Koscho v. The Merit Distribution Group, LLC

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

CHRISTOPHER KOSCHO, )
)
Plaintiff, )
v. ) C.A. No. N24C-12-106 PAW CCLD
)
THE MERIT DISTRIBUTION )
GROUP, LLC and CZECH ASSET )
MANAGEMENT, L.P., )
)
Defendants. )

Submitted: June 20, 2025
Decided: September 29, 2025

MEMORANDUM OPINION

Upon Consideration of Defendant The Merit Distribution Group, LLC’s Motion to
Dismiss Count I and Defendant Czech Asset Management, L.P.’s Motion to
Dismiss Counts III and IV;

GRANTED.

Jonathan M. Stemerman, Esq.; Glen H. Waldman, Esq.; and Jeffrey R. Lam, Esq.,
of Armstrong Teasdale LLP, Attorneys for Plaintiff Christopher Koscho.

Lauren K. Neal, Esq.; and Sarah Carnahan, Esq., of Morris, Nichols, Arsht &
Tunnell LLP; Alexandra Peurach, Esq., of Alston & Bird LLP, Attorneys for
Defendant The Merit Distribution Group, LLC.

Rebecca L. Butcher, Esq.; and Howard W. Robertson IV, Esq., of Landis Rath &
Cobb LLP, Attorneys for Defendant Czech Asset Management, L.P.

WINSTON, J.
I. INTRODUCTION

Plaintiff initiated this litigation against the company for which he used to work

and the private credit manager that controls it. After the private credit manager took

control, the company terminated plaintiff’s employment. Plaintiff asserted that he

was entitled to benefits under two agreements with the company. The company

refused to pay those benefits, and plaintiff brought suit. Against the company, the

Complaint alleges two counts of breach of contract, one relating to an Employment

Agreement (Count I), the other to a Transaction Benefit Agreement (Count II).

Against the controller, the Complaint alleges two counts of tortious interference with

those contracts (Counts III and IV).

The company moves to dismiss Count I, and the controller moves to dismiss

Counts III and IV, each motion under Superior Court Civil Rule 12(b)(6). For the

reasons discussed below, the motions are GRANTED. Plaintiff fails to plead a

breach of the Employment Agreement because he failed to sign a release, which was

a condition precedent to the company’s obligation to pay the benefits he seeks.

Although plaintiff signed a modified version of the release, that version was not

“substantially in the form” of the release attached to the Employment Agreement, as

contractually required. Plaintiff also fails to plead that the controller tortiously

interfered with either of the two contracts because the Complaint lacks facts

sufficient to overcome the “affiliate privilege,” which requires Plaintiff to plead bad

2
faith. Only Count II, for breach of the Transaction Benefit Agreement against the

company, remains.

II. FACTUAL AND PROCEDURAL BACKGROUND1

A. THE EMPLOYMENT AGREEMENT

Defendant Merit Distribution Group, LLC (“Merit” or the “Company”) hired

plaintiff Christopher Koscho to serve as its Chief Executive Officer pursuant to an

Employment Agreement dated as of January 16, 2023 (the “Employment

Agreement”).2

Section 5 of the Employment Agreement sets forth the term of Koscho’s

employment. 3 Section 5(a) provides the circumstances in which Koscho’s

employment period would end. 4 Section 5(d) provides that in two of those

circumstances—“termination by the Company at any time without Cause” under

Section 5(a)(iii) or “resignation by [Koscho] with Good Reason” under Section

5(a)(iv)—Koscho is entitled to receive certain benefits from the Company.5 In full,

Section 5(d) provides:

1
The facts are drawn from the Complaint and the documents incorporated therein.
The Court accepts as true the well-pled facts in the Complaint solely for the purposes
of defendants’ motions to dismiss.
2
Compl. ¶ 8; see also Compl., Ex. A (hereinafter “Employment Agreement”).
3
Compl. ¶ 12.
4
Employment Agreement § 5(a).
5
Id. § 5(a), (d).
3
If the Employment Period is terminated pursuant to Section
5(a)(iii) or Section 5(a)(iv), [Koscho] shall be entitled to receive
from the Company:

(i) The Accrued Benefits;

