AG Mobile Holdings LP v. H.I.G. Mobile LP

EFiled: Feb 13 2025 03:43PM EST
Transaction ID 75635436
Case No. 2023-1103-MAA
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
AG MOBILE HOLDINGS, L.P., )
)
Plaintiff, )
)
v. ) C.A. No. 2023-1103 MAA
)
H.I.G. MOBILE, L.P., MATRIX )
TOPCO, L.P., MATRIX TOPCO GP, )
LLC, H.I.G. TECHNOLOGY )
PARTNERS, LLC, NISHANT )
NAYYAR, ALEXANDER THORN, )
and GAVIN PATTERSON, )
)
Defendants. )
)

Submitted: November 13, 2024
Decided: February 13, 2025

Upon Defendants’ Motion to Dismiss:
GRANTED in Part, and DENIED in Part.

MEMORANDUM OPINION

Kevin R. Shannon, Esquire, Christopher N. Kelly, Esquire of POTTER
ANDERSON & CORROON LLP, Wilmington, DE, and Kevin B. Huff, Esquire
(Argued), David L. Schwarz, Esquire, and Aaseesh P. Polavarapu, Esquire of
KELLOGG, HANSEN, TODD, FIGEL & FREDERICK, P.L.L.C., Washington,
DC, Attorneys for Plaintiff AG Mobile Holdings, L.P.

Daniel M. Kirshenbaum, Esquire, and Michael A. Laukaitis, II, Esquire, of YOUNG,
CONAWAY, STARGATT, and TAYLOR LLP, Wilmington, DE, and Michael S.
Shuster, Esquire (Argued), Vincent Levy, Esquire, Jessica Marder-Spiro, Esquire,
and Rashelle R. James, Esquire of HOLWELL SHUSTER & GOLDBERG LLP,
New York, NY, Attorneys for Defendants H.I.G. Mobile, L.P., Matrix Topco, L.P.,
Matrix Topco GP, LLC, H.I.G. Technology Partners, LLC, Nishant Nayyar, and
Alexander Thorn.

Adam K. Schulman, Esquire of ABRAMS & BAYLISS LLP, Wilmington, DE,
Attorney for Defendant Gavin Patterson.

Adams, J.1

1
Sitting as a Vice Chancellor of the Court of Chancery of the State of Delaware by designation of
the Chief Justice of the Supreme Court of Delaware pursuant to In re: DESIGNATION OF THE
HONORABLE Meghan A. Adams under Del. Const. art. IV § 13(2) dated November 15, 2023.
2
I. INTRODUCTION

This action arises out of the sale and subsequent management of Mobileum,

Inc. (“Mobileum”). Non-party Audax Management Company, LLC (“Audax”) sold

a controlling interest in Mobileum, through Audax’s subsidiary, Plaintiff AG Mobile

Holdings, L.P. (“Plaintiff”), to Defendant H.I.G. Mobile, L.P. (“H.I.G.”), while

retaining a significant minority stake (the “Transaction”). H.I.G. and Plaintiff

formed Defendant Matrix Topco, L.P. (the “Partnership”) to own and operate

Mobileum pursuant to the parties’ Limited Partnership Agreement (the “Partnership

Agreement”). Under the Partnership Agreement, Defendant Matrix Topco GP, LLC

(“Matrix Topco GP”) was formed to serve as the Partnership’s General Partner.

Over a year after the Transaction closed, the Partnership’s board (the “Board”)

formed a Special Committee – consisting of Defendant directors Nishant Nayyar

(“Nayyar”), Alexander Thorn (“Thorn”), and Gavin Patterson (“Patterson,”

collectively with Nayyar and Thorn, the “Individual Defendants”) – to investigate

alleged accounting irregularities at Mobileum before the Transaction (the

“Investigation”). The Investigation resulted in H.I.G. filing a lawsuit in the Superior

Court alleging Audax fraudulently induced H.I.G. to enter into the Transaction (the

“Fraud Suit”).2

2
Matrix Parent, Inc. v. Audax Management Co., Case No. N23C-10-212 MAA CCLD (Del.
Super.).
3
The Fraud Suit prompted Plaintiff to file this action, alleging H.I.G., related

entity Defendant H.I.G. Technology Partners, LLC (“H.I.G. Tech”), the Partnership,

Matrix Topco GP, and the Individual Defendants breached the Partnership

Agreement through their conduct during the Investigation. Plaintiff’s amended

complaint also asserts a claim for breach of the implied covenant of good faith and

fair dealing against all Defendants. In the alternative to its breach of contract claims,

Plaintiff alleges the Individual Defendants tortiously interfered with the Partnership

Agreement.

Defendants seek dismissal of all counts (the “Motion”). Defendants make

three general arguments supporting their Motion. First, Defendants contend they are

insulated from liability for any alleged breach of the Partnership Agreement.

Second, Defendants argue each count brought by Plaintiff should be dismissed for

failure to state a claim. Finally, Defendants assert Plaintiff failed to plead any

recoverable damages. For the reasons discussed below, the Court GRANTS in part,

and DENIES in part, the Motion.

4
II. BACKGROUND3

A. The Parties and Relevant Non-Parties

Plaintiff is a Delaware limited partnership with its principal place of business

in Boston, Massachusetts.4 Plaintiff is “an investment entity affiliated with funds

managed by” non-party Audax, a middle-market investment firm.5 Plaintiff is a

Limited Partner in the Partnership and a signatory of the Partnership Agreement.6

Defendant H.I.G. is a Delaware limited partnership with its principal place of

business in New York, New York.7 H.I.G. is a Limited Partner in the Partnership

and signatory of the Partnership Agreement.8 Similarly, Defendant Matrix Topco

GP is a Delaware limited liability company with its principal place of business in

New York, New York.9 Matrix Topco GP serves as the Partnership’s General Partner

and is a signatory to the Partnership Agreement.10 Defendant H.I.G. Tech is a

Delaware limited liability company with its principal place of business in Miami,

3
The facts incorporated herein are drawn from Plaintiff’s Verified Amended and Supplemental
Complaint (D.I. 24) (hereinafter “Compl.”) and the documents incorporated therein. The Court
accepts the well-pled facts in the Amended Complaint as true solely for the purpose of resolving
the Motion.
4
Compl. ¶ 18.
5
Id.
6
Id.
7
Id. ¶ 19.
8
Id.
9
Id. ¶ 21.
10
Id.
5
Florida.11 H.I.G. Tech is a “Special Limited Partner” of the Partnership and a party

to the Partnership Agreement.12

Defendant the Partnership is a Delaware limited partnership with its principal

place of business in New York, New York.13 The Partnership “indirectly owns a 100

percent interest in non-party Mobileum[.]”14 The Individual Defendants are

members of the Partnership’s Board, and each were “appointed by H.I.G. to serve as

one of its representatives.”15 The Individual Defendants were each members of the

Special Committee that led the Investigation at the center of this litigation.16

B. Audax Buys, Operates, and Sells, Mobileum

In November 2016, Audax acquired Mobileum.17 Over the next five years,

Mobileum grew through a series of acquisitions and expansions into new markets

and product lines.18 After driving this growth, Audax sought to sell a majority stake

in Mobileum while “retain[ing] a significant minority interest with the right buyer

so that it could continue to reap the upside of its initial investment[.]”19

11
Id. ¶ 22.
12
Id.
13
Id. ¶ 20.
14
Id.
15
Id. ¶¶ 24-26.
16
Id.
17
Id. ¶ 33.
18
Id. ¶¶ 35-38.
19
Id. ¶¶ 39-43.
6
In December 2021, Audax sold a controlling interest in Mobileum to H.I.G.20

As part of the Transaction, Audax “rolled over approximately $100 million” into

Mobileum, giving it a roughly 23.5 percent stake, and H.I.G. a 66.9 percent stake, in

the new Partnership.21 The Transaction closed in March 2022.22

C. The Partnership Agreement

As part of the Transaction, the parties thereto entered into the Partnership

Agreement “[t]o govern their partnership in [Mobileum].”23 Several provisions of

the Partnership Agreement are relevant here.

