Ketan Jhaveri v. K1 Investment Management LLC

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

KETAN JHAVERI, )
)
Plaintiff, )
)
v. ) C.A. No. 2024-0410-LWW
)
K1 INVESTMENT MANAGEMENT )
LLC, EDISON PARTNERS )
MANAGEMENT LLC, RAJ GOYLE, )
CHRISTOPHER SUGDEN, DAN )
HERSCOVICI, MIKE VELCICH, ERIC )
ELFMAN, ERIC SMITH, EDISON IX )
GP, LLC, EDISON PARTNERS IX, LP, )
K4 CAPITAL ADVISORS, L.P., K4 )
PRIVATE INVESTORS, L.P., ONIT )
HOLDINGS, INC., and ONIT, INC., )
)
Defendants. )

MEMORANDUM OPINION

Date Submitted: March 28, 2025
Date Decided: June 27, 2025

Ketan Jhaveri, pro se

Robert L. Burns & Nicholas F. Mastria, RICHARDS, LAYTON & FINGER, P.A.,
Wilmington, Delaware; Martin Roth & Nadia Abramson, KIRKLAND & ELLIS
LLP, Chicago, Illinois; Counsel for Defendants K1 Investment Management, LLC,
Mike Velcich, Eric Elfman, Eric Smith, K4 Capital Advisors, L.P., K4 Private
Investors, L.P., Onit Holdings, Inc., and Onit, Inc.

Robert L. Burns & Nicholas F. Mastria, RICHARDS, LAYTON & FINGER, P.A.,
Wilmington, Delaware; Kathleen Goodhart, COOLEY LLP, San Francisco,
California; Amanda Liverzani, COOLEY LLP, New York, New York; Defendants
Edison Partners Management LLC, Edison IX GP, LLC, Edison Partners IX, LP,
Christopher Sugden, and Dan Herscovici

Robert L. Burns & Nicholas F. Mastria, RICHARDS, LAYTON & FINGER, P.A.,
Wilmington, Delaware; Rishi Bhandari & Robert Glunt, MANDEL BHANDARI
LLP, New York, New York; Counsel for Defendant Raj Goyle

WILL, Vice Chancellor
This case, filed by a co-founder of Bodhala, Inc., involves a multitude of

claims stemming from Bodhala’s 2021 sale to Onit, Inc. The plaintiff, a significant

Bodhala stockholder at the time of the acquisition, was compensated with millions

of dollars in merger consideration. In exchange, he agreed to comprehensive

releases of Bodhala, Onit, and their related parties from all pre-closing claims.

Seven of the plaintiff’s claims—for breach of fiduciary duty, aiding and

abetting, and fraud—are barred by the unambiguous releases he executed. His claim

for breach of the implied covenant of good faith and fair dealing fails on the merits.

But his breach of contract claim is partly viable, and a related claim for tortious

interference with contract may proceed against all but one of the named defendants.

I. FACTUAL BACKGROUND

The following facts are drawn from the operative complaint, documents it

incorporates by reference, and matters subject to judicial notice.1

A. Bodhala’s Founding and Funding

Plaintiff Ketan Jhaveri and defendant Raj Goyle met in 1997 at Harvard Law

School.2 Thirteen years later, while Jhaveri was practicing at a prominent law firm,

1
Pl. Ketan Jhaveri’s Compl. Against K1, Edison, and Raj Goyle (Dkt. 1) (“Compl.”); see
In re Books A Million, Inc. S’holders Litig., 2016 WL 5874974, at *1 (Del. Ch. 2016)
(explaining that judicial notice may be taken of facts “not subject to reasonable dispute”
(citing In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 170 (Del. 2006))).
2
Compl. ¶ 3.
1
they reunited and founded Bodhala, Inc. as equal partners.3 With third co-founder

Brad Chick, Jhaveri and Goyle built Bodhala into a successful software-as-a-service

(SAAS) company used by top financial institutions to monitor legal spending.4

Jhaveri and Goyle served as directors and officers of Bodhala, with Jhaveri its

President and Goyle its Chief Executive Officer.5 Chick served as Chief Technology

Officer.6

Bodhala closed its Series A financing round in March 2020.7 Defendant

Edison Partners IX, LP (“Edison Partners IX”)—a fund managed by defendant

Edison IX GP, LLC (“Edison IX GP”)—invested.8 As a result of that financing,

Bodhala’s Board was expanded to five members in December 2020.9 Defendant

Daniel Herscovici—an Edison Partners Management LLC (“Edison Partners”)

3
Id. ¶¶ 1, 3. Bodhala was formed as a Delaware corporation. Id. ¶ 26. Jhaveri and Goyle
each originally granted themselves a 45% stake, with the remaining 10% allocated to a
third co-founder, Brad Chick. Id. ¶ 4. After increasing Chick’s stake to 20%, Jhaveri and
Goyle held 40% each. Id.
4
Id. ¶¶ 4-5.
5
Id. ¶¶ 74, 81.
6
Id. ¶ 76.
7
Id. ¶ 93.
8
Id. ¶¶ 37, 93; see also id. ¶ 33 (explaining that Edison IX GP is the general partner of
Edison Partners IX); Defs. Edison P’rs Mgmt. LLC, Edison IX GP, LLC, Edison P’rs IX,
LP, Christopher Sugden, and Daniel Herscovici’s Mot. to Dismiss, with a Certificate of
Serv. (Dkt. 25) (“Edison Opening Br.”) 1 (clarifying the relationships between the different
Edison defendants).
9
Compl. ¶¶ 94-96.
2
partner—was appointed to the Board.10 Edison also appointed another director, as

did Goyle and Jhaveri.11

B. The Onit Merger

In 2019, defendant Onit, Inc. showed interest in purchasing Bodhala.12 Onit

is a Houston-based technology company specializing in business process

automation.13 It is controlled by defendant K1 Investment Management, LLC.14

Onit’s discussions with Bodhala stalled because Jhaveri believed a sale was

premature.15

In May 2021, Goyle told the Board that he had retained JEGI Clarity—an

M&A advisory firm—to assist with a potential sale of Bodhala.16 The retention

letter suggested that talks with Onit had been renewed, of which Jhaveri had been