(ii) Subject to compliance with Section 5(f), the Prior Year
Bonus; and

(iii) Subject to compliance with Section 5(f), for a period of
twelve (12) months (the “Severance Period”), (A)
continued payment of [Koscho’s] Base Salary (the
“Severance Payments”), payable in regular installments in
accordance with the Company’s general payroll practices;
and (B) an amount sufficient, on an after-tax basis, to
cover [Koscho’s] premium for family coverage under the
Consolidated Omnibus Budget Reconciliation Act
(“COBRA Coverage”), payable over the Severance
Period, unless during such period, [Koscho] undertakes
employment which provides [Koscho] with access to
group health plan coverage that is substantially equivalent
or better than the group health plan coverage to which
[Koscho] is entitled under the COBRA Coverage, in which
case, all such payments shall terminate as of the first day
of the month on which [Koscho] is eligible to participate
in the group health plans of [Koscho’s] new employer (the
“COBRA Subsidy”).6

Section 5(f) sets forth conditions precedent to Koscho’s entitlement to three

of the benefits listed in Section 5(d), namely: (1) the Prior Year Bonus, (2) the

6
Id. § 5(d).
4
Severance Payments, and (3) the COBRA Subsidy (together, the “Disputed

Severance Benefits”).7 Specifically, Section 5(f) provides:

To be eligible for the Prior Year Bonus, the Severance Payments
and the COBRA Subsidiary set forth in Section 5(d), [Koscho]
must meet the following conditions:

(i) Within thirty (30) days following termination,
[Koscho] (or his estate, as applicable) must
promptly sign, not revoke, and continue to honor an
employment separation and release, substantially in
the form attached as Exhibit A (the “Release”);

(ii) [Koscho’s] compliance with this Section (and the
expiration of the seven-day revocation period
required by the Older Workers Benefit Protection
Act, or any similar mandatory revocation or waiting
period, if applicable) shall be a condition to the
Company’s obligation to make any Severance
Payment under this Agreement; and

(iii) [Koscho] must comply with his continuing
obligations under this Agreement and any similar
agreements with the Company and its Subsidiaries.
Should [Koscho] fail to comply with this Section,
[Koscho] shall receive no further amounts under
Section 5(d) of this Agreement.8

7
Id. § 5(f). Section 5(f) refers to the “COBRA Subsidiary.” No party disputes that
this is a typo meant to refer to the COBRA Subsidy.
8
Id. § 5(f).
5
As referenced in Section 5(f)(i), the Employment Agreement attaches, as

Exhibit A, an unexecuted document titled “GENERAL RELEASE” (the “Exhibit A

Release”).9 The Exhibit A Release reads, in part:

Except as provided in Section 3 below, I knowingly and
voluntarily (for myself, my heirs, executors, administrators and
assigns) release and forever discharge the Company and the other
Released Parties from any and all claims, causes of action, cross-
claims, counter-claims, or liabilities of any nature whatsoever in
law and in equity, both past and present (through the date on
which I sign this General Release) and whether known or
unknown, including, but not limited to, any allegation, claim or
violation arising under or for: breach of contract; Title VII; the
Age Discrimination in Employment Act as amended (including
the Older Workers Benefit Protection Act); the Americans with
Disabilities Act; the Employee Retirement Income Security Act;
their state and/or local counterparts; or under any other federal,
state, common or local law or theory (the “Claims”). I represent
that I have made no assignment or transfer of any released
claims.10

B. KOSCHO AND THE COMPANY ENTER INTO A TRANSACTION BONUS
AGREEMENT AFTER CAM EXPRESSES INTEREST IN TAKING OVER.

About one year after he was hired, Koscho learned that Czech Asset

Management, L.P. (“CAM”), a private credit manager, was interested in taking over

the Company.11 Koscho began having discussions with the directors of Merit—

including CAM, which had a representative on Merit’s Board—in which Koscho

9
Employment Agreement, Ex. A (hereinafter “Exhibit A Release”).
10
Exhibit A Release § 2.
11
Compl. ¶ 15.
6
made clear he did not want to work for a lender-owned company such as CAM.12

Consistent with these discussions, Koscho and Merit negotiated an arm’s-length

transaction in the event there was change in control of Merit.13 On June 27, 2024,

Koscho and Merit entered into the Transaction Bonus Agreement (the “TBA”).14

The TBA provides, subject to certain terms and conditions, that Kosho would

be entitled to receive a “Transaction Bonus” from Merit in the event of a “Change

of Control” of the Company.15 Under Section 1 of the TBA, “the Transaction Bonus

shall be payable within (7) days after the Closing of the Change of Control.”16

C. CAM TAKES CONTROL OF MERIT, THE COMPANY TERMINATES
KOSCHO, AND CONTRACTUAL DISPUTES ARISE.

In October 2024, CAM took control of Merit’s Board.17 The next month, the

Company terminated Koscho’s employment.18

After Koscho’s termination, CAM “attempted to have” Koscho sign a new

document titled “SEPARATION AGREEMENT AND RELEASE” (the “CAM

12
Id. ¶ 18, 22.
13
Id. ¶ 19.
14
Id. ¶ 20; see also Compl., Ex. B (hereinafter “TBA”).
15
TBA § 1.
16
Id.
17
Compl. ¶ 24.
18
Id. ¶ 25.
7
Release”). 19 The CAM Release differed from the Exhibit A Release, including