Section 2.4 states the Partnership’s purpose is to “invest in Matrix Holdco,

Inc.,” the direct parent of the entity “which purchased the majority stake in

Mobileum.”24

Article VI of the Partnership Agreement details the “Management of the

Partnership.”25 Section 6.1 gives the Board the authority to manage the Partnership,

stating:

all powers of the Partnership shall be exercised by or under the
authority of, and the business and affairs of the Partnership shall be
managed by and under the direction of, the Board (to which the General
Partner hereby irrevocably delegates all of its rights and powers under
the Act pursuant to Section 17-403(c) thereof), and the Board shall

20
Id. ¶ 44.
21
Id. According to the Amended Complaint, “Management and the Board held a 9.6 percent
stake.” Id.
22
Id.
23
Id. ¶ 45.
24
Id. ¶ 46; Compl., Ex. A (hereinafter “Partnership Agreement”) § 2.4.
25
Partnership Agreement Article VI.
7
make all decisions and take all actions for the Partnership which are
necessary or appropriate to carry out the Partnership’s business[.]26
Section 6.3 empowers the Board to create committees and provides

The Board may designate one (1) or more committees of the Board.
Each committee shall keep regular minutes of its meetings and report
the same to the Board when required. H.I.G. Managers shall not
constitute less than a majority of any committee of the Board without
the prior written consent of H.I.G. For so long as Audax is entitled to
appoint at least one Audax Manager pursuant to Section 6.2, each
committee of the Board shall have at least one (1) Audax Manager.27
Section 6.12 and 6.13 “articulated the parties’ intent to collaborate on Board-

level decisions.”28 While those provisions allowed H.I.G. to cast the majority vote

on any Board matter through its appointed managers, “[e]ach Other Manager shall

be entitled to one (1) vote upon any matter submitted to a vote[.]”29

Section 8.17 of the Partnership Agreement details H.I.G. and its subsidiaries’

ability to transact with the Partnership.30 Specifically, Section 8.17 provides, in

relevant part:

Notwithstanding that it may constitute a conflict of interest, [H.I.G.] or
their Affiliates may engage in any transaction . . . with the Partnership
and/or its Subsidiaries so long as [sic] (i) such transaction is approved
by Managers holding a majority of the votes of all disinterested
Managers then serving on the Board, (ii) such transaction is on arms’
length terms or terms no less favorable to the Partnership and/or its
Subsidiaries than those available from a third party, as determined in
good faith by the Board, or (iii) the Board has obtained a written

26
Id. § 6.1.
27
Id. § 6.3 (underlying in original).
28
Compl. ¶ 49.
29
Partnership Agreement § 6.12; see Compl. ¶ 49; Partnership Agreement § 6.13.
30
Partnership Agreement § 8.17.
8
opinion from an independent valuation, investment banking or financial
advisory firm, that the consideration payable in, or other principal
financial terms, as applicable, of, such transaction are fair, from a
financial point of view, to the holders of Class A Common Units other
than, if applicable based on the nature of the transaction, H.I.G.31
The Partnership Agreement also discusses the potential liability of managers

and partners. Section 6.17 absolves any “Manager, General Partner or Related

Persons of the foregoing,” of “any liability for breach of duty (including fiduciary

duty)[.]”32 While the Partnership Agreement waives any fiduciary duty claims, it

obligates “the Board or the General Partner . . . to take any action or to make a

decision in its ‘good faith.’”33 Section 3.2 absolves the Limited Partners of any

personal liability for the Partnership’s debts or obligations, stating:

Except as expressly set forth in this Agreement, the Act or a contractual
liability agreed to by a Partner or other Holder, no Limited Partner or
other Holder shall have any personal liability whatsoever in his, her or
its capacity as a Limited Partner or Holder, whether to the Partnership,
to any of the other Partners or Holders, to the creditors of the
Partnership or to any other third party, for the debts, liabilities,
commitments or any other obligations of the Partnership or for any
losses of the Partnership, and therefore each Limited Partner or other
Holder shall be liable only to make such Person's required Capital
Contribution to the Partnership and the payments provided in Section
3.2(c) below. Each Partner hereby consents to the exercise by the
Board, the General Partner and the Partnership's officers of the powers
conferred on them by this Agreement.34

31
Id.
32
Id. § 6.17(d).
33
Id. § 6.17(c).
34
Id. § 3.2(a) (underlying in original).
9
Also relevant here, Section 11.2 of the Partnership Agreement details the

information rights of the various entities affiliated with the Partnership.35 Section

11.2(a) requires the Partnership to “deliver to each Manager periodic financial

statements, annual audited financial statements, and annual budgets and other

financial reports requested by the Board.”36 Section 11.2(c) details Plaintiff’s right

to access various financial documents including monthly, quarterly, and annual

financial statements, as well as the annual approved budget.37

D. Post-Closing Partnership Management Issues and the Investigation
After the Transaction, Mobileum’s business steadily declined.38 Plaintiff

argues this was due to poor management decisions by H.I.G., through its Board

Managers, including micromanagement, firing key executives, and destroying

customer relationships.39 Plaintiff alleges while making these poor choices, H.I.G.

“exclude[d] [Plaintiff] and the Audax Managers from many key decisions.”40

One such Board decision Plaintiff challenges is the formation of the Special

Committee to conduct the Investigation.41 On June 14, 2023, two of H.I.G.’s Board

representatives – Defendants Nayyar and Thorn – announced the Board “had

35
See id. § 11.2.
36
Id. § 11.2(a).
37
Id. § 11.2(c).
38
Compl. ¶ 60.
39
Id. ¶¶ 60-77.
40
Id. ¶¶ 78-80.
41
See id. ¶¶ 82-83.
10
established a Special Committee . . . to investigate alleged but unspecified

accounting irregularities.”42 The Special Committee consisted of the Individual

Defendants and “hired outside counsel” “before its formal creation.”43 The Special

Committee’s creation and its hiring of counsel were “done without Board approval,

or even awareness.”44 Consequently, Plaintiff “demanded that its designated

manager be appointed to the Special Committee as required by Section 6.3. [But]

H.I.G. and the Individual Defendants refused.”45

The Special Committee’s stated purpose was to investigate accounting

irregularities.46 Plaintiff, however, alleges the Investigation “was designed not to

get to the truth, but rather to benefit H.I.G. and falsely accuse Audax of impropriety,”

so H.I.G. could “deflect blame for the consequences of its unilateral [managerial]

decision[s].”47 As a result, Plaintiff criticizes the Investigation as “filled with basic

and material errors.”48 During the Investigation, the Special Committee did not

consult with Plaintiff or its Board member, did not comply with Plaintiff’s request

for information, and only provided summary updates to the Board.49 The Special

Committee nevertheless concluded there were “accounting irregularities at

42
Id. ¶ 84.
43
Id.
44
Id.
45
Id. ¶ 85.
46
Id. ¶¶ 84, 87.
47
Id. ¶ 82.
48
Id. ¶¶ 83, 90-93.
49
Id. ¶¶ 85-86, 88-90.
11
Mobileum” before the Transaction.50 After the Special Committee reached that

conclusion, it “proceeded to hand the work product of its purported investigation

over to H.I.G.’s outside litigation counsel – a related party transaction prohibited by

the [] Partnership Agreement.”51

Based on the Special Committee’s information, H.I.G. filed the Fraud Suit

against Audax (and others), arguing “Mobileum’s revenue recognition practices

were fraudulent and rendered inaccurate the representations and warranties

Mobileum gave to H.I.G. as part of the sale of the business.”52 The Fraud Suit alleges

these wrongful accounting practices fraudulently induced H.I.G. to enter the

Transaction at an inflated price.53

Plaintiff denies the Fraud Suit’s allegations.54 Plaintiff additionally alleges

Defendants’ bad-faith actions continued after H.I.G. filed the Fraud Suit, including:

delivering a Notice of Default to Mobileum’s lenders; restructuring the Partnership

to give H.I.G. more control; continuing to not involve the Board (and thus Plaintiff)

in decision making; and maintaining the Special Committee.55 Plaintiff responded

to these actions by filing this lawsuit.

50
Id. ¶ 87.
51
Id. ¶ 95.
52
Id. ¶ 96.
53
Id.
54
Id. ¶¶ 95-104.
55
Id. ¶¶ 105-110.
12
E. Procedural History

Plaintiff initiated this action in October 2023 and filed its Amended Complaint

in January 2024.56 The Amended Complaint asserts four claims: Breach of Contract

(Sections 6.3 and 11.2(a)) against all Defendants;57 Breach of Contract (Section

8.17) against all Defendants;58 Breach of the Implied Covenant of Good Faith and

Fair Dealing against all Defendants;59 and Tortious Interference against the

Individual Defendants.60

On February 5, 2024, Defendants filed their Motion seeking dismissal of all

counts in the Amended Complaint.61 The parties completed briefing on April 19,

2024,62 and the Court held oral argument on October 30, 2024. 63 On November 12

56
See generally Compl.
57
See id. ¶¶ 116-132
58
See id. ¶¶ 133-142.
59
See id. ¶¶ 143-155.
60
See id. ¶¶ 156-160.
61
See D.I. 48, Defendants’ Opening Brief in Support of their Motion to Dismiss the Amended
Complaint (hereinafter “MTD”) at 1-4, 57.
62
See generally D.I. 56, Defendants’ Reply Brief in Support of their Motion to Dismiss the Verified
Amended and Supplemental Complaint (hereinafter “MTD Reply”).
63
D.I. 77, Judicial Action Form for October 30, 2024. Oral argument on the Motion was delayed
pursuant to a March 22, 2024, Order to Stay pending resolution of a motion to dismiss in the Fraud
Case. See D.I. 48, Judicial Action Form for Motion to Stay Non-Party Discovery and for Protective
Order Pending Motion to Dismiss & Motion for Protective Order Pending Resolution of Motion
to Dismiss (Chancery). See also D.I. 53, Defendants’ Motion to Dismiss Tr., March 22, 2024 at
129:16-19 (Matrix Parent, Inc. v. Audax Management Co., Case No. N23C-10-212 MAA CCLD)
(referencing the fact the Court granted a stay).
13
and 13, 2024, the parties submitted their respective slides presented during oral

argument.64

III. STANDARD OF REVIEW

The standard governing a motion to dismiss pursuant to Court of Chancery

Rule 12(b)(6) is well-settled.65 On such a motion:

(i) all well-pleaded factual allegations are accepted as true; (ii) even
vague allegations are ‘well-pleaded’ if they give the opposing party
notice of the claim; (iii) the Court must draw all reasonable inferences
in favor of the non-moving party; and (iv) dismissal is inappropriate
unless the plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances susceptible of proof.66
The court does not, however, “accept as true conclusory allegations ‘without specific

supporting factual allegations,’”67 or draw unreasonable inferences.68

IV. ANALYSIS

Defendants’ Motion makes three general arguments.69 First, the Motion

argues none of the Defendants can be held liable for the alleged breaches of the

64
See D.I. 82, Exhibit A to Letter to Judge Adams from Charles P. Wood enclosing the PowerPoint
slides Plaintiff AG Mobile Holdings, L.P. presented during the Court’s October 30, 2024 hearing
on Defendants’ Motion to Dismiss the Verified Amended and Supplemental Complaint; D.I. 83,
Exhibit A to Letter to Judge Adams from Michael A. Laukaitis transmitting courtesy copies of
presentation used at hearing on Defendants’ Motion to Dismiss the Verified Amended and
Supplemental Complaint.
65
In re General Motors (Hughes) Shareholder Litigation, 897 A.2d 162, 167-68 (Del. 2006).
66
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (internal quotations omitted).
67
In re General Motors, 897 A.2d at 168 (quoting In re Santa Fe Pac. Corp. S’holder Litig., 669
A.2d 59, 65-66 (Del. 1995)).
68
Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001) (the Court must accept only “reasonable
inferences that logically flow from the face of the complaint” and “is not required to accept every
strained interpretation of the allegations proposed by the plaintiff.”).
69
See generally MTD.
14
Partnership Agreement, because the contract stipulated “the entity defendants would

have no liability, and . . . non-signatories are not liable for contract breach.”70

Second, Defendants argue the Amended Complaint fails to state a claim for any of

the counts asserted.71 Finally, Defendants argue Plaintiff’s “damages claims are not

well pleaded,” because Plaintiff “lacks standing to seek damages directly” and the

direct damages Plaintiff can seek fail to “adequately plead causation.”72 The Court

first addresses Defendants’ contract-based arguments, as the Court’s decision

regarding such arguments will dictate whether any Defendants can be liable based

on the Partnership Agreement’s language.73

A. The Amended Complaint States a Claim for Breach of Section 6.3 of the
Partnership Agreement but the Remainder of Plaintiff’s claims Fail
Under Rule 12(b)(6).

70
Id. at 3, 14-18.
71
Id. at 18-48.
72
Id. at 48-56.
73
The Court notes Defendants’ Motion to Dismiss also challenges whether Plaintiff’s damages
claims should be dismissed as derivative or for lack of causation. MTD at 48-56. Many of
Defendants’ arguments regarding damages are necessarily subsumed by the Court’s analysis
concerning which claims are well-pled and which Defendants can be held liable. See Infra IV.A-
B. The Amended Complaint does not isolate Plaintiff’s requested damages by Count; rather it
asserts damages collectively. See Compl. Prayer for Relief. As discussed herein, only part of
Count I survives the Motion, and it is therefore not clear which damage claims are specific to the
part of Count I which survives the Motion. The Court does not separately address the Motion’s
arguments specific to damages but will entertain argument regarding damages as the case
progresses.
15
Defendants argue the Amended Complaint fails to state any claim.74 The

Court finds Plaintiff only states a claim with respect to Count I regarding the

exclusion of Plaintiff’s board member from the Special Committee.

1. The Amended Complaint Alleges Defendants Breached the
Partnership Agreement by Excluding Plaintiff’s Board Member from
the Special Committee.
Though pled as a single claim, Count I alleges breaches of two separate

sections of the Partnership Agreement.75 First, Plaintiff alleges Defendants breached

Section 6.3 of the Partnership Agreement by “establish[ing] [the] Special Committee

. . . without advising [Plaintiff] or allowing it to appoint at least one Audax

Manager[.]” Second, the Amended Complaint alleges Defendants breached Section

11.2(a) of the Partnership Agreement by “repeatedly refus[ing] to provide financial

documents and information requested by the Audax Managers,” related to the

Investigation.76

To state a claim for breach of contract, the complaint must allege “first, the

existence of the contract . . . ; second, the breach of an obligation imposed by that

contract; and third, the resultant damage to the plaintiff.”77 The complaint “need not

74
See MTD at 19-48.
75
See Compl. ¶¶ 116-132.
76
Id. ¶ 127.
77
VLIW Technology, LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).
16
plead specific facts to state an actionable claim;”78 rather, “[t]he principal issue at

the pleading stage is the existence of a contractual violation.”79

In interpreting the Partnership Agreement, the court applies well-established

principles of contract interpretation. As a general matter, “the parties to a Delaware

limited partnership have the power and discretion to form and operate a limited

partnership in an environment of private ordering according to the provisions in the

limited partnership agreement.”80 “Delaware courts respect the terms of a

partnership’s governing agreement[],” and recognize parties can “limit liabilities

[and] waive fiduciary duties.”81 The court, therefore, interprets such agreements “to

give maximum effect to the principle of freedom of contract[.]”82 When analyzing

a partnership agreement, courts apply the general principles of contract

interpretation, including ensuring no portion is rendered “illusory or meaningless.”83

Delaware courts “adhere[] to the objective theory of contract interpretation,

meaning the court must attempt to give effect to the parties’ shared expectations at

the time they entered into those agreements and interpret the contractual language in

78
Id. at 611.
79
Cygnus, 302 A.3d at 454 (citing Garfield v. Allen, 277 A.3d 296, 328 (Del. Ch. 2022)).
80
Gotham Partners, L.P. v. Hallwood Realty Partners, L.P., 817 A.2d 160, 170 (Del. 2002).
81
Boardwalk Pipeline Partners, LP v. Bandera Master Fund LP, 288 A.3d 1083, 1108–09 (Del.
2022).
82
6 Del. C. § 17-1101(c).
83
See Sonitrol Holding Co. v. Marceau Investissements, 607 A.2d 1177, 1183 (Del. 1992).
17
the manner that ‘would be understood by an objective, reasonable third party.’”84

The court interprets “‘clear and unambiguous terms according to their ordinary

meaning’ and does not consider evidence outside a contract’s four corners unless the

contract is ambiguous.”85 A contractual provision is only ambiguous if it is

susceptible to two or more meanings.86

In reading contracts, “interpretations that are commercially unreasonable or

that produce absurd results must be rejected.”87 An interpretation is absurd if it

produced “a result ‘that no reasonable person would have accepted when entering

the contract.’”88 Courts, “including the Delaware Supreme Court and the United

States Supreme Court, have invoked the absurdity doctrine when interpreting

[language] that [is] clear on [its] face.”89 Rather than focusing on a provision’s text,

the absurdity analysis “consider[s] the practical consequences of each [proffered]

84
Bay Point Capital Partners L.P. v. Fitness Recovery Holdings, LLC, 2021 WL 55787055, at *4
(Del. Super. Nov. 30, 2021) (quoting Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d
688, 696 (Del. 2019)).
85
Id. (quoting GMG Capital Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 780
(Del. 2012)).
86
Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012).
87
Manti Hldgs, LLC v. Authentix Acquisition Co., Inc., 261 A.3d 1199, 1211 (Del. Sept. 13, 2021);
see Osborn v. Kemp, 991 A.2d 1153, 1160 (Del. 2010)).
88
Weinberg v. Waystar, Inc., 294 A.3d 1039 (Del. 2023) (quoting Manti Hldgs, 261 A.3d at 1208).
89
In re Last Will and Testament of Palecki, 920 A.2d 413, 424 (Del. Ch. Apr. 26, 2007) (citing
Church of the Holy Trinity v. U.S., 143 U.S. 457, 465 (1892); Coastal Barge Corp. v. Coastal Zone
Indus. Control Bd., 492 A.2d 1242, 1246–47 (Del. 1985)); see Director of Revenue v. CAN
Holdings, Inc., 818 A.2d 953, 958 (Del. 2003) (“[e]ven though the language of the statute is plain
and unambiguous, we must decide whether a literal reading of § 1903 leads to unreasonable
results.”).
18
reading . . . in deciding which interpretation was intended[.]”90 The court rejects

any interpretation which “produces results that are so at odds with accepted public

policy and fundamental fairness,” as to suggest the drafters committed “scrivener’s

error.”91 Based on that standard, courts have applied to absurdity doctrine to reject

interpretations of unambiguous text.92

Contract interpretation issues “can be pure questions of law that are

appropriate to consider on a motion to dismiss.”93 “If two opposing interpretations