unaware.17

10
Id. ¶ 87.
11
Id. ¶¶ 93-96.
12
Id. ¶¶ 70-73.
13
Id. ¶ 27; see also Onit, Inc., Home Page, https://www.onit.com (last visited Mar. 28,
2025).
14
Compl. ¶ 27.
15
Id. ¶ 73.
16
Id. ¶¶ 238-40.
17
Id. ¶ 240.
3
In late May and early June, Onit submitted term sheets outlining the details of

its offer to purchase Bodhala.18 JEGI also made multiple presentations to the Board

about Onit’s offer, including on June 11, July 21, and August 8.19 Jhaveri attended

these presentations, asked questions, and repeatedly said that Onit’s offer was too

low.20 Negotiations over a definitive merger agreement ensued, with the parties

exchanging over thirty drafts.21 Jhaveri received two draft merger agreements before

discussions at Board meetings.22

C. The Merger Agreement

On August 15, Jhaveri and other stockholders received the final Merger

Agreement, an Information Statement, and a Joinder Agreement.23 The Merger

Agreement was executed on August 17.24 Goyle signed the Merger Agreement on

behalf of Bodhala as the “Equityholders’ Representative.”25 The same day, Jhaveri

18
Id. ¶ 256.
19
Id. ¶¶ 264, 280, 284.
20
Id. ¶¶ 265-70, 279, 281.
21
Id. ¶ 278.
22
Id.
23
Id. ¶ 308.
24
Id. ¶ 43.
25
See Trans. Aff. of Nicholas F. Mastria, Esq. in Supp. of Opening Br. in Supp. of Def.
Raj Goyle’s Mot. to Dismiss (Dkt. 24) (“Mastria Aff.”) Ex. A (“Merger Agreement”) 80
(signature page). The Merger Agreement is integral to and expressly referred to in the
Complaint, such that it is incorporated by reference. See Freedman v. Adams, 2012 WL
1345638, at *5 (Del. Ch. Mar. 30, 2012) (“When a [petitioner] expressly refers to and
heavily relies upon documents in her complaint, these documents are considered to be
4
signed the Joinder Agreement in his individual stockholder capacity, evincing his

“willingness to enter into” and “become a party to the Merger Agreement.”26

The Merger Agreement included a broad release by each “Equityholder” of

any claims that may have arisen before closing against Onit, Bodhala, and their

stockholders, directors, officers, employees, and agents.27 The Equityholders agreed

that their receipt of merger consideration would “constitute [their] express

acceptance of the terms of the release . . . .”28 They also disclaimed any reliance on

extra-contractual representations.29

The transaction closed on August 17.30 Jhaveri received a pro rata share of

the $40 million merger consideration based on his Bodhala stock ownership.31

incorporated by reference into the complaint[.]” (citation omitted)). As Equityholders’
Representative, Goyle was authorized to act as “exclusive agent, attorney-in-fact, and
representative” of Bodhala’s stockholders. Merger Agreement § 10.8(a).
26
See Mastria Aff. Ex. B (“Joinder Agreement”) 1 (Recitals), 8 (Jhaveri’s signature page).
“[A]s a condition to their willingness to enter into the Merger Agreement, [Onit] and [its]
Merger Sub . . . required that certain of the holders of [Bodhala] Capital Stock enter into
th[e] Joinder Agreement . . . .” Id. at 1.
27
Merger Agreement § 10.5(a); see infra Section II.B.1 (discussing the terms of the release
in greater depth). “Equityholders” were defined as “the Stockholders and the
Optionholders” of Bodhala. Merger Agreement art. I.
28
Merger Agreement § 10.5(c).
29
Id. § 10.5(c)(v).
30
Compl. ¶ 26.
31
See Merger Agreement art. I (defining “Initial Merger Consideration” as “an amount
equal to (i) Forty Million Dollars ($40,000,000) . . . plus (ii) the Estimated Cash and Cash
Equivalents as of the close of business on the Business Day immediately preceding the
Closing Date, minus (iii) the Estimated Indebtedness as of immediately prior to Closing,
minus (iv) the Estimated Transaction Expenses as of immediately prior to Closing, minus
5
D. Jhaveri’s Resignation

On September 8, 2021, Jhaveri met with defendant Eric Elfman—then Chief

Executive Officer of Onit—to discuss Jhaveri’s future at the combined company.32

Jhaveri said that he felt excluded from meetings about the management performance

plan and had yet to receive a formal employment agreement.33 Elfman told Jhaveri

that the lack of an employment agreement was an “oversight” but encouraged

Jhaveri to apply to jobs at Onit outside of Bodhala.34 Jhaveri interpreted this

suggestion to mean that Elfman, others at K1, and Goyle were trying to force him to

leave Bodhala, which he believed could prevent him from receiving payments under

the management performance plan.35 A few days later, Chick confirmed Jhaveri’s

fears, telling him that Elfman and Goyle “had discussed a plan to force Jhaveri out

of Bodhala and into a consulting agreement.”36

(v) the Estimated Downward Working Capital Adjustment, plus (vi) the Estimated Upward
Working Capital Adjustment”).
32
Compl. ¶¶ 315-16.
33
Id. ¶¶ 314-16.
34
Id. ¶ 316.
35
Id. ¶¶ 316-17. Jhaveri avers he would not be entitled to a payment under the
Management Performance Plan if he were to take a position outside of Bodhala. Id. ¶ 317.
I note, however, that the Merger Agreement names the individuals entitled to payments
under the Management Performance Plan. See Merger Agreement sched. 1.1.
36
Compl. ¶ 322.
6
The situation worsened for Jhaveri.37 In early October, he learned from Chick

that Elfman had authorized Goyle to fire him.38 On October 14, 2021, Jhaveri

voluntarily resigned.39

E. The Earnout

According to a formula laid out in the Merger Agreement, former Bodhala

stockholders could receive up to $36 million in earnout payments if Bodhala hit

certain annual recurring revenue (“ARR”) targets after closing.40 No payments were

owed unless Bodhala achieved at least $5.5 million in ARR as of March 11, 2022.41

Bodhala never achieved this ARR threshold.42 No earnout payments were

paid. Jhaveri blames Goyle, who—as Equityholders’ Representative—was

“charged as a fiduciary of the Equityholders tasked with guarding against frustration

of the earnout.”43 Jhaveri and other former Bodhala stockholders learned about the

failed earnout through a letter Goyle and K1 sent on March 29, 2023.44

37
Id. ¶ 324.
38
Id. ¶ 325.
39
Id. ¶ 326.
40
Id. ¶ 45; Merger Agreement § 2.14 (providing the schedule for granting the payments
based on ARR); see also id. at art. I (defining “Managing Performance Payments” and
“Management Performance Payment Participants”); id. at sched. 1.1 (identifying the
persons eligible for such payments).
41
Merger Agreement § 2.14; see Compl. ¶ 45.
42
Compl. ¶ 423.
43
Id. ¶ 44.
44
Id. ¶¶ 48, 56-57.
7
F. This Litigation