because it would have released not only Merit, but also CAM, from all claims.20 In

return for signing the CAM Release, Koscho would receive severance benefits.21

Koscho alleges that he was already entitled to severance benefits under the

Employment Agreement and therefore refused to sign this “self-serving document

prepared by CAM.”22

By mid-November, Merit had paid neither the Disputed Severance Benefits

under the Employment Agreement nor the Transaction Bonus under the TBA.23 At

that time, Koscho sent a Notice of Default to Merit, with a copy to CAM, regarding

the Company’s alleged failure to comply with the TBA.24 A few days later, Koscho

sent the Company an executed modified version of the Exhibit A Release (the

“Modified Release”).25 The Modified Release differed from the Exhibit A Release

in one respect—specifically, at the end of Section 2, which sets forth the scope of

19
Id. ¶ 26; Pl.’s Ans. Br. in Opp’n to Def. Czech Asset Management, L.P.’s Mot. to
Dismiss Count III and Count IV of the Compl. (D.I. 20) (hereinafter “Ans. Br. to
CAM’s Mot.”), Ex. 1.
20
Compl. ¶ 26.
21
Id.
22
Id.
23
Id. ¶¶ 27, 38.
24
Id. ¶ 28.
25
Compl. ¶ 29; Def.’s Op. Br. in Support of Mot. to Dismiss Count I of the Compl.
(D.I. 15) (hereinafter “Merit Op. Br.”), Ex. 1 (hereinafter “Modified Release”) § 2.
8
the released claims, Koscho added a sentence: “The released Claims are related

solely to the Agreement and, in any event, do not include claims related to The

Transaction Bonus Agreement dated June 27, 2024.” 26 Koscho alleges that the

executed release he sent entitled him to benefits including the Disputed Severance

Benefits.27

Merit has notified Koscho it will not pay any benefits to him under the

Employment Agreement and has not paid the Transaction Bonus under the TBA.28

26
Modified Release § 2. The Court may consider the Modified Release on the
present motions because it was incorporated by reference into and is integral to the
Complaint. See Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 817-18 (Del. 2013);
Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 797 (Del. Ch. 2016) (“The
incorporation-by-reference doctrine permits a court to review the actual document
to ensure that the plaintiff has not misrepresented its contents and that any inference
the plaintiff seeks to have drawn is a reasonable one.” (citations omitted)), abrogated
on other grounds by Tiger v. Boast Apparel, Inc., 214 A.3d 933 (Del. 2019).
Moreover, no party objects to the Court’s consideration of the Modified Release.
Merit attached the Modified Release as Exhibit 1 to its opening brief, and Koscho in
his answering brief cited Merit’s opening brief Exhibit 1 as the release that he
contends “entitl[es] him to” the Disputed Severance Benefits. See Pl.’s Ans. Br. in
Opp’n to Def. The Merit Distribution Group, LLC’s Mot. to Dismiss Count I of the
Compl. (D.I. 21) (hereinafter “Ans. Br. to Merit’s Mot.”) at 4-5.
27
Compl. ¶ 29.
28
Id. ¶¶ 30, 38, 44.
9
D. PROCEDURAL HISTORY

Koscho initiated this action by filing his Complaint on December 16, 2024.29

Merit filed a motion to dismiss Count I,30 and CAM filed a motion to dismiss Counts

III and IV.31 Koscho filed two answering briefs, one in opposition to Merit’s motion

and one in opposition to CAM’s motion, 32 and Merit and CAM each filed reply

briefs.33 The Court heard oral argument on June 20, 2025 and reserved its decision.