90
In re Last Will and Testament of Palecki, 920 A.2d at 423.
91
Id. at 424.
92
See Bay Point, 2021 WL 55787055, at *5 (“Taken to its logical conclusion, Fitness’s
interpretation would allow Peak and Fitness to rewrite all the essential terms in the parties’
agreement, including reducing the interest rate to zero, extending the maturity date into perpetuity,
or reducing the principal amount owed under the Notes.”); Manti Hldgs, 261 A.3d at 1211-12
(“[t]he Petitioners’ interpretation is commercially unreasonable. It is difficult to imagine that
reasonable parties would draft a contractual provision that would require stockholders to “refrain”
from exercising a right that would never be ripe to exercise. And it is incredible that the parties
included the Refrain Obligation to block appraisal rights only in a roundabout fashion by stopping
stockholders from taking the preliminary steps needed to perfect their appraisal claims.”).
Delaware courts have also applied the absurdity doctrine to reject proffered interpretations of a
limited partnership agreement. See, e.g., Stockman v. Heartland Indus. Partners, L.P., 2009 WL
2096213, at *14-15 (Del. Ch. July 14, 2009) (applying the absurdity doctrine to reject an
interpretation of a partnership agreement that would “force even successful Indemnitees to
demonstrate their compliance with their legal and fiduciary duties, even though such a reading
leads to an inefficient result at odds with Delaware's public policies for indemnification.”).
Delaware courts, however, appear more skeptical of the absurdity doctrine’s applicability in the
context of limited partnership agreements given the DRUPLA “gives ‘maximum effect to the
principle of freedom of contract.’” Dieckman v. Regency GP LP, 155 A.3d 358, 366 (Del. 2017)
(quoting 6 Del. C. § 17–1101(c)). Courts are therefore more likely to invoke the absurdity doctrine
when a “literal reading” would violate the DRUPLA. See Techmer Accel Holdings, LLC v. Amer,
2010 WL 5564043, at *8 (Del. Ch. Dec. 29, 2010) (“Under a literal reading . . . a limited
partnership could largely avoid the limitations of § 17–804 by a course of action resembling what
Crescent did here.”). In Techmer the court explicitly considered analogues provisions of the DGCL
when interpreting “skeletal” portions of the DRULPA. Id. at *7-9.
93
MCG Capital Corp. v. Maginn, 2010 WL 1782271, at *8 (Del. Ch. May 5, 2010).
19
are reasonable,” however, “the Court may not choose between them” on a motion to

dismiss.94 On a contractual interpretation issue, “[d]ismissal. . . is proper only if the

defendants’ interpretation is the only reasonable construction as a matter of law.”95

a. The Amended Complaint States a Claim for Breach of Section 6.3
of the Partnership Agreement.
Section 6.3 states, in pertinent part, that “[f]or so long as Audax is entitled to

appoint at least one Audax Manager . . . each committee of the Board shall have at

least one (1) Audax Manager.”96 There is no dispute Plaintiff was entitled to, and

did, have at least one Manager on the Partnership’s Board throughout the

Investigation.97 The parties also do not dispute that at least some Defendants

“refus[ed] to seat an Audax Manager on the [Special] [C]ommittee when [it was]

created and afterward.”98 Rather, Defendants argue they were entitled to “exclud[e]

Audax’s Managers” to “preserve independence,” because the Special Committee’s

purpose was “to investigate allegations of pre-sale wrongdoing.”99 Defendants

assert Section 6.3 “cannot reasonably be read to say – [] that Audax must have a role

to play,” in a committee conducting “an investigation into allegations of fraud

94
Prokupek v. Consumer Capital Partners LLC, 2014 WL 7452205, at *3 (Del. Ch. Dec. 30, 2014).
95
VLIW, 840 A.2d at 615 (emphasis in original).
96
Partnership Agreement § 6.3.
97
See MTD at 19-23 (challenging Plaintiff’s Section 6.3 claim, but not arguing Plaintiff was not
entitled to have a Manager on the Board when the Special Committee was created); MTD Reply
at 8-13 (same).
98
MTD Opp’n at 11; see MTD at 19-23 (challenging Plaintiff’s Section 6.3 claim, but not claiming
an Audax Manager was on the Special Committee); MTD Reply at 8-13 (same).
99
MTD at 20-21.
20
implicating Audax.”100 The Court may grant the Motion regarding Section 6.3 if

Defendants’ interpretation is the only reasonable reading.101 It is not.

Section 6.3’s text requires Plaintiff to have a Manager on “each committee of

the Board.”102 Delaware courts have equated the word “each,” with terms like

“every,” “each one,” and “all.”103 Based on that meaning, Section 6.3 requires

Plaintiff to have a Board member on every Board committee. Under that reading,

excluding Plaintiff’s Board member from the Special Committee would breach

Section 6.3.

Defendants argue Plaintiff’s reading of the Partnership Agreement leads to an

“absurd” result, essentially invoking the implied covenant to attempt to dismiss

Plaintiff’s claims.104 Defendants, however, provide no precedential support for the

100
Id.
101
Fortis Advisors LLC v. Stora Enso AB, 2018 WL 3814929, at *3 (Del. Ch. Aug. 10, 2018) (“The
court may grant a motion to dismiss based on contractual language, however, only if the contractual
language is unambiguous—meaning, the language is susceptible of only one reasonable
interpretation.”).
102
Partnership Agreement § 6.3 (emphasis added).
103
See In re GGP, Inc. Stockholder Litigation, 282 A.3d 37, 78 (Del. 2022) (“[t]he use of the word
‘any’ . . . means ‘each’ or ‘every.’”) (Montgomery-Reeves, J., concurring in part, dissenting in
part); Maverick Therapeutics, Inc. v. Harpoon Therapeutics, Inc., 2020 WL 1655948, at *22 (Del.
Ch. Apr. 3, 2020) (“‘each’ as a pronoun, which merely means ‘each one.’”).
104
Defendants argue “it would have been ‘obvious and provocative’ for the [Partnership
Agreement] to say that ‘if Audax is suspected of fraud, the partnership would have the power to
conduct an independent investigation without Audax’s involvement.’” MTD Reply at 8-10
(quoting MTD at 22-23; Dieckman, 155 A.3d at 368). While acknowledging a limited partnership
“can contract away nearly anything,” Defendants contend the Court can “‘easily impl[y]’” a carve-
out into Section 6.3 (which prohibits Plaintiff’s membership on the Special Committee), “because
‘the parties must have intended [it] and have only failed to express [it] because [it was] to obvious
to need expression.’” Id. at 9 (quoting Dieckman, 155 A.3d at 368 (alterations in original)
(emphasis added). In arguing the Court should depart from Section 6.3’s “‘plain meaning,’”
Defendants rely on numerous cases which invoke the absurdity and implied covenant doctrines.
21
notion that the implied covenant can be used like a cannon of contract interpretation

to reject a reasonable reading of Section 6.3. While a Plaintiff would not typically

have a voice on a committee investigating its own alleged fraud, a contrary

contractual interpretation does not rise to the level of absurdity needed to overcome

a rational reading of Section 6.3’s text.105 The Court will not use the absurdity

doctrine to depart from the text of the Partnership Agreement, drafted by

sophisticated parties, on a motion to dismiss.106 Reading Section 6.3 to require

Plaintiff to have a member on the Special Committee is at least a plausible

construction. Dismissal of Plaintiff’s Section 6.3 claim is therefore improper. 107

Id. at 9-10 (quoting Lipson v. Anesthesia Servs., P.A., 790 A.2d 1261, 1278 (Del. Super. 2001))
(citing Dieckman, 155 A.3d at 368 (evaluating implied covenant claims in the limited partnership
context); Manti Hldgs, 261 A.3d at 1208 (“Delaware courts read contracts as a whole, and
interpretations that are commercially unreasonable or that produce absurd results must be
rejected.” (emphasis added)); New Enter. Assocs. 14, L.P. v. Rich, 292 A.3d 112, 138 (Del. Ch.
2023) (applying the absurdity doctrine to reject an interpretation “[o]nly a litigator reading a
contract after a dispute has arisen . . . could embrace.”)).
105
Green Tree Financial Corp. v. Stone, 2000 WL 1610637, at *4 (Del. Super. Sept. 29, 2000)
(“judicial construction in cases of perceived absurd or unjust results flowing from a literal
interpretation of language ‘is a rule that is cautiously applied.’” (quoting Magill v. North American
Refractories Co., 128 A.2d 233, 236 (Del. 1956))); see Cantor Fitzgerald, L.P. v. Ainslie, 312 A.3d
674, 692 (Del. 2024) (noting “[a]s the Court of Chancery recognizes, 6 Del. C. § 17-306 permits
partnership agreements to contain consequences that would be unavailable in a standard
commercial contract[.]” (internal quotations omitted)).
106
See Cantor Fitzgerald, 312 A.3d at 692-93 (strictly enforcing the terms to which “sophisticated
parties agree in a limited partnership agreement[.]”).
107
Id. ¶¶ 123-125. The Amended Complaint also argues Defendants breached Section 6.3 “by
refusing to provide the Audax Managers all documentation and communications sent, received by,
or involving the purported Special Committee[.]” Id. ¶ 126. The basis of Plaintiff’s entitlement to
information under Section 6.3 is allegedly its right to place a manager on the Special Committee.
Id. Section 6.3, however, does not provide any information-based rights, unlike other provisions
expressly conveying the right to access records. See Partnership Agreement §§ 10.2, 11.2. The
Court finds Section 6.3 does not provide Plaintiff the information-based rights it seeks.
22
The Court DENIES Defendants’ Motion to Dismiss the portion of Count I

concerning Section 6.3.