In April 2024—nearly three years after the merger with Onit closed—Jhaveri

filed a complaint in this court.45 He brought ten claims against three groups of

defendants: (1) Goyle;46 (2) the “K1 Defendants”;47 and (3) the “Edison

Defendants.”48

Counts I, III, and IV are breach of fiduciary duty claims against Goyle and the

Edison Defendants for “secretly tilting [Bodhala’s] fundraising process to a sale to

the K1 Entities” without Jhaveri’s knowledge;49 excluding Jhaveri from Board-level

decisions;50 and transferring financial control of Bodhala from Jhaveri to Goyle.51

Count II is a related claim against the K1 Defendants for aiding and abetting Goyle

45
Id.
46
Id. ¶ 32.
47
The “K1 Defendants” are K1 and its affiliates K4 Capital Advisors L.P. and K4 Private
Investors, L.P.; Onit and its affiliate Onit Holdings, Inc. (together with K1, K4 Capital
Advisors, and K4 Private Investors, the “K1 Entities”); Elfman; Eric Smith (Onit’s Chief
Operating Officer at the time of the merger); and Mike Velcich (an Onit director at the time
of the merger). Id. ¶¶ 27-28, 38.
48
The “Edison Defendants” are Edison Partners; Edison Partners IX; Edison IX GP, LLC
(Edison Partners IX’s general partner); Herscovici; and Christopher Sugden (managing
partner and a managing member of Edison IX GP). Id. ¶¶ 33, 35-37.
49
Id. ¶¶ 350-60.
50
Id. ¶¶ 367-71.
51
Id. ¶¶ 372-77.
8
and the Edison Defendants’ purported breaches of fiduciary duty arising from their

“secret[]” sale of Bodhala to Onit.52

Counts V and VII are claims for fraudulently inducing Jhaveri to (1) believe

there was a legitimate fundraising process,53 and (2) consent to the Merger

Agreement.54 Count VI is a related claim against the K1 Defendants for aiding and

abetting this purported fraud.55

Count VIII is a claim for breach of the implied covenant of good faith and fair

dealing against Goyle and the K1 Defendants.56 Jhaveri alleges that although the

Merger Agreement implied he would remain employed at Bodhala, he was pushed

out by Goyle, the K1 Entities, and Elfman.57

Count IX is a claim against Goyle for breaching the Merger Agreement by

“utilizing his [Equityholder Representative] powers to extract payments from the K1

Entities without corresponding payments to Equityholders” and not communicating

with former Bodhala stockholders about the earnout.58 Count X is a claim for

52
Id. ¶¶ 361-66.
53
Id. ¶¶ 378-84.
54
Id. ¶¶ 391-400.
55
Id. ¶¶ 385-90.
56
Id. ¶¶ 402-08.
57
Id. ¶¶ 404-05.
58
Id. ¶¶ 410, 413-14; Merger Agreement § 10.8(b).
9
tortious interference against most of the K1 Defendants for assisting Goyle’s

purported breaches of his contractual duties.59

Jhaveri seeks relief including compensatory damages of “no less than

$200,000,000,” “punitive damages,” and rescission of certain settlement agreements

between Goyle and the K1 Entities.60

Each of the three defendant groups separately moved to dismiss.61 Jhaveri

filed an answering brief in opposition to each motion.62 Each of the defendant

groups then filed reply briefs in support of their motions.63 Oral argument on the

motions was presented on March 28,64 after which I took the matter under

advisement.

59
Compl. ¶¶ 417-25. Count X was not alleged against Smith. Id.; see supra note 47
(defining the K1 Defendants).
60
Id. at 97-98 (Prayer for Relief). Jhaveri cannot recover punitive damages in this court.
See Metro Storage Int’l LLC v. Harron, 275 A.3d 810, 886 (Del. Ch. 2022) (“Absent a
statutory grant of authorization, the Delaware Court of Chancery does not have jurisdiction
to assess punitive damages.”).
Opening Br. in Supp. of the K1 Defs.’ Mot. to Dismiss (Dkt. 21) (“K1 Opening Br.”);
61

Opening Br. in Supp. of Def. Raj Goyle’s Mot. to Dismiss (Dkt. 23); Edison Opening Br.
62
Pl. Jhaveri’s Answering Br. in Opp’n to Opening Br. in Supp. of Def. Raj Goyle’s Mot.
to Dismiss (Dkt. 34) (“Pl.’s Br. in Opp’n to Goyle”); Pl. Jhaveri’s Answering Br. in Opp’n
to Opening Br. and Joinder in Supp. of the Edison Defs.’ Mot. to Dismiss (Dkt. 35); Pl.
Jhaveri’s Answering Br. in Opp’n to Opening Br. and Joinder in Supp. of the K1 Defs.’
Mot. to Dismiss (Dkt. 36) (“Pl.’s Br. in Opp’n to K1”).
63
Reply Br. in Supp. of Def. Raj Goyle’s Mot. to Dismiss (Dkt. 38); Reply Br. in Further
Supp. of the K1 Defs.’ Mot. to Dismiss (Dkt. 39) (“K1 Reply Br.”); Defs. Edison P’rs
Mgmt. LLC, Edison IX GP, LLC, Edison P’rs IX, LP, Christopher Sugden, and Daniel
Herscovici’s Reply Br. and Joinder in Supp. of Mot. to Dismiss (Dkt. 40).
64
See Tr. of Oral Arg. on Defs.’ Mots. to Dismiss (Dkt. 53).
10
II. ANALYSIS

Goyle, the K1 Defendants, and the Edison Defendants have moved to dismiss

the Complaint under Court of Chancery Rule 12(b)(6) for failure to state a claim

upon which relief can be granted. Their motions are governed by the

plaintiff-friendly reasonable conceivability standard. I must “(1) accept all well

pleaded factual allegations as true, (2) accept even vague allegations as ‘well

pleaded’ if they give the opposing party notice of the claim, [and] (3) draw all

reasonable inferences in favor of the non-moving party . . . .”65 But I am “not

required to accept every strained interpretation of [Jhaveri’s] allegations.”66 Nor

must I accept conclusory assertions “unsupported by allegations of specific facts.”67

