkt. 64 at 13–15.
229
See supra Section II.A.2.
230
Pre-Trial T/C at 6:21–7:10.
231
Id. at 11:6–12 (“[PLAINTIFF’S COUNSEL]: That’s correct Your Honor. I mean, the
person who is not – who is not present in this proceeding is [ ] de Boer, who is the
gentleman in Singapore who is an OPL consultant and to whom Rabe transferred the
business. It was our understanding that he would be providing us with information, and all
of a sudden he did not.”).

55
begin, well after the cutoff date for fact discovery. 232 VH5’s counsel was unable to

provide any satisfactory reason for its intransigence in seeking these documents. 233

So, less than a month before trial, VH5 switched its entire damages theory and

now argues that at least some portion of Rabe’s Can$1 million signing bonus was

intended to compensate Rabe for his interest in OPL. 234 VH5 has cited no law in

support of the proposition that I may use Rabe’s signing bonus to join as CEO of

Aimia as a proxy for calculating the value of OPL. VH5 put forward no expert to

232
Id. at 13:3–7 (“THE COURT: When did you first request these documents [concerning
OPL Singapore]? [PLAINTIFF’S COUNSEL]: I believe I did that in my letter that’s
attached to the motion. I believe it’s August 1st.”); id. at 19:13–23 (“[DEFENDANT’S
COUNSEL]: . . . I should point out that this case was originally supposed to go to trial in
September of 2021, so really, the case began back in April of 2020, and at that time, up
until the fact discovery deadline, the plaintiff, as you were exploring with [Plaintiff’s
counsel], did not seek a subpoena to get documents from Aimia or from Mr. Mittleman or
take their depositions. It should be noted that they also did not seek to subpoena Mr. de
Boer or obtain documents from Mr. de Boer.”).
233
Id. at 13:8–24 (“THE COURT: Why the delay [in seeking documents from de Boer]?
[PLAINTIFF’S COUNSEL]: Well, I mean – well, I mean, Your Honor, I think the – you
know, with respect to the expert issues, you know – I mean, these documents – these
documents or these documents, or these deposition transcripts, they effectively go to
damages, okay. So it’s a – it’s a damages theory based on the view that Rabe divested his
interest in OPL in exchange for the signing bonus. It’s you know – I would say in terms
of – I mean, could they have been requested sooner? I suppose that’s correct. But like I
said, our damages theory was different than it is now. And it’s been the – you know, it’s
been the inability to obtain that information from Singapore that pushed us in this direction
and necessitated this request.”).
234
Pl.’s OB at 49–51.

56
support either this proposition or to put forward a valuation of OPL. VH5 does not

even suggest what portion of Rabe’s signing bonus should be attributed to OPL.235

At bottom, VH5 failed to prove by a preponderance of the evidence that OPL

had any value. And, to be clear, this was not a close call. OPL was an operating

company for less than six months. Furthermore, it was a consulting company where

all value was attributable to Rabe and the other consultants brought in by Rabe. The

minimal evidence presented at trial left me convinced that, the second Rabe stepped

away from OPL to join Aimia, whatever small value OPL might otherwise have had

was eliminated.

VH5’s reliance on Rabe’s email with Phil Mittleman where Rabe touts the

purported success of OPL is misguided. This email exchange was in the context of

Rabe negotiating to obtain the highest compensation possible. And as noted, Rabe’s

comments about the purported success of OPL is better viewed as optimistic self-

promotion. Furthermore, to the extent VH5 thinks Phil Mittleman’s comment that

Aimia could do an “acquihire” and obtain both Rabe and OPL, it is undisputed that

Aimia never acquired OPL. VH5 is unable to account for this fact in its theory of

damages.236 In addition, Rabe’s Can$1 million signing bonus is attributable to two

235
VH5 also failed to take even the simple step of converting the signing bonus to U.S.
dollars, so that is not in the record.
I pause to highlight my concern that Phil Mittleman’s deposition testimony concerning
236

OPL was influenced by Rabe’s litigation against Aimia in Canada, given Mittleman
Brothers’ significant financial interest in Aimia. VH5 failed to arrange to have Phil
57
far more concrete items: (1) the millions of dollars of LifeMiles options that, it is

undisputed, everyone assumed Rabe would need to forfeit if he joined Aimia and (2)

Aimia’s desire to induce Rabe to join as CEO.237

In short, VH5 has failed to meet its burden to prove damages. With that said,

VH5 has shown that Rabe breached the Operating Agreement when he dissolved

OPL without Hill’s or VH5’s consent. VH5 is therefore entitled to nominal damages

of one dollar. This result is all the more appropriate considering OPL had little to

no value anyway.