b. The Amended Complaint Does Not State a Claim for Breach of
Section 11.2(a).
Section 11.2(a) provides, “[t]he Partnership shall deliver to each Manager

periodic financial statements, annual audited financial statements, and annual

budgets and other financial reports requested by the Board.”108 Plaintiff argues

“Defendants breached this provision when they repeatedly refused to provide

financial information and reports to Audax Managers.”109 Plaintiff specifically

challenges the Special Committee’s refusal to provide Plaintiff, or its Board member,

with documents related to the Investigation.110 Plaintiff argues the requested

documents fall within Section 11.2(a)’s “other financial reports” language.111

The only reasonable interpretation of Section 11.2(a)’s “other financial

reports” language does not include the information Plaintiff requested.112 While the

Court must give each term independent meaning,113 “Delaware courts interpret

108
Partnership Agreement § 11.2(a).
109
MTD Opp’n at 18-19 (citing Compl. ¶¶ 88, 127-128).
110
Compl. ¶¶ 88, 127-128.
111
MTD Opp’n at 21 (emphasis in original).
112
See Fortis Advisors, 2018 WL 3814929, at *3.
113
See Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393, 396-97 (Del. 2010).
23
words ‘in the context of words surrounding them’ and use specific examples to

construe general language.”114

Here, the phrase “other financial reports” is a general term. The Court

therefore reads that term in the context of the surrounding specific examples. Such

a construction is appropriate given the lack of any comma separating “annual

budgets and other financial reports.”115 Reading “other financial reports” in that

context, it is clear the term does not include the Special Committee information

Plaintiff requests.116 The specific examples in Section 11.2(a) are all reports on a

company’s general financial condition prepared in the ordinary course of business.

Plaintiff does not allege the Special Committee documents related to the

Investigation were prepared in the ordinary course of business.117 Nor are there any

allegations that the requested information related to Mobileum’s general financial

status, rather, the Special Committee discussed the alleged accounting

irregularities.118 Thus, the information related to the Investigation Plaintiff requested

from the Special Committee does not constitute “other financial reports” under

114
Tetragon Financial Group Limited v. Ripple Labs Inc., 2021 WL 1053835, at *5 (Del. Ch. Mar.
19, 2021) (quoting Agar v. Judy, 151 A.3d 456, 473 (Del. Ch. 2017)).
115
Partnership Agreement § 11.2(a).
116
Plaintiff requests “all documents received by counsel for the Special Committee, and all
communications with counsel for the Special Committee . . . the entirety of [the Special
Committee’s counsel’s] legal file . . . and . . . all financial information requested by the Audax
Managers.” Compl. Prayer for Relief ¶ e.
117
See generally id.
118
See generally id.
24
Section 11.2(a). Plaintiff’s allegation that Defendants withheld the requested

information does not state a claim for breach of the Partnership Agreement. The

Court GRANTS the Motion as it relates to the Section 11.2(a) portion of Count I.119

2. The Amended Complaint Does Not Allege a “Transaction” Occurred
which Breached Section 8.17.
Count II of the Amended Complaint alleges Defendants breached Section 8.17

of the Partnership Agreement.120 Section 8.17 prohibits H.I.G. from “engag[ing] in

any transaction . . . with the Partnership,” except in certain circumstances.121 The

Amended Complaint articulates several actions which Plaintiff alleges breached

Section 8.17.122 The crux of the parties’ arguments related to Count II is whether

119
The Court notes its holding that the Amended Complaint does not state a claim for breach of
Section 11.2(a) seems to support Defendants’ argument concerning Section 6.3. Infra IV.A.1.b.
That is because Plaintiff’s primary theory of liability based on Section 11.2(a) is “the exclusion of
an Audax Manager from the Special Committee . . . depriv[ed] [Plaintiff] of the documentation
and information shared with or created by the purported Special Committee (on which an Audax
Manager is contractually entitled under Section 6.3 of the Limited Partnership Agreement to sit).”
Compl. ¶ 128. Even if Plaintiff was improperly excluded from the Special Committee, Section
11.2(a) would not necessarily entitle Plaintiff to the requested information. See Supra n.116
(detailing the information Plaintiff seeks pursuant to Section 11.2(a)). This is especially true given
Section 11.2(a) concerns the Managers’ access to a specific type of information. See Partnership
Agreement § 11.2(a) (“The Partnership shall deliver to each Manager periodic financial
statements, annual audited financial statements, and annual budgets and other financial reports
requested by the Board.” (emphasis added); Supra IV.A.1.b (interpreting Section 11.2(a)’s text)).
Regardless, the Court concludes its rulings are true to the Partnership Agreement’s text, which “is
the cornerstone of a Delaware limited partnership, and effectively constitutes the entire agreement
among the parties with respect to . . . operation and termination of, the limited partnership.” Elf
Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 291 (Del. 1999) (quoting Martin I. Lubaroff & Paul
Altman, Delaware Limited Partnerships § 1.2 (1999)).
120
MTD at 29-37.
121
Partnership Agreement § 8.17 (emphasis added).
122
Compl. ¶ 140 (“In violation of Section 8.17 of the Limited Partnership Agreement, each of the
Defendants nevertheless caused the Partnership to enter into a related party transaction with H.I.G.,
including but not limited to: the establishment of a Special Committee intended solely to benefit
the H.I.G. Defendants and to the detriment of the Partnership and Mobileum’s employee and
25
any of the challenged actions was a “transaction . . . with the Partnership.”123 Using

fundamental interpretive principles, the Court finds the answer is no.

The Partnership Agreement does not define “transaction.” Accordingly, the

Court turns to dictionary definitions to ascertain that term’s meaning.124 Multiple

dictionaries define “transaction” to mean “an occasion when someone buys or sells

something” or “the process of doing business.”125 Based on that definition, the only

“transaction” the Amended Complaint challenges is “the engagement of counsel

purportedly representing the Special Committee, all expenses of which were paid

for by the Partnership[.]”126 Even if the hiring of counsel was a “transaction,” it does

not fall within Section 8.17’s language because the hiring of counsel was not a H.I.G.

action “with the Partnership.”127 Dictionaries demonstrate “with” is “used as a

customer relations; the engagement of counsel purportedly representing the Special Committee,
all expenses of which were paid for by the Partnership; the production of documents, analysis, and
the work product of the sham investigation to the H.I.G. Defendants and their separate counsel;
the direct involvement of H.I.G.’s counsel in the Special Committee’s investigation; and the use
of the sham investigation in negotiations with Mobileum’s lenders for H.I.G.’s self-interested aim
of deflecting responsibility for running Mobileum’s business into the ground.”).
123
Partnership Agreement § 8.17.
124
See Stream TV Networks, Inc. v. SeeCubic, Inc., 279 A.3d 323, 339 (Del. 2022) (“Court[s] often
looks to dictionaries to ascertain a term’s plain meaning.” (internal quotation omitted)).
125
Transaction, CAMBRIDGE BUSINESS ENGLISH DICTIONARY (1st ed. 2011); see Transaction, THE
BRITANNICA DICTIONARY (2024) (“a business deal: an occurrence in which goods, services, or
money are passed from one person, account, etc., to another” and “the act or process of doing
business with another person, company, etc.: the act or process of transacting business.”);
Transaction, MERRIAM-WEBSTER (2024) (“something transacted especially: an exchange or
transfer of goods, services, or funds.”).
126
Compl. ¶ 140.
127
Partnership Agreement § 8.17.
26
function word to indicate a participant in an action, transaction, or arrangement.”128

This definition shows a transaction only falls within Section 8.17 if both H.I.G. and

the Partnership were participants. There are no allegations H.I.G. participated in the

Special Committee’s hiring of counsel.129 The Amended Complaint therefore does

not allege a transaction covered by Section 8.17 occurred, such that it states a claim

Defendants breached that provision. The Court GRANTS Defendants’ Motion to

Dismiss Count II.