The Edison Defendants also move to dismiss Christopher Sugden—the

Managing Partner and a Managing Member of Edison IX GP—under Court of

Chancery Rule 12(b)(2) for lack of personal jurisdiction.68 “In ruling on a Rule

12(b)(2) motion, the court may consider the pleadings, affidavits, and any discovery

65
Cent. Mortg. Co. v. Morgan Stanley Mortg Cap. Hldgs. LLC, 27 A.3d 531, 535 (Del.
2011) (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002)).
66
Gen. Motors (Hughes), 897 A.2d at 168 (quoting Malpiede v. Townson, 780 A.2d 1075,
1083 (Del. 2001)).
In re Lukens Inc. S’holders Litig., 757 A.2d 720, 727 (Del. Ch. 1999), aff’d sub nom.
67

Walker v. Lukens, Inc., 757 A.2d 1278 (Del. 2000)
68
Edison Opening Br. 6-10; see Compl. ¶ 36 (discussing Sugden’s background).
11
of record.”69 But if there is no evidentiary record, a plaintiff “need only make a

prima facie showing of personal jurisdiction,” and “the record is construed in the

light most favorable to the plaintiff.”70

I begin with the threshold question of personal jurisdiction over Sugden.

Because Jhaveri fails to meet his burden on this issue, Sugden is dismissed.

I then address the parties’ arguments on the merits. The defendants assert that

Jhaveri released Counts I through VII and that Counts VIII through X are non-viable.

I agree as to Counts I through VIII, but deny the motion in part on Counts IX and X.

A. Personal Jurisdiction Over Sugden

Sugden is a resident of Chattanooga, Tennessee.71 He contends that this court

lacks personal jurisdiction over him. Resolving this issue involves a two-step

analysis. “[T]he court must first determine that service of process is authorized by

statute and then must determine that the exercise of jurisdiction over the nonresident

defendant comports with traditional due process norms of fair play and substantial

justice.”72

69
Ryan v. Gifford, 935 A.2d 258, 265 (Del. 2007).
70
Id.
71
Dkt. 5 at 8. Delaware courts may rely on “extra-pleading material” beyond the
allegations in the Complaint to determine whether a defendant is subject to personal
jurisdiction. Crescent/Mach I Partners, L.P. v. Turner, 846 A.2d 963, 974 (Del. Ch. 2000).
72
Ryan, 935 A.2d at 265.
12
Jhaveri fails on the first step. He alleges that the court has personal

jurisdiction over Sugden under 6 Del. C. § 17-109 and 6 Del. C. § 18-109.73 Neither

statute provides an adequate basis to serve Sugden.

Section 17-109 of the Delaware Revised Uniform Limited Partnership Act

permits service of process on a general partner of a Delaware limited partnership “in

all civil actions or proceedings brought in the State of Delaware involving or relating

to the business of the limited partnership or a violation by the general partner . . . of

a duty to the limited partnership . . . .”74 The only defendant organized as a Delaware

limited partnership is Edison Partners IX.75 But, according to the Complaint,

Edison IX GP—not Sugden—is the general partner of Edison Partners IX.76

Section 18-109 of the Delaware Limited Liability Company Act permits

service of process on a manager of a Delaware limited liability company “in all civil

actions or proceedings brought in the State of Delaware involving or relating to the

business of the limited liability company or a violation by the manager . . . of a duty

to the limited liability company . . . .”77 Section 18-109 “narrowly refer[s] to [the]

73
Compl. ¶ 40.
74
6 Del. C. § 17-109(a).
75
Compl. ¶ 33.
76
Id.; see also supra note 8 and accompanying text.
77
6 Del. C. § 17-109(a).
13
corporate governance and [] internal affairs of an LLC.”78 Sugden is the managing

partner and a managing member of Edison IX GP.79 This suit, however, concerns

the internal workings of Bodhala—not Edison IX GP. None of Jhaveri’s allegations

concern Edison IX GP’s business or governance.

Sugden is therefore dismissed for lack of personal jurisdiction.80

B. The Released Claims

The defendants assert that seven of the ten counts in Jhaveri’s Complaint are

barred by comprehensive releases in Section 10.5 of the Merger Agreement.81

Section 10.5 is “governed by and enforced and interpreted in accordance with the

laws of the State of Delaware.”82 “Delaware courts recognize the validity of general

releases.”83

“A clear and unambiguous release ‘will [only] be set aside where there is

fraud, duress, coercion, or mutual mistake concerning the existence of a party’s

Endowment Rsch. Grp., LLC v. Wildcat Venture P’rs, LLC, 2021 WL 841049, at *5 (Del.
78

Ch. Mar. 5, 2021).
79
Compl. ¶ 36. Jhaveri also alleges that Sugden “has control” over Edison Partners, though
he does not allege that Sugden is a manager of the entity, as required for personal
jurisdiction under 6 Del. C. § 18-109. Id.
80
Even if personal jurisdiction existed over Sugden, the claims against him would be
dismissed on the merits. See infra Sections II.B and II.C.
81
See Goyle Opening Br. 9-11.
82
Merger Agreement § 10.5(b).
83
Deuley v. DynCorp Int’l, Inc., 8 A.3d 1156, 1163 (Del. 2010).
14
injuries.’”84 Jhaveri does not assert that the releases were procured through “fraud,

duress, coercion, or mutual mistake.”85 Nor does he contend that the releases were

unknown to him when he signed the Joinder Agreement, conditional, or void for

want of consideration.86

Given that, I focus on the terms of the releases. “Delaware law adheres to the

objective theory of contracts,” meaning that “a contract’s construction should be that

which would be understood by an objective, reasonable third party.”87 “When

interpreting a contract, [the] Court ‘will give priority to the parties’ intentions as