III. STANDARD OF REVIEW

Upon a Rule 12(b)(6) motion, the Court: (i) accepts all well-pleaded factual

allegations as true; (ii) credits vague allegations if they give the opposing party

notice of the claim; (iii) draws all reasonable inferences in favor of the non-moving

party; and (iv) denies dismissal if recovery on the claim is reasonably conceivable.34

The Court does not, however, accept conclusory allegations unsupported by the facts

or draw unreasonable inferences in favor of the nonmovant.35

29
See generally Compl.
30
D.I. 15.
31
D.I. 16.
32
D.I. 20; D.I. 21.
33
D.I. 23; D.I. 24.
34
Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldg., LLC, 27 A.3d 531, 535
(Del. 2011) (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896 (Del. 2002)).
35
Windsor I, LLC v. CWCapital Asset Mgmt. LLC, 238 A.3d 863, 871 (Del. 2020)
(citing Deuley v. DynCorp Int’l, Inc., 8 A.3d 1156, 1160 (Del. 2010)).
10
IV. ANALYSIS

Koscho’s Complaint brings two counts for breach of contract against Merit:

one for breach of the Employment Agreement (Count I), the other for breach of the

TBA (Count II).36 The Complaint also brings two counts for tortious interference

with contract against CAM, relating to the Employment Agreement (Count III) and

the TBA (Count IV).37

Merit moves to dismiss the claim for breach of the Employment Agreement

but not the claim for breach of the TBA. CAM moves to dismiss both claims for

tortious interference. The Court first addresses Merit’s argument that the Complaint

fails to state a claim for breach of the Employment Agreement. Then, the Court

addresses CAM’s arguments that the Complaint fails to state a claim for tortious

interference with either agreement.

A. COUNT I IS DISMISSED; UNDER THE UNAMBIGUOUS TERMS OF THE
EMPLOYMENT AGREEMENT, KOSCHO FAILED TO SATISFY A
CONDITION PRECEDENT TO THE DISPUTED SEVERANCE BENEFITS.

In Count I, Koscho alleges that Merit breached the Employment Agreement

by failing to pay him the Disputed Severance Benefits following his termination.38

Merit argues that Koscho is not entitled to the Disputed Severance Benefits because

36
See Compl. ¶¶ 33-45.
37
See id. ¶¶ 46-63.
38
See id. ¶¶ 29-31, 33-39.
11
he failed to satisfy a condition precedent to them—namely, that Koscho sign a

release “substantially in the form” of the Exhibit A Release.39 The parties do not

dispute that this is a condition precedent,40 meaning that if Koscho did not satisfy it,

then Merit was not obligated to perform and did not breach the contract. 41 Nor do

the parties dispute that, to the extent Koscho signed a release, it was only the

Modified Release, which differed from the Exhibit A Release.42 The only dispute is

whether the Modified Release was “substantially in the form” of the Exhibit A

Release, as required by the condition precedent. Merit contends that it was not, as a

matter of law.43 Koscho asserts that the dispute raises an issue of fact that the Court

cannot resolve at this stage.44

“[T]he proper interpretation of language in a contract is a question of law”

which may be decided on a motion to dismiss.45 Dismissal is warranted where the

39
See Merit Op. Br. at 11.
40
See id. at 1; see generally Ans. Br. to Merit’s Mot.
41
See Roth v. Sotera Health Co., 2024 WL 4260649, at *10 (Del. Ch. Sept. 23, 2024)
(“A condition precedent ‘must be performed or happen before a duty of immediate
performance arises on the promise which the condition qualifies.’” (quoting 13
Williston on Contracts § 38:7 (4th ed.) (Westlaw, May 2024 Update))).
42
See Merit Op. Br. at 7; Ans. Br. to Merit’s Mot. at 4.
43
See Merit Op Br. at 2-3, 11.
44
See Ans. Br. to Merit’s Mot. at 1, 6.
45
Allied Capital Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1030 (Del. Ch. 2006)
(citing OSI Sys., Inc. v. Instrumentarium Corp., 892 A.2d 1086, 1090 (Del. Ch.
2006)).
12
contract’s terms are unambiguous and support the movant.46 “To determine whether

the contract is unambiguous, Delaware ‘adheres to the objective theory of

contracts.’”47 That means the Court will “interpret a particular contractual term to

mean ‘what a reasonable person in the position of the parties would have thought it

meant.’” 48 The Court must “read [the] contract as a whole and . . . give each

provision and term effect.”49 The Court will grant a motion to dismiss where “the

movant’s interpretation is ‘the only reasonable construction as a matter of law.’”50

The dispute here requires the Court to interpret contract language,

specifically, the language “substantially in the form.” It appears that Delaware

courts have not had occasion to interpret this language in the present context of

comparing a contractual release to a modified version of it.51 Accordingly, the Court

46
See Maka v. Musial, 2025 WL 1744936, at *3 (Del. Super. June 11, 2025).
Vinton v. Grayson, 189 A.3d 695, 704 (Del. Super. 2018) (quoting Osborn ex rel.
47

Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010)).
48
Id. at 699 (quoting Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728,
740 (Del. 2006)).
49
Osborn, 991 A.2d at 1159.
50
Seaworld Entm’t, Inc. v. Andrews, 2023 WL 3563047, at *3 (Del. Ch. May 19,
2023) (quoting Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB
Managers, Inc., 691 A.2d 609, 613 (Del. 1996)), aff’d, 314 A.3d 662 (Del. 2024)
(TABLE).
51
Roth involved nearly identical language in a very similar context, where a former
officer was required to sign a release to be entitled to severance benefits. 2024 WL
4260649, at *10. But in Roth, the former officer did not sign any release. Id. The
Court of Chancery thus did not need to determine whether a modified version of a
release was “in substantially the form” of the release attached to the contract. Id.
13
looks to dictionary definitions52 and caselaw interpreting similar language. Itself

consulting dictionaries, the Court of Chancery observed that “substantial” means,

among other things, “being largely but not wholly that which is specified.”53 The

court observed further that “[s]ubstantially conveys the same meaning as

‘considerably’ and ‘essentially’ because it means ‘to a great extent or degree’ and

communicates that it is very nearly the same thing as the noun it acts upon.” 54

Black’s Law Dictionary defines “substantial” as, among other things, “[o]f, relating

to, or involving substance; material,” “[i]mportant, essential, and material; of real

worth and importance,” and “[c]ontaining the essence of a thing; conveying the right

idea even if not the exact details.”55 “In all their relevant meanings,” the Court of

Chancery has observed, “substantial and substantially convey the idea of amplitude,

52
See Stream TV Networks, Inc. v. SeeCubic, Inc., 279 A.3d 323, 339 (Del. 2022)
(“[T]his Court ‘often looks to dictionaries to ascertain a term’s plain meaning.’”
(quoting In re Solera Ins. Coverage Appeals, 240 A.3d 1121, 1132 (Del. 2020))).
53
Hollinger Inc. v. Hollinger Int’l, Inc., 858 A.2d 342, 377 (Del. Ch. 2004) (quoting
Merriam-Webster On-Line Dictionary, http://www.m-w.com) (analyzing the
meaning of “substantially all” under 8 Del. C. § 271 concerning the stockholder
approval required for a sale of “all or substantially all” of a corporation’s assets),
appeal refused, 871 A.2d 1128 (Del. 2004) (TABLE).
54
Id. at 377 (first quoting MSN Encarta Dictionary, http://
encarta.msn.com/encnet/features/dictionary/dictionaryhome.aspx; and then quoting
http://www.dictionary.reference.com).
55
Substantial, Black’s Law Dictionary (12th ed. 2024).
14
of something that is ‘[c]onsiderable in importance, value, degree, amount, or

extent.’”56

It is also worth noting that, because these meanings of “substantial” evoke

comparisons between things, the proper criteria for comparison will depend on the

types of things being compared. In considering whether one apple is “substantially

similar to” or “substantially in the form” of another apple, for example, one might

properly consider the apples’ size, color, smell, taste, texture, or number of bruises.

None of those criteria are relevant when comparing contracts; a contract itself is

intangible, and the Court does not need to feel the texture of the paper on which a

contract is written, much less taste it. More relevant will be the scope of rights and

obligations that the contracts establish. And, zooming in further, which rights and

obligations are most important may depend on the type of contract and the context

of the parties’ bargain.

In sum, for the Modified Release to be “substantially in the form” of the

Exhibit A Release, the two must, at least, contain the same essence and not differ in

important or considerable ways. And when determining what is “essential” and what

differences are “important” or “considerable,” the Court takes into account that it is

56
Hollinger, 858 A.2d at 377 (citing American Heritage Dictionary 1727 (4th ed.
2000)).
15
comparing contractual releases. Based on these considerations, the Modified

Release is not “substantially in the form” of the Exhibit A Release.

The Exhibit A Release is a general release. It is titled as such and purports to

“release and forever discharge the Company and the other Released Parties from any

and all claims, causes of action, cross-claims, counter-claims, or liabilities of any

nature whatsoever in law and in equity, both past and present (through the date on

which I sign this General Release) and whether known or unknown, including, but

not limited to” several examples.57 As a general release, the Exhibit A Release was

“intended to cover everything—what the parties presently have in mind, as well as

what they do not have in mind.”58 Such a general release is “designed to provide

‘complete peace.’”59

The Modified Release differs from the Exhibit A Release in an important and

considerable respect, and the two releases do not contain the same essence. True,

the Modified Release only “added one sentence” to the Exhibit A Release,60 but in