3. Plaintiff Does Not State a Claim for Breach of the Implied Covenant.
Count III of the Amended Complaint alleges a breach of the implied covenant

of good faith and fair dealing. The implied covenant is a gap-filling mechanism to

address issues “neither party anticipated.”130 While the implied covenant “is

inherent in all contracts,” its role is limited to ensuring the parties do not “frustrat[e]

the fruits of the bargain.”131 Thus, “[i]t does not apply when the contract addresses

the conduct at issue.”132 For a plaintiff to state a breach of the implied covenant, the

plaintiff must identify some contractual gap for the covenant applies.133

128
E.g., With, MERRIAM-WEBSTER (2024).
129
See generally Compl.
130
Nemec v. Shrader, 991 A.2d 1120, 1125 (Del. 2010).
131
Baldwin v. New Wood Res. LLC, 283 A.3d 1009, 1116 (Del. 2022).
132
Nationwide Emerging Managers, LLC v. Northpointe Holdings, LLC, 112 A.3d 878, 896 (Del.
2015).
133
Miller v. HCP & Co., 2018 WL 656378, at *2 (Del. Ch. 2018), aff’d sub nom., Miller v. HPC
Trumpet Invs., LLC, 194 A.3d 908 (Del. 2018).
27
Here, the Amended Complaint’s implied covenant claim focuses on three sets

of allegations: (1) Audax was allegedly sidelined from management;134 (2) H.I.G.

allegedly conducted a “sham investigation” and excluded Audax;135 and (3) H.I.G.

supposedly mismanaged Mobileum.136 After Defendants challenged each of those

allegations,137 Plaintiff only substantively reaffirmed its argument that “Defendants

breached the implied covenant of good faith and fair dealing by routinely making

fundamental business decisions without any Board consultation, deliberation, or

participation.”138 “[F]ail[ure] to respond to [an] argument” made in a motion to

dismiss constitutes “waive[r].”139 As a result, the only implied covenant claim

before the Court is related to Defendants’ alleged failure to consult the Board, and

by extension Plaintiff, before making managerial decisions.

134
Compl. ¶¶ 148, 152.
135
Id. ¶¶ 149-50.
136
Id. ¶¶ 147, 153.
137
MTD at 37-42.
138
MTD Opp’n at 38-46. Plaintiff’s only response regarding its implied covenant claim related to
the Investigation, Defendants’ alleged mismanagement, and Plaintiff’s requests for information is
a conclusory restatement of the Amended Complaint’s allegations, relegated to a footnote. Id. at
46 n. 19 (“Defendants also violated the implied covenant by conducting a bad-faith, sham
investigation as discussed at length in Part I. And in the alternative, Defendants breached the
implied covenant by withholding information about the sham investigation, when Audax
reasonably believed it would receive the same information other Managers received about the
investigation.”).
139
Bocock v. Innovate Corp., Inc., 2022 WL 17101448, at *2 (Del. Ch. Nov. 22, 2022); see Reith
v. Lichtenstein, 2019 WL 2714065, at *19 (June 28, 2019) (“Plaintiff did not address aiding and
abetting at all in his brief or at argument. By failing to respond, Plaintiff abandoned this claim. It
is dismissed.”); MHS Capital LLC v. Goggin, 2018 WL 2149718, at *16 (Del. Ch. May 10, 2018)
(ruling plaintiff's failure to respond to arguments raised in support of motion to dismiss meant it
“abandoned every claim” not addressed); see also Emerald Pr’s v. Berlin, 726 A.2d 1215, 1224
(Del. 1999) (“Issues not briefed are deemed waived.”).
28
Plaintiff maintains the Partnership Agreement “implicitly required Defendants

to consult with Audax Managers before making Board-level decisions that could

significantly impact Mobileum.”140 This obligation allegedly arises from the

Partnership Agreement granting “Audax two Board seats and representation on each

committee.”141 Plaintiff argues the Partnership Agreement does not have a provision

requiring Defendants to consult the Board, because it was “obvious . . . the parties

must have intended” such a result.142 Thus, Defendants’ alleged failure to consult

the Board before making major changes at Mobileum “frustrated the purpose” of

those provisions.143 That conclusion, however, ignores the Partnership Agreement’s

robust allocation of unilateral managerial rights to Defendants.

The Partnership Agreement outlines the parties’ managerial rights and

responsibilities regarding the Partnership in detail.144 Article VI emphasizes H.I.G.’s

ability to direct the Partnership.145 Because the Partnership Agreement establishes

140
MTD Opp’n at 40 (citing Compl. ¶¶ 52, 55).
141
Id.
142
Id. at 41.
143
Id. at 38-39.
144
See Partnership Agreement Article VI – “Management of the Partnership.”
145
Id. §§ 6.11 (stating “one H.I.G. Manager shall be required in order to establish a quorum at any
[Board] meeting.”), 6.12 (establishing the H.I.G. Managers are “collectively entitled to a number
of aggregate votes on any matter submitted to a vote at a meeting of the Board or any committee
thereof equal to” a majority of the votes available to be cast.); 6.13 (stating “the affirmative vote
of the elected managers holding a majority of the total votes shall be the act of the Board.”), 6.15
(establishing “[a]ny action required to be, or which may be, taken by the Board or any committee
thereof may be taken without a meeting, without prior notice and without a vote if a consent in
writing setting forth the action so taken is signed by the elected managers or committee members,
as applicable, holding a majority of the total votes that would be eligible to be cast at such
meeting.”).
29
the “H.I.G. Managers” will necessarily have a majority of votes for any Board

resolution,146 Defendants can control the Partnership’s actions without calling a

Board meeting or vote.147 The Partnership Agreement’s text, therefore, contradicts

Plaintiff’s suggestion that Defendants were required to consult its Board Member

before the Board made major managerial decisions. Plaintiff’s argument that such a

provision was “obvious[ly]” part of the parties’ bargain,148 is therefore unconvincing.

Where sophisticated parties addressed a certain contractual issue, the Court

will not “imply terms that parties failed to include but which could have been

drafted.”149 The Partnership Agreement is not silent on the parties’ managerial

rights.150 The Partnership Agreement gives Plaintiff the right to appoint two Board

members, attend and call meetings, and vote,151 but not the right to be consulted

before the Board directed the Partnership’s actions. As discussed above, the

Partnership Agreement’s text suggests such a right was not part of the parties’

bargain. Accordingly, there is no “gap” in the Partnership Agreement related to the

Partnership’s management, such that the implied covenant applies. The Court will

not use the implied covenant to rewrite the parties’ agreement.152 The Amended

146
Id. § 6.12.
147
See id. §§ 6.12, 6.15.
148
MTD Opp’n at 41.
149
Baldwin, 283 A.3d at 1117.
150
See Partnership Agreement Article VI.
151
Id. §§ 6.2(b), 6.7, 6.12.
152
Baldwin, 283 A.3d at 1116-17.
30
Complaint fails to state a claim for breach of the implied covenant. Defendants’

Motion to Dismiss is GRANTED with respect to Count III.

B. The Complaint only States a Claim for Breach of Contract Against the
Individual Defendants.
Having found the Amended Complaint only states a claim for the Section 6.3

portion of Count I, the Court next considers which Defendants can be held liable for

the alleged breach. The Motion advances a variety of contentions to ultimately argue

no Defendant can held liable for the alleged breach.153 Plaintiff resists Defendants’

argument and maintains all Defendants can be held liable.154 The Court concludes

the Amended Complaint only states a claim for breach of Section 6.3 against the

Individual Defendants.

1. The Partnership Agreement Prevents Plaintiff’s Claim against the
Limited Partners.
The unambiguous terms of Section 3.2(a) provide Limited Partners H.I.G. and

H.I.G. Tech cannot be liable for any breach of the Partnership Agreement.155 Section

3.2(a) states, “no Limited Partner . . . shall have any personal liability whatsoever . .

whether to the Partnership [or] to any of the other Partners . . . for any losses of the

Partnership.” This provision is consistent with the Delaware Revised Uniform

Limited Partnership Act which “allows a partnership to eliminate ‘and any all

153
See MTD at 3, 14-18.
154
MTD Opp’n at 30-38.
155
MTD at 14-16.
31
liabilities for breach of contract and breach of duties (including fiduciary duties) of

a partner or other person to a limited partnership[.]’”156

This provision also comports with Partnership Agreement Sections: (1) 6.1

which states that “the Board shall make all decisions and take all actions for the

Partnership which are necessary or appropriate to carry out the Partnership’s

business and purpose;157 and (2) 8.3, which states that “No Partner or other Holder.