84
Id. (quoting Parlin v. DynCorp Int’l, 2009 WL 3636756, at *4 (Del. Super. Sept. 30,
2009)).
85
Id.
86
In Cigna Health & Life Insurance v. Audax Health Solutions, the Court of Chancery held
unenforceable a release of claims in a letter of transmittal, the return of which was a
condition to stockholders receiving merger consideration. 107 A.3d 1082, 1085 (Del. Ch.
2014). The court explained that stockholders became entitled to their merger consideration
upon closing under 8 Del. C. § 251. Id. Because the merger consideration was a
preexisting entitlement, it could not serve as new consideration for a release in the letter of
transmittal. Id.
This case is different in several respects. The release was not effectuated by a
separate agreement but included within the Merger Agreement itself. In Cigna, there was
“no indication to stockholders that they may have to agree to a release.” Id. at 1091. Here,
by contrast, stockholders had notice of the release before final approval and closing.
Equityholders explicitly “acknowledge[d] and agree[d]” in the Merger Agreement that
their receipt of merger consideration constituted “express acceptance” of the release.
Merger Agreement § 10.5(c). They further “acknowledge[d] and agree[d]” that the release
was “a material inducement to the Released Parties to consummate the transactions
contemplated by th[e] [Merger] Agreement . . . .” Id. Jhaveri confirmed his acceptance of
the release when he executed the Joinder Agreement.
87
Salamone v. Gorman, 106 A.3d 354, 367-68 (Del. 2014) (quoting Osborn ex rel. Osborn
v. Kemp, 991 A.2d 1153, 1159 (Del. 2010)).
15
reflected in the four corners of the agreement.’”88 The court must construe the

contract “as a whole and . . . will give each provision and term effect, so as not to

render any part of the contract mere surplusage.”89

A court will not look beyond the four corners on an agreement if a contract is

unambiguous.90 Ambiguity exists if “the provisions in controversy are fairly

susceptible of different interpretations.”91 “The parties’ steadfast disagreement over

interpretation will not, alone, render the contract ambiguous.”92 Neither party here

asserts that the releases are ambiguous.

Consistent with these principles of contract interpretation, “[i]f the language

of the release is clear, it will be given effect.”93 And “[i]f the claim falls within the

plain language of the release, then the claim should be dismissed.”94 Here, Counts I

88
Id. at 368 (quoting GMG Cap. Invs., LLC v. Athenian Venture P’rs, 36 A.3d 776, 779
(Del. 2012)).
89
Osborn, 991 A.2d at 1159 (quoting Kuhn Constr., Inc. v. Diamond State Port Corp.,
2010 WL 779992, at *2 (Del. Mar. 8, 2010)).
90
Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997)
(“Contract terms themselves will be controlling when they establish the parties’ common
meaning so that a reasonable person in the position of either party would have no
expectations inconsistent with the contract language.”); Lorillard Tobacco Co. v. Am.
Legacy Found., 903 A.2d 728, 739 (Del. 2006) (“Clear and unambiguous
language . . . should be given its ordinary and usual meaning.”).
91
Eagle Indus., 702 A.2d at 1232.
92
Osborn, 991 A.2d at 1160 (citation omitted).
93
Corp. Prop. Assocs. 6 v. Hallwood Grp. Inc., 817 A.2d 777, 779 (Del. 2003).
94
Seven Invs., LLC v. AD Cap., LLC, 32 A.3d 391, 396 (Del. Ch. 2011).
16
through VII fall squarely within the releases. Consequently, those claims are

dismissed.

1. Terms of the Releases

Section 10.5 of the Merger Agreement includes a general release of claims by

each “Equityholder.”95 Jhaveri is one such Equityholder. In Section 10.5(a), the

Equityholders released Onit, Bodhala, and “and each of their respective past and

present direct and indirect equityholders, parents,

subsidiaries, . . . directors, . . . officers, employees, . . . agents and representatives,

and each of their respective Affiliates.”96 These “Released Parties” include all

defendants named in the Complaint.97

The claims released in Section 10.5(a) include:

any and all commitments, rights, claims, counterclaims,
demands, debts, liabilities, Losses, costs, expenses, attorneys’
fees, obligations, promises, covenants, agreements, Contracts,
charges, dues, sums of money, compensation, accounts, suits,
95
Merger Agreement § 10.5.
96
Id. § 10.5(a).
97
Id. (defining “Released Parties” and “Released Party Affiliates”). Edison Partners IX
was a “direct . . . equityholder” in Bodhala, which was one of the “Released Parties,”
thereby making it a “Released Party Affiliate.” Id. Edison IX GP and Edison Partners are
affiliates of Edison Partners IX, and Herscovici was a Bodhala director—making these
individuals or entities also Released Party Affiliates. Id. (defining “Released Party
Affiliates” to include, in relevant part, “parents, subsidiaries, . . . directors, . . . general
partners, [and] limited partners”). Onit, Inc. and Onit Holdings, Inc. are expressly defined
as Released Parties. Id.; id. at 1 (defining these terms). K1 controls Onit, and the other K1
Defendants are affiliates of K1. See supra notes 14, 47, and accompanying text. They are
thus each “direct and indirect equityholders” of a Released Party and meet the definition
of Released Party Affiliates. Merger Agreement § 10.5(a).
17
Actions, of any kind or nature whatsoever, whether known or
unknown, suspected or unsuspected, matured or unmatured,
contingent or otherwise, at Law or in equity, which such
Equityholder or Related Party now has, has ever had or may
hereafter have against any Released Party arising
contemporaneously with or prior to the Closing or on account of
or arising out of, directly or indirectly, any act, omission, matter,
cause, circumstance, event or transaction occurring
contemporaneously with or prior to the Closing, including any
claims arising from or relating to the Equityholder’s or any
Related Party’s prior relationship with the Released Parties or
any Released Party Affiliate or the Equityholder . . . .98

The provision goes on to confirm that:

[e]ach Equityholder understands that this is a full and final
general release of all claims, demands, causes of action, Losses,
liabilities and obligations of any nature whatsoever, whether or
not known, suspected or claimed, that could have been asserted
in any Action against any of the Released Parties and the
Released Party Affiliates.99

In Section 10.5(c), each Equityholder further agreed that the release in

Section 10.5(a) was “a material inducement to the Released Parties to consummate

the transactions contemplated by th[e] [Merger] Agreement and the Ancillary

Agreements, and that the Released Parties w[ould] rely upon [] Section 10.5 in

consummating such transactions.”100 The referenced “Ancillary Agreements”

include the Joinder Agreement and Option Cancellation Agreement that Jhaveri

98
Merger Agreement § 10.5(a).
99
Id.
100
Id. § 10.5(c).
18
executed at the same time as the Merger Agreement, which likewise contain

releases.101 Each Equityholder acknowledged “that its receipt of its [p]ro [r]ata