VH5 Is Not Entitled To A “Do-Over” In Proving Damages

VH5 argues that in the event I conclude that it has failed to meet its burden in

proving damages, then it should be granted leave to obtain financial information

from de Boer on the present value of OPL’s business.238 I have devoted significant

Mittleman testify in person for this litigation, where he would have been subject to cross-
examination. And, compounding issues with VH5’s reliance on Phil Mittleman’s
deposition testimony, he was not involved in the final negotiation of Rabe’s compensation
package. Even setting aside any evidentiary issues, which the parties have not raised, I still
do not rely on Phil Mittleman’s account of events for purposes of this decision.
237
See, e.g., SX 19 (“The initial equity grant [and] buyout of [OPL] needs to offset losing
these [LifeMiles] options and create some immediate liquidity.”). Furthermore, Section
4.7 of the Operating Agreement clearly provides that “[n]either the Company nor any
Member shall have any right, by virtue of this Agreement, to share or participate in such
other activities or the income or proceeds derived” from a Director’s other business
interests and activities. Operating Agreement § 4.7.
238
Pl.’s OB at 51–53. VH5 does not cite to any Delaware caselaw supporting the
proposition that I should reopen the factual record to allow it to prove damages after failing
to meet its burden at trial. Rather, VH5 cites to a 1980 case from the Court of Appeals for
58
passages of this memorandum opinion to highlighting VH5’s intransigence in

prosecuting this case, including its failure even to attempt to compel the production

of OPL Singapore’s financial records until the month of trial. VH5 is not entitled to

a “do-over” now, well after the close of trial. Thus, to the extent VH5’s argument

on this point should be interpreted as a motion to reopen the case so that it may

continue its efforts to divine the value of a valueless company, the motion is denied.

Also, given my stated concerns that VH5 brought and maintained this litigation as

leverage over Rabe, continued litigation would be inequitable.

B. VH5’s Implied Covenant Claim Is Duplicative Of Its Breach Of Contract
Claim And Thus Fails

The implied covenant is “a limited and extraordinary remedy” and “is not an

equitable remedy for rebalancing economic interests after events that could have

been anticipated, but were not, that later adversely affected one party to a

contract.”239 “The implied covenant is inherent in all contracts and is used to confer

contract terms ‘to handle developments or contractual gaps that the asserting party

pleads neither party anticipated.’”240 “The implied covenant cannot be invoked to

the State of Washington, which does not constitute binding precedential authority. Pl.’s
OB at 52 (quoting Cerjance v. Kehres, 613 P.2d 192 (Wash. Ct. App. 1980)).
239
Nemec v. Shrader, 991 A.2d 1120, 1128 (Del. 2010).
240
Dieckman v. Regency GP LP, 155 A.3d 358, 367 (Del. 2017) (quoting Nemec, 991 A.2d
at 1125 (Del. 2010)).

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override the express terms of the contract.” 241 “The party asserting the implied

covenant has the burden of proving ‘that the other party has acted arbitrarily or

unreasonably, thereby frustrating the fruits of the bargain that the asserting party

reasonably expected.’” 242

VH5’s claim that Rabe breached the implied covenant is challenging to

follow. VH5 appears to argue that Rabe’s facilitation of “de Boer’s take over [sic]

OPL’s business without objection is a breach of the implied covenant[.]” 243 Per

VH5, “Rabe was the Executive Officer of OPL with general supervision and control

over and responsibility for OPL’s day-to-day operations” and “[h]e breached the

implied covenant by facilitating de Boer’s assumption and takeover of the [sic]

OPL’s business.”244

In support of its position, the caselaw on which VH5 primarily relies is our

Supreme Court’s opinion in Dieckman v. Regency GP LP.245 In Dieckman, the

general partner of a publicly traded master limited partnership issued a proxy

statement to induce unitholders to approve a conflicted transaction.246 The general

241
Kuroda v. SPJS Hldgs., L.L.C., 871 A.2d 872, 888 (Del. 2009).
242
Baldwin v. New Wood Resources LLC, 283 A.3d 1099, 1118 (Del. 2022).
243
Pl.’s OB at 42.
244
Id. at 44.
245
Id. at 43–44.
246
Dieckman, 155 A.3d at 367–68.