. .shall have the authority or power to represent or act for or on behalf of the

Partnership, to do any act that would be binding on the Partnership, or to make any

expenditures or incur any obligations on behalf of the Partnership.”158 While the

Partnership Agreement gives the Special Limited Partner certain managerial

powers,159 it also states that additional authority does not abrogate limited liability.160

Plaintiff does not dispute Section 3.2(a) eliminates Limited Partners’ liability

for Partnership obligations, but asserts that boilerplate provision is not a broader

waiver of any cause of action against Limited Partners.161 Plaintiff notes the

Partnership Agreement waives liability “[e]xcept as expressly set forth in this

156
Boardwalk, 288 A.3d at 1108 (quoting 6 Del. C. § 17-1101(f)).
157
See Partnership Agreement § 6.1.
158
Id. § 8.3.
159
See Partnership Agreement § 6.1 (establishing the powers of the Special Limited Partner to
consult the General Partner and manage the Partnership jointly with the General Partner).
160
See id. § 9.1. See also id. § 3.2(a) (absolving all “Limited Partner[s] [of] . . . any personal
liability whatsoever[,]” without exception).
161
MTD Opp’n at 31-32.
32
Agreement,” and permits liability for bad-faith actions.162 Because the Amended

Complaint does not seek to hold Defendants liable for the Partnership’s obligations,

but for bad-faith breach of contract, Plaintiff argues Section 3.2(a) does not absolve

H.I.G. or H.I.G. Tech of potential liability.163

Plaintiff’s reading of the Partnership Agreement cannot be accepted. As the

Supreme Court of Delaware recently held, “Delaware courts respect the terms of a

partnership’s governing agreements to preserve the maximum flexibility of

contract.”164 Here, the parties did just that – the Partnership Agreement contained

broad limitations of liability for the Limited Partners, while also severely limiting

the Limited Partners’ ability to participate in management and bind the Partnership.

Plaintiff was “put on notice” when it signed the Partnership Agreement and cannot

use creative pleading to attempt to put the Limited Partners on the hook for actions

they cannot actually take pursuant to the Partnership Agreement.165

162
Partnership Agreement §§ 3.2(a), 6.17.
163
MTD Opp’n at 31-32.
164
Boardwalk, 817 A.3d at 1108-09 (internal quotations and citations omitted).
165
See id. at 1109 (“Our strict approach to contract interpretation and enforcement puts investors
on notice regarding the primacy of partnership agreements. . . .”) (internal citations and quotation
omitted). Plaintiff also makes a “sky is falling” argument that Defendants’ reading, “basically
leaves no one – according to them, no one that can be liable for a breach of 6.3 even though the
right was clearly breached. That can’t be the law.” D.I. 95, Defendants’ Motion to Dismiss Tr.,
Oct. 30, 2024 at 66:10-13. As this Court has previously held, however, “[t]he partners may use
their partnership agreement to order the relations between them and eliminate ‘any and all
liabilities for breach of contract and breach of duties (including fiduciary duties)’ that would
otherwise arise.” Seibold v. Camulos Partners LP, 2012 WL 4076182, at *10 n. 97 (Del. Ch. Sept.
17, 2012) (quoting 6 Del. C. § 17-1101(d)). This is precisely what the parties agreed to here. See
Exit Strategy, LLC v. Festival Retail Fund BH, L.P., 2023 WL 4571932, at *8 (Del. Ch. July 17,
2023) (“[t]he DRULPA also permits the partnership to replace [fiduciary duties] with contractual
33
Plaintiff also cites to Partnership Agreement Sections 6.3, 6.17(a), 8.17, and

11.2(a) as exceptions to the broad language in Section 3.2(a). None of these

provisions set forth applicable exceptions to Section 3.2(a)’s otherwise expansive

grant of limited liability. Section 6.3 concerns the parties’ right to appoint managers

to the Partnership Board, but it does not discuss liability or mention the Limited

Partners.166 Section 11.2(a) does not mention the Limited Partners or liability.167

Section 8.17 restricts the ability of H.I.G. and its affiliates to transact with the

Partnership, and does not discuss any waiver of limited liability.168 Section 6.17(a)

broadens the Partnership Agreement’s grant of limited liability, and moreover, does

not reference the Limited Partners.169

Finally, with the exception of damages discussed in relation to the Individual

Defendants, the damages Plaintiff seeks would all be “Partnership” losses, including:

duties. . . . [therefore] [t]he appropriate contractual standard varies with the partnership
agreement’s precise language. One word can make all the difference.” (internal quotations omitted)
(citing Brinckerhoff v. Enbridge Energy Co., 159 A.3d 242, 252 (Del. 2017) (citing 6 Del. C. § 17-
1101(d)); Allen v. Encore Energy Partners, L.P., 72 A.3d 93, 100 (Del. 2013)).
166
See Partnership Agreement § 6.3.
167
See id. § 11.2(a).
168
See id. § 8.17.
169
See id. § 6.17(a).
34
(1) mismanagement of Mobileum and Matrix Topco GP;170 and (2) amounts

“wasted” by the Special Committee’s alleged “sham investigation.”171

For these reasons, Plaintiff cannot state a claim against the Limited Partners.

2. The Limited Partnership Agreement Prevents Plaintiff’s Claim
against the General Partner.

Defendants note Matrix Topco GP “irrevocably delegate[d] all of its rights and

powers” to manage the Partnership, to the Board.172 Defendants also argue Matrix

Topco GP’s status as a Partner, “makes clear that it would have no ‘authority or

power to represent or act for or on behalf of the Partnership[.]’”173 Because Matrix

Topco GP had no authority to direct, manage, or act for the Partnership, Defendants

maintain it “cannot be liable for breach[.]”174

Plaintiff acknowledges Matrix Topco GP’s delegation of authority, but

counters “[n]othing in the General Partner’s delegation in Section 6.1 purports to

eliminate its liability for contract breaches it directed that were performed by Board

members[.]”175 Plaintiff asserts the Amended Complaint alleges Matrix Topco GP,

170
Compl. ¶ 76 (“H.IG.’s mismanagement resulted in significant harm to Mobileum’s business.”);
¶¶ 60, 63, 76 (describing how Mobileum lost customers, and, as a result, Mobileum’s sales
suffered, and Mobileum’s revenue and profits were down); ¶¶ 147, 153 (H.I.G. “damage[d]
Mobileum’s business and business opportunities,” causing “severe damages to the business.”); see
also Kramer v. W. Pac. Indus., Inc., 546 A.2d 348, 353 (Del. 1988) (“A claim of mismanagement
resulting in corporate waste . . . represents a direct wrong to the corporation that is indirectly
experienced by all shareholders[,]” and, “thus, the wrong alleged is entirely derivative in nature.”)
171
Compl. ¶¶ 9, 129, 142.
172
Partnership Agreement § 6.1.
173
MTD at 16-17 (quoting Partnership Agreement § 3.3).
174
Id.
175
MTD Opp’n at 32.
35
along with other Defendants, “directed the Board to breach the [Partnership

Agreement].”176 Plaintiff similarly alleges Matrix Topco GP “participated in the

breaches directly and through its appointed Board members,” thus it can be held

liable for breach of contract.177

Defendants’ position is consistent with precedent and the Partnership

Agreement’s text. A fundamental principle of contract law is “[a] plaintiff only can

assert a breach of contract claim against a party that owed the pertinent obligation

under the agreement.”178 This Court has applied that principle to limited partnership

agreements.179 Moreover, “Delaware does not recognize a cause of action for aiding

and abetting a breach of contract.”180

Here, the Amended Complaint asserts contractual claims against Matrix

Topco GP.181 The Partnership Agreement, however, explicitly provides Matrix

Topco GP “irrevocably delegate[d] all of its rights and powers [to manage the

Partnership] under the Act pursuant to Section 17-403(c) thereof[,] and the Board

176
Id. (citing Compl. ¶¶ 1, 8, 11, 16, 82-89, 95).
177
Id. at 33 (citing Compl. ¶¶ 133-160).
178
In re P3 Health Group Holdings, LLC, 2022 WL 16548567, at *11 (Del. Ch. Oct. 31, 2022);
see Gotham Partners, 817 A.2d at 172 (“It is a general principle of contract law that only a part to
a contract may be sued for breach of contract.”).
179
See In re Kinder Morgan, Inc. Corp. Reorg. Litig., 2015 WL 4975270, at *5 (Del. Ch. Aug. 20,
2015) (dismissing a breach of a limited partnership agreement claim, asserted against an entity
which “did not owe the contractual obligation that the Complaint [sought] to enforce.”).
180
CMS Investment Holdings, LLC v. Castle, 2015 WL 3894021, at *13 (Del. Ch. June 23, 2015)
(citing Allen v. El Paso Pipeline GP Co., 2014 WL 8266199, at *22 (Del. Ch. June 20, 2014).
181
Compl. ¶¶ 116-155.
36
shall make all decisions and take all actions for the Partnership[.]”182 Given such a

broad delegation of authority, a general partner only remains liable for breach of a

partnership agreement where it retained a “duty to oversee its delegates.”183 Matrix

Topco GP’s delegation shows that the General Partner had neither oversight

responsibilities, nor any obligations regarding the Partnership’s management.

Because Plaintiff’s damage claims focus on the alleged mismanagement of the

Partnership,184 Matrix Topco GP cannot be liable for breach.