[s]hare of the [i]nitial [m]erger [c]onsideration [would] constitute its express

acceptance of the terms of the release set forth in [] Section 10.5.”102

2. The Effect of the Releases

As noted above, Jhaveri does not dispute that he had full notice of the

releases.103 He received at least two drafts of the Merger Agreement before voting

to approve it as a director and executing a Joinder Agreement as a stockholder.104

By signing the Joinder Agreement, he affirmed that he “ha[d] consulted with

counsel” about the Merger Agreement, was “fully apprised of the consequences of

th[e] release,” and “had access to adequate information regarding the terms of th[e]

[Merger] Agreement, the scope and effect of the releases set forth [t]herein, and all

101
In Section 4(a) of the Joinder Agreement, Jhaveri “irrevocably and unconditionally”
released “the Buyer Group, [Bodhala], and each current and former manager, officer,
director, equityholder, agent, representative, legal and financial advisor, of the Buyer
Group, [Bodhala] and their respective Affiliates . . . from any and all actions, causes of
action, suits, proceedings, executions . . . arising out of, or relating to, or accruing from
[Jhaveri’s] prior relationship with the Released Parties or [Jhaveri’s] rights or status as a
current or former, direct or indirect, equityholder, stockholder, . . . director, . . . officer,
employee, or representative of the Released Parties.” Joinder Agreement § 4(a). The
Option Cancellation Agreement includes a nearly identical release in Section 1.4. Mastria
Aff. Ex. C (Option Cancellation Agreement) § 1.4.
102
Merger Agreement § 10.5(c).
103
See supra notes 85-86 and accompanying text.
104
See supra note 22 and accompanying text.
19
other matters encompassed by th[e] [Merger] Agreement to make an informed and

knowledgeable decision . . . .”105 In exchange, he received and accepted a

substantial sum of merger consideration.106

Counts I through VII are encompassed by the releases to which Jhaveri

agreed.107

First, the fiduciary duty claims were released. Count I is brought against

Goyle and Herscovici for breaching their fiduciary duties as directors Bodhala of

before closing; and against Edison Partners, Edison Partners IX, and Edison IX GP

for similar breaches.108 Counts III and IV are similarly brought against Goyle and

the Edison Defendants for additional pre-closing breaches of fiduciary duty.109 But

Jhaveri released all claims against Bodhala, Edison Partners IX, and their directors,

officers, employees, agents, and affiliates for any alleged misconduct before

closing.110 Count II is brought against the K1 Defendants for allegedly aiding and

105
Merger Agreement § 10.5(c).
106
See supra note 31 and accompanying text.
107
The release in the Merger Agreement preserves “rights or claims by the Equityholder
arising from or under this Agreement or any Ancillary Agreement.” Merger Agreement
§ 10.5(a). Thus, Jhaveri’s breach of contract, implied covenant, and tortious interference
claims were not released. Those claims are addressed on the merits below. See infra
Section II.C.
108
Compl. ¶¶ 350-60.
109
Id. ¶¶ 367-77.
110
Merger Agreement § 10.5(a); see supra notes 97-98 and accompanying text (quoting
release and explaining application to the Edison defendants). Separately, Edison Partners
IX (a non-controlling stockholder of Bodhala) and an employee of Edison IX GP (not a
20
abetting the Bodhala directors’ pre-closing misconduct.111 Jhaveri also released all

claims these defendants.112

Second, the fraud claims were released.113 Count V is brought against Goyle

and the Edison Defendants for making purportedly fraudulent statements before

closing.114 Count VI is brought against various K1 Entities, Velcich, Elfman, and

Smith for allegedly aiding and abetting pre-closing fraud by Goyle, Herscovici, and

Sugden.115 And Count VII is another fraudulent inducement claim brought against

Goyle, the Edison Defendants, and the K1 Defendants for withholding terms of the

Merger Agreement from Jhaveri.116 Again, Jhaveri released all claims against these

individuals and entities for any pre-closing misconduct.117

Bodhala stockholder) did not plausibly owe fiduciary duties. Jhaveri was also not owed
duties as a Bodhala director.
111
Compl. ¶¶ 361-66.
112
Merger Agreement § 10.5(a); see supra notes 97-98 and accompanying text (quoting
release and explaining application to the K1 Defendants). This claim also employs group
pleading, failing to identify the specific acts each individual or entity took to “participate”
in the alleged breach. See In re Mindbody, Inc. S’holder Litig., 332 A.3d 349, 393 (Del.
2024) (explaining that the “knowing participation” element of an aiding and abetting claim
requires “active participation rather than ‘passive awareness’” (citation omitted)).
113
See infra notes 131-133 (discussing whether the fraud claims were preserved under the
releases).
114
Compl. ¶¶ 372-77.
115
Id. ¶¶ 385-90.
116
Id. ¶¶ 391-401.
117
See supra notes 97-98 and accompanying text. As discussed below, these claims also
flout the anti-reliance provision in the Merger Agreement, in which Jhaveri disclaimed
reliance on extra-contractual statements. See infra notes 124-126 and accompanying text.
21
3. Jhaveri’s Arguments About the Releases and Disclaimers

Jhaveri advances several reasons why he believes his claims are not barred by

the releases. None succeed.

First, Jhaveri asserts that Delaware law rejects the application of broad

releases which “immunize systematic misconduct by fiduciaries.”118 Not so. Parties

routinely release breach of fiduciary duty claims for past acts, and Delaware courts

enforce such releases.119

Jhaveri also contends that “[b]road releases cannot shield fraudulent conduct”;

he asserts, under Delaware law, “any disclaimer of fraud must be explicit and

unambiguous.”120 He also cites case law standing for the unremarkable proposition

that standard integration clauses are insufficient to bar claims of extra-contractual

fraud.121 But the Merger Agreement contained “language that . . . add[s] up to a

118
Pl.’s Br. in Opp’n to Goyle 27.
119
See Feuer v. Dauman, 2017 WL 4817427, at *4 (Del. Ch. Oct. 25, 2017) (dismissing a
breach of fiduciary duty claim because “the claims asserted in the complaint were released
as part of a settlement agreement”), aff’d, 187 A.3d 551 (Del. 2018) (TABLE) (explaining
that “corporate fiduciaries can[] contract away or limit their fiduciary duties” in a release
where the release “extinguishe[d] potential liability arising from prior acts” but not where
it “purport[ed] to limit prospectively any exercise of fiduciary duty owed by [the]
directors”).
Pl.’s Br. in Opp’n to Goyle 27 (citing Kronenberg v. Katz, 872 A.2d 568, 593 (Del. Ch.
120