57
Exhibit A Release § 2; see Riverbend Cmty., LLC v. Green Stone Eng’g, LLC, 55
A.3d 330, 333, 335 (Del. 2012) (holding similarly broad language constituted
general release).
58
Corp. Prop. Assocs. 6 v. Hallwood Grp. Inc., 817 A.2d 777, 779 (Del. 2003)
(quoting Hob Tea Room v. Miller, 89 A.2d 851, 856 (Del. 1952)).
59
See Seven Invs., LLC v. AD Capital, LLC, 32 A.3d 391, 397 (Del. Ch. 2011)
(quoting In re Phila. Stock Exch., Inc., 945 A.2d 1123, 1137 (Del. 2008)).
60
See Ans. Br. to Merit’s Mot. at 10.
16
the contractual context, one sentence, even one word, can make all the difference.61

The sentence Koscho added is important. At the end of Section 2, which sets forth

the scope of the release, Koscho added: “The released Claims are related solely to

the Agreement and, in any event, do not include claims related to The Transaction

Bonus Agreement dated June 27, 2024.”62 In other words, whereas the Exhibit A

Release covers all claims to provide a complete peace between the parties, the

Modified Release does not cover all claims and does not provide assurance of a

complete peace. A general category of claims, those that are not “related solely to

the Agreement,” as well as a more specific category, those “related to [t]he [TBA],”

were carved out. The Modified Release’s change strikes at the core purpose of the

Exhibit A Release. The two releases are not considerably or essentially the same.

To avoid this result, Koscho argues that because “substantial” is “not an

absolute term” and “can be ambiguous,” interpreting it here requires a determination

of fact that the Court cannot make on this motion.63 The Court is not persuaded.

Koscho is right that “substantial,” like many other words, can be ambiguous in some

61
For an illustration of the difference a single word can make, consider what happens
when “not” is added to almost any contract provision, such as the italicized in the
following: “I do not release all claims.” This is not to say that adding a single word
or sentence to a contract will always result in an important or considerable change.
That will depend on the word or sentence, as well as the words directly around it and
the contract as a whole.
62
Modified Release § 2.
63
See Ans. Br. to Merit’s Mot. at 10.
17
contexts. But the Court is not required to determine and apply the meaning of

“substantial” in all contexts; it is required to determine if, based on the contract and

claims at issue in this case, there is a reasonable interpretation under which the

plaintiff can recover.64 Koscho has not offered such an interpretation, and the Court

does not know of one.65 No reasonable person would consider the Modified Release,

which materially narrowed the scope of the released claims, to be “substantially in

the form” of the general Exhibit A Release. Accordingly, Koscho has failed to

satisfy the condition precedent to his receipt of the Disputed Severance Benefits, and

his claim for breach of the Employment Agreement is dismissed.

The Court, therefore, GRANTS Merit’s motion to dismiss Count I.66

64
See Weinberg v. Waystar, Inc., 294 A.3d 1039, 1043 (Del. 2023) (explaining that
“[i]n giving sensible life to a real-world contract, courts must read the specific
provisions of the contract in light of the entire contract” and that “[l]anguage is
ambiguous if it is susceptible to more than one reasonable interpretation” (citations
omitted)); Winshall, 76 A.3d at 813 (explaining that dismissal is appropriate if
complaint does not “allege[] a reasonably conceivable set of facts under which the
plaintiff would be entitled to relief” (citation omitted)).
65
Koscho offered two definitions of “substantial”: “[c]ontaining the essence of a
thing; conveying the right idea even if not the exact details,” and “being largely but
not wholly that which was specified.” Ans. Br. to Merit’s Mot. at 8 (first quoting
Substantial, Black’s Law Dictionary (12th ed. 2024); and then quoting Substantial,
Merriam-Webster, https://www.merriam-webster.com/dictionary/substantial (last
accessed Mar. 24, 2025)). But the Court considered those definitions above and,
even under them, no reasonable person would consider the Modified Release to be
“substantially in the form” of the Exhibit A Release.
66
It is unclear whether Count I seeks payment of only the Disputed Severance
Benefits or also the “Accrued Benefits.” The Complaint references Employment
Agreement Section 5(d), which provides that, under certain circumstances, Koscho
18
B. COUNTS III AND IV ARE DISMISSED; THE COMPLAINT FAILS TO STATE
A CLAIM FOR TORTIOUS INTERFERENCE BECAUSE IT DOES NOT
ALLEGE FACTS TO OVERCOME THE AFFILIATE PRIVILEGE.