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partner was not required to issue a proxy statement, but doing so allowed the general

partner to claim the protections of a safe harbor contained in the limited partnership

agreement that would have protected the merger from judicial review. 247 A

unitholder claimed that the proxy statement contained false and misleading

statements.248 Our Supreme Court held that once the general partner went beyond

the minimal disclosure requirements of the LP agreement and issued the detailed

proxy statement, the implied covenant required that it not mislead unitholders. 249

Per VH5, Dieckman is applicable here because “Rabe should not be able to

subvert the Operating Agreement’s protections against a sale or disposal of all of

[sic] substantially all of OPL’s assets by facilitating de Boer’s assumption and

takeover of OPL’s business.”250 I struggle to see any connection between Dieckman

and this dispute. VH5 has not claimed that Rabe somehow made false or misleading

statements to induce VH5’s consent to a supposedly improper transfer of OPL’s

assets. Indeed, Rabe expressly told Hill that he intended to transfer OPL to de Boer,

and Hill did not voice any objection.

At bottom, VH5’s implied covenant claim is duplicative of its breach of

contract claim—VH5 essentially rehashes its argument that Rabe breached the

247
Id.
248
Id. at 360.
249
Id. at 368.
250
Pl.’s OB at 44.

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Operating Agreement by allegedly transferring OPL’s assets to OPL Singapore. But

“[t]he implied covenant cannot be invoked to override the express terms of the

contract.”251 Thus, VH5 has failed to prove by a preponderance of the evidence that

Rabe breached the implied covenant.

C. Rabe Is Not Entitled To Fee Shifting

Rabe seeks fee shifting, arguing that “[t]his case was brought by [VH5] in bad

faith and is driven, not by any harm that VH5 claims that it suffered, but rather due

to a personal grudge held by Felsher.” 252 “Delaware operates by the American Rule,

under which ‘litigants are expected to bear their own costs of litigation.’” 253 One

exception to this general rule is the bad faith exception:

The bad faith exception to the American rule applies in cases where the court
finds litigation to have been brought in bad faith or finds that a party
conducted the litigation process itself in bad faith, thereby unjustifiably
increasing the costs of litigation. . . . The bad faith exception is not lightly
invoked. The party seeking a fee award bears the stringent evidentiary burden
of producing ‘clear evidence’ of bad-faith conduct. 254

I have highlighted throughout this memorandum opinion many of my

concerns with the behavior by VH5 and Hill in litigating this action.255 As discussed,

251
Kuroda v. SPJS Hldgs., L.L.C., 871 A.2d 872, 888 (Del. 2009).
252
Def.’s OB at 50.
253
Manti Hldgs., LLC v. Authentix Acq. Co., Inc., 2020 WL 4596838, at *4 (Del. Ch. Aug.
11, 2020) (quoting Beck v. Atl. Coast PLC, 868 A.2d 840, 850 (Del. Ch. 2005)).
254
Beck, 868 A.2d at 850–51.
255
See, e.g., supra Section I.I.

62
I found that much of Hill’s trial testimony was not credible. I also noted my serious

concerns with Hill’s behavior in his interactions with Rabe given that Hill is an

attorney. In addition, Rabe, in his post-trial briefing, set forth other troubling actions

by VH5 and Hill over the course of this litigation.256 Finally, I have grave

reservations about whether Felsher, a non-party in this litigation, may have used this

Court to put pressure on Rabe, either to exact personal revenge for Felsher’s

termination from Aimia, to create leverage in the parallel litigation in Canada, or

both.

With that said, I cannot conclude that Rabe has produced clear evidence of

bad faith such that the extraordinary remedy of fee shifting is warranted. Ultimately,

Rabe did breach the Operating Agreement. While VH5 is entitled to only nominal

damages, it has nonetheless prevailed on its breach of contract claim. Even

considering the concerning tactics taken by VH5 and Hill throughout this litigation,

I would be hard pressed to find that VH5 has engaged in a level of bad faith that

256
See Def.’s OB at 52–53 (discussing how Hill and VH5 initially denied ever receiving
the May 2018 email exchange in VH5’s sworn responses to Rabe’s RFAs but later changed
the denial to an “admitted”); id. at 53 (highlighting Hill’s highly suspect claim during trial
that he had become aware in 2019 “from reputable industry sources that OPL billed in
excess of one million dollars” but refusing to identify these “reputable sources” or produce
any documentation substantiating these claims); id. at 54 (noting that Hill refused to
produce any emails, texts, or other correspondence from, to, or copying Felsher on the basis
of attorney-client privilege, even though VH5 never produced a privilege log).

63
would warrant overriding the American Rule when it ultimately prevailed on its

claim. Therefore, Rabe’s request for fee shifting must be rejected.

III. CONCLUSION

For the foregoing reasons, Count III of VH5’s Complaint must be dismissed.

VH5 is entitled to judgment in its favor on Count II and is awarded nominal damages

in the amount of one dollar. The parties are directed to confer and submit a proposed

form of final judgment within five business days.

64