2004)).
121
Id. at 27-28 (citing McDonald’s Co. v. Easterbrook, 2021 WL 351967 (Del. Ch. Feb. 2,
2021)); McDonald’s, 2021 WL 351967, at *6 (explaining that disclaiming reliance on
extra-contractual statements requires “explicit and comprehensive” language where parties
“forthrightly affirm that they are not relying upon any representation or statement of fact
22
clear anti-reliance clause by which the [Equityholders] contractually promised that

[they] did not rely upon statements outside the contract’s four corners in deciding to

sign the contract.”122

Next, Jhaveri claims that the alleged fraud in the inducement of the Merger

Agreement voids the release.123 He relies on ABRY Partners V L.P. v. F & W

Acquisition LLC, where the court held that contract terms could not preclude claims

to rescind the contract based on intra-contractual fraud.124 Yet Jhaveri is claiming

fraud based on extra-contractual alleged misrepresentations.125 In ABRY Partners,

then-Vice Chancellor Strine rejected a similar argument, emphasizing that “a party

cannot promise, in a clear integration clause of a negotiated agreement, that it will

not rely on promises and representations outside of the agreement and then shirk its

own bargain in favor of a ‘but we did rely on those other representations’ fraudulent

not contained [in the contract]” (citing Anschutz Corp. v. Brown Robin Cap., LLC, 2020
WL 3096744, at *13 (Del. Ch. June 11, 2020); Kronenberg, 872 A.2d at 591).
122
ABRY P’rs V, L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1059 (Del. Ch. 2006) (citation
omitted); see Merger Agreement § 10.5(c); supra note 29 and accompanying text (quoting
the anti-reliance provision in Section 10.5(c) of the Merger Agreement).
123
Pl.’s Br. in Opp’n to Goyle 30.
124
Id.; see ABRY P’rs, 891 A.2d at 1051.
125
See Compl. ¶¶ 378-83 (alleging that Goyle and the Edison Defendants induced Jhaveri
to consent to the Onit merger by fraudulently convincing him that it was part of a Series B
fundraising process); id. ¶¶ 392-95 (alleging that Goyle, the Edison Defendants, and the
K1 Defendants “fraudulently induced Jhaveri’s consent to the Merger Agreement by
entirely omitting and telling deliberate falsehoods about terms designed to restructure the
consideration of the deal from the equal shares held by Jhaveri and Goyle”).
23
inducement claim.”126 The release in the Merger Agreement is thus not void due to

fraud.

Finally, Jhaveri argues that the releases have “carveouts . . . that preserve [his]

claims.”127 He identifies two. The release in the Merger Agreement excludes “any

rights or claims by the Equityholder arising from or under th[e] [Merger] Agreement

or any Ancillary Agreement.”128 And the Joinder Agreement—one of the referenced

Ancillary Agreements129—preserves five categories of claims, including fraud.130

Neither of these “carveouts” save Jhaveri. First, neither agreement exempts

fiduciary duty claims from the releases. As to fraud, although the release in the

Joinder Agreement excludes claims for “Fraud by a Released Party,” the release in

126
891 A.2d at 1057.
127
Pl.’s Br. in Opp’n to Goyle 28.
128
Id. (quoting Merger Agreement § 10.5).
129
See supra note 101 and accompanying text.
130
Pl.’s Br. in Opp’n to Goyle 28 (quoting Joinder Agreement § 4). The five preserved
claims in the Joinder Agreement are:
(i) any rights or claims by the Stockholder arising from or under this
Agreement, the Merger Agreement or any Ancillary Agreement, (ii)
any claim such Stockholder may have, in his or her capacity as a
director or officer of [Bodhala] for indemnifications, whether
pursuant to an indemnification agreement, under the Restated Charter
as in effect immediately prior to the Closing or pursuant to applicable
law or under the Tail Policy, (iii) any rights to any unpaid employment
compensation due from [Bodhala] to the undersigned in the ordinary
course of business, (iv) any right of contribution against another
Stockholder, and (v) claims related to the Fraud of a Released Party.
Joinder Agreement § 4.
24
the Merger Agreement does not.131 The Joinder Agreement provides that if its terms

conflict with the Merger Agreement, “the Merger Agreement shall control.”132

Even if the release in the Joinder Agreement applied, Jhaveri’s claims would

fall outside it. The fraud exclusion in the Joinder Agreement’s release concerns

intra-contractual fraud.133 Jhaveri’s fraud claims refer exclusively to pre-closing

conduct.

* * *

Jhaveri executed broad releases discharging all claims against Bodhala, Onit,

and the other deal participants. He agreed that he was only relying upon the

representations in the Merger Agreement. He is bound by those promises. Since

Counts I through VII fall within the scope of unambiguous releases, they are

dismissed under Rule 12(b)(6).

C. The Remaining Claims

Three claims remain: breach of the implied covenant of good faith and fair

dealing (Count VIII); breach of contract (Count IX); and tortious interference

131
Compare Joinder Agreement § 4, with Merger Agreement § 10.5.
132
Joinder Agreement § 5(d).
133
The Merger Agreement defines “Fraud” as “common law fraud under Delaware law
with respect to the making of one or more representations and warranties in Article III [of
the Merger Agreement] or in any Ancillary Agreement.” Merger Agreement art. I; see
Joinder Agreement 1 (“Capitalized terms used but not defined in this Joinder Agreement
shall have the meanings ascribed to such terms in the Merger Agreement.”).
25
(Count X). Goyle and the K1 Defendants named in those counts maintain that no

claim is reasonably conceivable.134 I consider each claim in turn.

