Alex Capano v. Ecofibre Limited

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
MORGAN T. ZURN LEONARD L. WILLIAMS JUSTICE CENTER
VICE CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734

February 5, 2025

Thomas V. Ayala, Esquire Seth A. Niederman, Esquire
Klehr Harrison Harvey Branzburg LLP Fox Rothschild LLP
919 Market Street, Suite 1000 1201 North Market Street, Suite 1200
Wilmington, DE 19801 Wilmington, DE 19801

RE: Alex Capano, et al. v. Ecofibre Limited, et al.,
Civil Action No. 2024-0164-MTZ

Dear Counsel:

This letter resolves the final piece of Defendants’ motion to dismiss:
Plaintiffs’ claim for unjust enrichment against Ecofibre, EUSA, and the Individual
Defendants. 1 The motion is granted in part and denied in part as to that claim.

Unjust enrichment is the “unjust retention of a benefit to the loss of another,
or the retention of money or property of another against the fundamental principles
of justice or equity or good conscience.” 2 To succeed on a claim for unjust
enrichment, a complainant must prove: “(1) an enrichment; (2) an
impoverishment; (3) a relation between the enrichment and the impoverishment;
[and] (4) the absence of justification” for the benefit. 3

“Further, in evaluating a party’s claim for an equitable remedy based on
unjust enrichment, courts inquire at the threshold as to whether a contract already
governs the parties’ relationship.” 4 “If a contract comprehensively governs the
1
Docket item (“D.I.”) 18 ¶¶ 310–14. This letter adopts the complaint’s defined terms.
2
McPadden v. Sidhu, 964 A.2d 1262, 1276 (Del. Ch. 2008).
3
State ex rel. Jennings v. Monsanto Co., 299 A.3d 372, 390 (Del. 2023) (citing Garfield
ex rel. ODP Corp. v. Allen, 277 A.3d 296, 351 (Del. Ch. 2022)). “Technically,
[impoverishment] is not a necessary element.” Principal Growth Strategies, LLC v. AGH
Parent LLC, 2024 WL 274246, at *12 (Del. Ch. Jan. 25, 2024).
4
Vichi v. Koninklijke Philips Elecs. N.V., 62 A.3d 26, 58 (Del. Ch. 2012).
Capano v. Ecofibre Ltd.,
C.A. No. 2024-0164-MTZ
February 5, 2025
Page 2 of 3

relevant relationship between the parties, then the contract must provide the
measure of the plaintiff’s rights, and any claim of unjust enrichment will be
denied.” 5 Put differently, “[a] claim for unjust enrichment is not available if there
is a contract that governs the relationship between parties that gives rise to the
unjust enrichment claim.” 6 An unjust enrichment claim pled in the context of a
contract may survive a motion to dismiss where the “factual basis for the unjust
enrichment claim [is] independent of the allegations supporting the breach of
contract claim.” 7

Here, Plaintiffs do not dispute that the Operating Agreement governs the
relationship between EOF and EUSA. But it appears, at least at this stage, that the
allegations supporting an unjust enrichment claim are independent of allegations
that could support a breach of the Operating Agreement. In other words, the
Operating Agreement does not comprehensively govern that aspect of the parties’
relationship. 8 As I explained in yesterday’s bench ruling, Plaintiffs’ Count I for
breach of a purported standard of care in Section 14.01(b) of the Operating
Agreement failed because that provision contains no such standard. Defendants
did not identify any contractual provision that could govern the allegations
underlying Plaintiffs’ unjust enrichment claim—i.e., that Defendants knowingly
misallocated EUSA’s operational costs to boost Ecofibre’s stock value and used
EOF funds to pay expenses of Ecofibre and EUSA. 9

5
Stone & Paper Invs., LLC v. Blanch, 2020 WL 3496694, at *12 (Del. Ch. June 29,
2020).
6
Kuroda v. SPJS Hldgs, L.L.C., 971 A.2d 872, 891 (Del. Ch. 2009).
7
Stone & Paper Invs., 2020 WL 3496694, at *12–13 (declining to dismiss unjust
enrichment claim because the underlying allegations could not constitute a breach of the
LLC agreement and the Court therefore could not conclude “that the LLC Agreement
comprehensively govern[ed] the relationship”); see also In re Molycorp, Inc. S’holder
Deriv. Litig., 2015 WL 3454925, at *11 (Del. Ch. May 27, 2015) (“Unjust enrichment
claims fail where a validly negotiated contract governs the contested matter, although the
Court can be wary of granting a motion to dismiss when it is not clear that the contract
covers the entire dispute.”).
8
See Stone & Paper Invs., 2020 WL 3496694, at *12–13.
9
See D.I. 18 ¶¶ 156–57.
Capano v. Ecofibre Ltd.,
C.A. No. 2024-0164-MTZ
February 5, 2025
Page 3 of 3

Plaintiffs’ claim against the Individual Defendants nonetheless fails because
it is not fairly pled. In their brief, Plaintiffs attempt to frame the alleged
enrichments to Ecofibre and EUSA as enrichments to the Individual Defendants,
arguing they “were Board members and/or officers of Ecofibre and/or EUSA” and
“knowingly misallocated EUSA’s operational costs to EOF to drive up the value of
Ecofibre stock.” 10 But those benefits run to Ecofibre and EUSA, not the Individual
Defendants. Plaintiffs have not alleged a benefit to the Individual Defendants, nor
provided any authority that a company officer is unjustly enriched merely because
the company was unjustly enriched. The claim is dismissed as to the Individual
Defendants.

Defendants’ motion to dismiss Plaintiffs’ unjust enrichment claim is granted
as to the Individual Defendants and denied as to Ecofibre and EUSA. The parties
shall submit a stipulated proposed implementing order resolving the motion to
dismiss, taking care to specify the fate of each count given the complaint’s
duplicative numbering.

Sincerely,

/s/ Morgan T. Zurn

Vice Chancellor

MTZ/ms

cc: All Counsel of Record, via File & ServeXpress

10
D.I. 55 at 52–53.