Counts III and IV are claims for tortious interference with contract against

CAM. Count III relates to the Employment Agreement, Count IV to the TBA. At

the outset, Count III can be dismissed because, as held above, the Complaint fails to

plead a breach of the Employment Agreement that underlies it. 67 Nonetheless,

because the law and many of the facts underlying Counts III and IV overlap, the

Court addresses additional arguments regarding both counts together below.

To state a claim for tortious interference with contract, a plaintiff must plead

five elements: “(1) a valid contract; (2) about which defendants knew; (3) an

intentional act that is a significant factor in causing the breach of such contract; (4)

would be entitled to not only the Disputed Severance Benefits, but also the Accrued
Benefits. See Compl. ¶ 13. Although the Complaint focuses on the Disputed
Severance Benefits, it leaves open that it may also seek other benefits under the
Employment Agreement. See, e.g., id. ¶ 35 (alleging that Koscho “was entitled to
certain benefits upon his termination without cause including [the Disputed
Severance Benefits]” (emphasis added)). Merit moved to dismiss Count I on
grounds that Koscho failed to satisfy the condition precedent in Section 5(f), but that
condition precedent does not appear to apply to the Accrued Benefits. See
Employment Agreement § 5(f). The parties did not brief whether Count I seeks the
Accrued Benefits or, if it does, whether it states a claim to receive them.
Accordingly, only to the extent it seeks the Accrued Benefits, Count I is dismissed
without prejudice.
67
See, e.g., Buck v. Viking Hldg. Mgmt. Co. LLC, 2021 WL 673459, at *5 (Del.
Super. Feb. 22, 2021) (“As explained, [plaintiff] has not sufficiently pleaded an
underlying breach of the [contract]. That alone precludes [plaintiff] from
maintaining the associated tortious interference claim.”).
19
without justification; (5) which causes injury.” 68 CAM’s motion to dismiss

challenges two of these elements: “justification” and “intentional act.”69 Here, the

“justification” element is dispositive.

CAM argues that the Complaint’s tortious interference claims are barred by

the “affiliate privilege” doctrine.70 That doctrine “shields an affiliate from primary

or vicarious tort liability for the breach of a contract to which the affiliate itself was

not a signatory.” 71 Courts assess the affiliate privilege under the “justification”

element because the doctrine balances value judgments about when a corporate

parent is “justified” in interfering with its subsidiary.72 The privilege arises from a

68
Beard Research, Inc. v. Kates, 8 A.3d 573, 605 (Del. Ch. 2010) (quoting
AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 437 n.7 (Del.
2005)).
69
See Opening Br. in Support of Czech Asset Mgmt., L.P.’s Mot. to Dismiss Counts
III and IV of the Compl. (D.I. 16) (hereinafter “CAM Op. Br.”) at 7.
70
See id. at 7.
71
Buck, 2021 WL 673459, at *6 (citing Surf’s Up Legacy P’rs, LLC v. Virgin Fest,
2021 WL 117036, at *7 (Del. Super. Jan. 13, 2021); Bhole, Inc. v. Shore Invs., Inc.,
67 A.3d 444, 453 (Del. 2013); Shearin v. E.F. Hutton Grp., Inc., 652 A.2d 578, 591
(Del. Ch. 1994)).
72
See, e.g., id. at *6 (applying privilege as a “presumption that any interference [the
corporate affiliate] may have undertaken was justified economically”); Surf’s Up,
2021 WL 117036, at *6 (explaining that privilege arises from “balanc[ing] important
policies” to “evaluat[e] whether a controller’s interference was ‘unjustified’”);
Shearin, 652 A.2d at 589-90 & n.13 (explaining that an intentional interference claim
“inevitably involve[s] a complex normative judgment relating to justification” and
that “the close economic relationship of related entities requires enhanced latitude in
defining what ‘improper’ interactions would be” (citation omitted)).
20
presumption that a corporate parent is “‘pursuing its legitimate profit seeking’

interests ‘in good faith.’”73 But that presumption, and thus the privilege it underlies,

are not absolute. 74 At the pleading stage, the plaintiff may rebut the privilege by