3. The Amended Complaint Does Not State a Claim Against the
Partnership.
Defendants assert the Partnership “is also an improper defendant[] . . .

[because] [t]here is no explanation for how the Partnership itself could be liable to

one of the limited partners, let alone for losses caused to itself.” 185 Plaintiff

maintains the Partnership is a proper defendant, because “[t]he Complaint alleges

that the Partnership participated in the breaches of the [Partnership Agreement].”186

Specifically, Plaintiff contends “[i]t would [] be ‘premature’ to dismiss . . . the

182
Partnership Agreement § 6.1.
183
Forsythe v. ESC Fund Management Co. (U.S.), Inc., 2007 WL 2982247, at *7-8 (Del. Ch. Oct.
9, 2007). Plaintiff cites Forsythe to argue a general partner “remain[s] liable for breach of
obligations it retained in the limited partnership agreement.” MTD Opp’n at 33. Forsythe does
not alter the analysis here. In Forsythe, the general partner delegated its managerial authority but
expressly retained a “duty to oversee its delegatees” which was “clearly stated in the Offering
Documents and the Partnership Agreement,” Forsythe, 2007 WL 2982247, at *8. Here, Matrix
Topco GP retained no such oversight authority, such that it can be held liable for Plaintiff’s breach
claims.
184
Compl. ¶¶ 9, 60, 63, 76, 129, 142, 147, 153.
185
MTD at 17.
186
MTD Opp’n at 34-35.
37
Partnership,” because the Amended Complaint alleges the non-Partnership

Defendants directed the Partnership to breach and “‘a potential remedy’ [sic] ‘may

involve’ the Partnership[.]”187 Given only Plaintiff’s Section 6.3 claim survives the

Motion,188 that argument is unconvincing.

Count I alleges Defendants breached Section 6.3 by excluding Plaintiff’s

Board member from the Special Committee.189 Section 6.3 states that the “Board”

determines committee membership in accordance with the limitations therein.190

The decision to exclude Plaintiff’s Board member from the Special Committee was

therefore made by the Board, not the Partnership. The Amended Complaint contains

no specific allegations regarding how the Partnership participated in, or was used by

Defendants to effectuate, that decision.191 As discussed above, most of Plaintiff’s

damages claims represent Partnership losses.192 The Amended Complaint does not

187
Id. (quoting Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP, 2019 WL 4927053,
at *21 (Del. Ch. Oct. 7, 2019).
188
Supra IV.A.
189
See Compl. ¶¶ 116-126.
190
Agreement § 6.3 (“[t]he Board may designate one (1) or more committees of the Board[.]”).
191
See generally Compl. See also El Paso Pipeline GP Company, L.L.C. v. Brinckerhoff, 152 A.3d
1248, 1260 (Del. 2016) (“[t]he reality that limited partnership agreements often govern the territory
that in corporate law is covered by equitable principles of fiduciary duties does not make all
provisions of a limited partnership agreement enforceable by a direct claim.”).
192
Supra IV.B.1.
38
state a claim for breach against the Partnership,193 and it is not premature to dismiss

the Partnership.194

4. Plaintiff States a Claim Against the Individual Defendants.

The Individual Defendants, as members of the Board which controls the

Partnership, can be held liable for the alleged breach of Section 6.3 of the Partnership

Agreement. As a preliminary matter, the Court notes Defendants’ argument to the

contrary is inconsistent with their position concerning the other entities. Defendants

argue the non-Individual Defendants cannot be liable for breach because the

Partnership Agreement gives the Board full authority to direct the Partnership.195

This contention conflicts with Defendants’ assertion that the “Individual Defendants

are not liable for contract breach as a matter of law,”196 given the Partnership

Agreement’s express delegation of all managerial authority to the Board.197

193
See Brinckerhoff, 152 A.3d at 1257-65 (holding a plaintiff could not assert claims against a
partnership for causes of actions dealing with losses the partnership itself experienced).
194
See In re CVR Refining, LP Unitholder Litigation, 2020 WL 506680, at *12-13 (Del. Ch. Jan.
31, 2020) (holding a cause of action did “not state a claim against the Partnership because the
General Partner did not cause the Partnership to take any action in connection with the [relevant
contractual right].”).
195
MTD at 14-17.
196
Id. at 17-18 (cleaned up).
197
Partnership Agreement § 6.1. The Partnership Agreement provides that the Board is comprised
of the individual appointed managers, which includes the Individual Defendants. See id. § 6.2.
Beyond the conflict discussed above, Defendants’ position also conflicts with its argument that the
non-Individual Defendants cannot be liable for breach of Section 6.3, because that provision only
applies to the Board. MTD Reply at 8. Accepting Defendants’ argument as true, the Individual
Defendants, as members of the Board, can be liable for any breach of Section 6.3.
39
Defendants’ contradictory arguments suggest the Individual Defendants may be

liable for a breach of the Partnership Agreement.

While true the Individual Defendants did not sign the Partnership

Agreement,198 that alone does not preclude their liability. A party “does not have to

be a signatory of a contract [] to become bound by it.”199 For a non-signatory to be

bound by a contract, they must “expressly or implicitly adopt[] the agreement.”200

The contract itself “must contemplate that non-signatories may adopt it.”201 Here,

based on the plaintiff-friendly motion to dismiss standard, that requirement is met.

The Partnership Agreement delegated all authority to manage the Partnership to the

Board.202 The Board, in turn, is comprised of “Managers,” some of whom are listed

in the Partnership Agreement.203 Based on those provisions, the Partnership

Agreement contemplated non-signatories would adopt its provisions through their

membership on the Board. The Amended Complaint’s numerous allegations that the

Individual Defendants, through their Board membership, directed the Partnership,204

198
See generally Partnership Agreement.
199
American Legacy Foundation v. Lorillard Tobacco Co., 831 A.2d 335, 343 (Del. Ch. Jan. 30,
2003). See also In re Shorenstein Hays-Nederlander Theatres LLC Appeals, 213 A.3d 39, 57 (Del.
2019) (rejecting the argument, “only formal parties . . . are bound by the terms of the [operative
agreement].”).
200
American Legacy, 831 A.2d at 343-44 (citing Wiggins Ferry Co. v. Ohio & Mississippi Ry. Co.,
142 U.S. 396, 408 (1892)).
201
Id. at 344.
202
Partnership Agreement § 6.1.
203
Id. §§ 1.1, 6.2. The Partnership Agreement provides the listed Managers may change over time
at the discretion of the entity appointing said manager as their Board representative. Id. § 6.2.
204
Compl. ¶¶ 24-26, 29-30, 60, 82-87, 123, 150.
40
create a reasonable inference that the Individual Defendants adopted the Partnership

Agreement.205 The Complaint states a claim for breach of the Partnership Agreement

against the Individual Defendants.206

For the sake of clarity, the Court notes it takes no position regarding whether

Plaintiff would be entitled to its claimed damages should the Individual Defendants

be found liable for breach of Section 6.3. Given the Amended Complaint pleads

damages collectively,207 yet only Count I survives the Motion,208 it is unclear what

damages Plaintiff could recover for a breach of Section 6.3 alone. The Court need

not address that issue at this stage.209 Rather, it is sufficient the Amended Complaint

states a claim for breach of Section 6.3 against the individual defendants and gives

“Defendants adequate notice of the existence of damages.”210

205
The Amended Complaint’s allegations also give rise to a reasonable inference that the
Individual Defendants can be held liable for breach as a “successor” or “assign[]” of Matrix Topco
GP. See Compl. ¶¶ 46 (detailing the delegation of the GP’s authority to the Board), 50 (same);
Partnership Agreement § 17.7 (providing the Partnership Agreement “is binding on” any
“successors” or “assigns.”). This Court has held liability could exist under similar circumstances
and contractual language. In re CVR Refining, 2020 WL 506680, at *11 n.90 (holding a non-
signatory “did not become bound by [the partnership agreement’s] terms until the General Partner
assigned the [relevant rights] in January 2019.”).
206
Because the Court concludes the Amended Complaint states a claim for breach of the
Partnership Agreement against the Individual Defendants, Plaintiff’s tortious interference claim
(Count IV) necessarily fails. Kuroda, 971 A.2d at 884 (“[i]t is well settled that a party to a contract
cannot be held liable for [both] breaching the contract and for tortiously interfering with the
contract.”). Defendants’ Motion to Dismiss is GRANTED with respect to Count IV.
207
See Compl. Prayer for Relief.
208
See Supra IV.A.
209
I Am Athlete, LLC v. IM EnMotive, LLC, 2024 WL 4904685, at *7 (Del. Super. Nov. 27, 2024)
(“so long as Plaintiff sufficiently pleads facts which, if true, show the ‘existence’ of damages,
arguments as to the ‘amount’ of damages do not justify granting a dismissal.”).
210
Id. at *8 (emphasis added).
41
V. CONCLUSION
For the foregoing reasons, Defendants’ Motion to dismiss is GRANTED in

part, DENIED in part.

IT IS SO ORDERED.

42