“alleg[ing] facts that support a reasonable inference that the interference was

‘motivated by some malicious or other bad faith purpose’ rather than ‘to achieve

permissible financial goals.’”75

Under Delaware law, pleading bad faith is generally a high bar.76 So too in

the affiliate privilege context, where “courts are reluctant to find bad faith because

affiliate interference often is a legitimate business strategy.”77 Courts have found

bad faith adequately pled where the controller took action that harmed the subsidiary

in some way, such as by rendering it insolvent or decreasing its value.78

73
Surf’s Up, 2021 WL 117036, at *7 (quoting Shearin, 652 A.2d at 591).
74
Id. at *1, *7.
75
Bandera Master Fund LP v. Boardwalk Pipeline P’rs, LP, 2019 WL 4927053, at
*27 (Del. Ch. Oct. 7, 2019) (quoting Shearin, 652 A.2d at 591).
76
See, e.g., In re Trade Desk, Inc. Derivative Litig., 2025 WL 503015, at *22 (Del.
Ch. Feb. 14, 2025) (explaining that, in the corporate fiduciary duty context, pleading
bad faith is “no easy task”).
77
Buck, 2021 WL 673459, at *6; Allied Capital, 910 A.2d at 1039 (noting that the
bad faith standard is “stringent”).
78
See, e.g., Surf’s Up, 2021 WL 117036, at *9 (citing examples of cases that
“involved insolvent breaching parties in which a controlling entity was alleged to
have forced their insolvency by siphoning the breaching parties’ assets and
arrogating those assets to itself”); Bandera, 2019 WL 4927053, at *27 (holding bad
faith adequately pled because complaint alleged general partner took action “to drive
down the price of [the partnership’s] common units” to benefit itself); AM Gen.
21
Here, Koscho agrees that CAM controlled Merit,79 so the affiliate privilege

will apply unless the Complaint pleads facts to support an inference of bad faith.

The Complaint does not do so. It alleges only that CAM knew of the relevant

agreements, sought to obtain a broad release for both itself and the Company, and

“tried to have Koscho tear up the TBA and waive his rights thereunder.”80 Obtaining

waivers of Koscho’s rights, under the TBA or more broadly, would be to the Merit’s

benefit, not detriment, because it could relieve Merit of potential liabilities. And

although the Complaint states that CAM engaged in “self-dealing” by seeking a

waiver for itself as well,81 it does not plead facts to support this contention or show

how Merit was harmed.82 Nor does the Complaint plead facts to suggest that CAM

was motivated to harm Koscho rather than to advance Merit’s and CAM’s joint

Hldgs. LLC v. Renco Grp., Inc., 2013 WL 5863010, at *13 (Del. Ch. Oct. 31, 2013)
(citing further examples).
79
See Compl. ¶¶ 24-25, 49, 62; Ans. Br. to CAM’s Mot. at 10 (“Plaintiff has alleged
that CAM had control of the Company and used its position to interfere with the
valid agreement between the Company and Koscho.”).
80
Compl. ¶¶ 22, 26, 48, 51, 57-58.
81
Id. ¶ 51.
82
MHC IV, LLC v. TCFIV Venturi Buyer P, LLC, 2024 WL 5183211, at *4 (Del.
Super. Dec. 19, 2024) (“Conclusory allegations . . . are insufficient to overcome the
presumption the controllers were acting in good faith to maximize joint profits.”
(citing Nivagen Pharm., Inc. v. Hikma Pharm. USA Inc., 2024 WL 1576519, at *4
(Del. Super. Apr. 11, 2024))); Buck, 2021 WL 673459, at *4 (“The Court need not
strain to read an untold narrative into the complaint.” (citing Malpiede v. Townson,
780 A.2d 1075, 1083 (Del. 2001))).
22
business interests. Absent factual allegations about CAM’s motivations or acts that

harmed Merit, the Complaint cannot support an inference of bad faith.

Because the Complaint lacks any facts from which it could be inferred that

CAM acted in bad faith, the affiliate privilege applies, and Koscho has failed to plead

the “justification” element of tortious interference.83 The Court therefore GRANTS

CAM’s motion to dismiss Koscho’s tortious interferences claims (Counts III and

IV).84

V. CONCLUSION

For the foregoing reasons, the Court GRANTS Merit’s and CAM’s motions

to dismiss Counts I, III, and IV of the Complaint.

IT IS SO ORDERED.

/s/ Patricia A. Winston
Patricia A. Winston, Judge

83
Koscho argues that, as a general matter, the Court cannot grant dismissal because
the affiliate privilege is an affirmative defense that cannot be decided at the pleading
stage. See Ans. Br. to CAM’s Mot. at 10-11. But that argument ignores the long line
of cases dismissing tortious interference claims based on the affiliate privilege. See,
e.g., Buck, 2021 WL 673459, at *7; Surf’s Up, 2021 WL 117036, at *9; AM Gen.
Hldgs., 2013 WL 5863010, at *14.
84
Because Koscho failed to plead the “justification” element, the Court need not
reach CAM’s additional argument for dismissal under the “intentional act” element.
See CAM Op. Br. at 13-15.
23