1. Breach of the Implied Covenant

The implied covenant of good faith and fair dealing “attaches to every

contract.”135 “The covenant is ‘best understood as a way of implying terms in the

agreement,’ whether employed to analyze unanticipated developments or to fill gaps

in the contract’s provisions.”136 A claim for breach of the implied covenant requires

a plaintiff to plead “a specific implied contractual obligation, a breach of that

obligation by the defendant, and resulting damages to the plaintiff.”137

Jhaveri asserts that the Merger Agreement contained an implied term that he

“would remain with [Bodhala] long enough to participate in the earnout.”138 He

asserts that the earnout structure created an expectation of his continued employment

at Bodhala.139 Goyle and the K1 Defendants (except Smith and Velcich) allegedly

134
Count VIII is brought against Goyle, the K1 Entities, and Elfman. Count IX is brought
against Goyle. And Count X is brought against the K1 Defendants other than Smith.
135
Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 442 (Del. 2005).
136
Id. at 441 (citing E.I. DuPont de Nemours & Co. v. Pressman, 679 A.2d 436, 443 (Del.
1996)).
137
Fitzgerald v. Cantor, 1998 WL 842316, at *1 (Del. Ch. Nov. 10, 1998); see also Metro
Life. Ins. Co. v. Tremont Grp. Hldgs., Inc., 2012 WL 6632681, at *15 (Del. Ch. Dec. 20,
2012).
138
Pl.’s Br. in Opp’n to Goyle 53.
139
Compl. ¶ 404 (“Jhaveri’s continued employment at Bodhala was implied in the contract
in being named a recipient of the Management Participant Plan.”); see also id. ¶¶ 273-76.
26
breached that implied term by “push[ing] Jhaveri out of [] Bodhala.”140 This theory

suffers from several defects.

To start, “[t]he implied covenant will not infer language that contradicts a

clear exercise of an express contractual right.”141 Section 3.19 of the Merger

Agreement states that “[e]ach employee, independent contractor and consultant of

[Bodhala] is terminable at will.”142 It also confirms that “[t]here [we]re no

agreements or understandings between [Bodhala] and any of its employees . . . that

their employment or services [were] for any particular period.”143 The alleged

implied term on which Jhaveri’s claim rests contradicts these explicit terms.

Delaware courts are hesitant to recognize the implied covenant in the context

of at-will employment “out of a concern that the [c]ovenant could thereby swallow

the [employment at-will doctrine] and effectively end at-will employment.”144 In

E.I. DuPont de Nemours & Co. v. Pressman, the Delaware Supreme Court

recognized three narrow exceptions: (1) where an employer terminates an employee

140
Id. ¶ 405; see supra note 57; see also Compl. ¶ 312 (“The K1 Entities facilitated Goyle
pushing Jhaveri out after the closing of the transaction. By pushing him out, Jhaveri was
robbed of his interests in the management performance plan.”); id. ¶ 313 (“Here, there was
no disclosure in the board meeting, term sheets, or Merger Agreement that Jhaveri could
be pushed out by Goyle. Indeed, the Merger Agreement included Jhaveri as a beneficiary
of the Management Performance Plan.”).
141
Nemec v. Shrader, 991 A.2d 1120, 1127 (Del. 2010).
142
Merger Agreement § 3.19(c).
143
Id.
144
Pressman, 679 A.2d at 442.
27
in violation of public policy;145 (2) where an employer misrepresents an important

fact that the employee relies on “to accept a new position or remain in a present

one”;146 or (3) where an employer “uses its ‘superior bargaining power to deprive

the employee of compensation that is clearly identifiable and is related to the

employee’s past services.’”147 None of these exceptions apply.

First, Jhaveri was not terminated. He pleaded that he resigned from Bodhala

“instead of allowing himself to be humiliated by being terminated by Goyle.”148 The

Complaint lacks facts describing the sort of “intolerable” working conditions that

reasonably suggest constructive discharge.149 And Jhaveri cites no public policy that

was violated by his departure.

The second exception is likewise inapplicable. Jhaveri’s implied covenant

claim does not concern a statement by his employer that led him to stay with Bodhala

145
Id. at 441 (citing Monge v. Beebe Rubber Co., 316 A.2d 549 (N.H. 1974) (addressing
the termination of an employee for refusing sexual advances)); Shearin v. E.F. Hutton Grp.,
Inc., 652 A.2d 578, 587-89 (Del. Ch. 1994) (addressing the termination of a lawyer for
refusing to violate her ethical duties)).
146
Pressman, 679 A.2d at 440-41 (citing Merrill v. Crothall-American, Inc., 606 A.2d 96
(Del. 1992)).
147
Id. at 441 (citing Fortune v. National Cash Reg. Co., 364 N.E.2d 1251 (Mass. 1977)).
148
Compl. ¶ 326 (“On or about October 14, 2021, Jhaveri would decide to leave Onit
instead of allowing himself to be humiliated by being terminated by Goyle.”); see also
supra note 39 and accompanying text.
149
Rizzitiello v. McDonald’s Corp., 868 A.2d 825, 832 (Del. 2005) (“To establish a
constructive discharge, the plaintiff [must] show ‘working conditions so intolerable that a
reasonable person would have felt compelled to resign.’” (citation omitted)).
28
or take a new position. Instead, his claim turns on his expectations for future tenure

at Bodhala.

Finally, though Jhaveri claims that Goyle and the K1 Defendants excluded

him from the negotiation process—and might have had “superior bargaining

power”150—the compensation at issue was a contingent earnout payment. The

payment was forward-looking; it did not “relate[] to [Jhaveri’s] past services.”151 No

members of Bodhala received the management performance payments.152

Jhaveri’s implied covenant claim is dismissed.

2. Breach of Contract

“Under Delaware law, the elements of a breach of contract claim are: 1) a

contractual obligation; 2) a breach of that obligation by the defendant; and 3)

resulting damage to the plaintiff.”153 Jhaveri claims that Goyle, as Equityholders’

Representative, breached certain obligations in the Merger Agreement related to the

ARR earnout target. These breaches allegedly harmed Jhaveri by depriving him of

his share of the earnout payment.

150
Pressman, 679 A.2d at 441; see supra note 147 and accompanying text.
151
Pressman, 679 A.2d at 441.
152
See supra note 42 and accompanying text.
153
H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 2003).
29
Jhaveri alleges that Goyle willfully breached the Merger Agreement in

connection with the ARR payments in four ways:154

(1) by not providing information about [payments from the K1
Defendants] despite numerous requests from Equityholders;

(2) not communicating with the Equityholders about the ARR
Payments, Holdback payments, and Reserve Amount, [while]
also coordinat[ing] with the K1 Entities to keep the
Equityholders in the dark including by sending notes to the K1
Entities directing them not to communicate with the
Equityholders;

(3) not challenging the ARR [r]ealization [p]ayments despite
numerous threats to sue based on claims of interference in the
[e]arnout by Onit COO Eric Smith; and

(4) not challenging the ARR [r]ealization payments despite
interference in sales of [its product, Smart Invoice Review].155

Jhaveri’s claim fails as to the first and second alleged breaches. The Merger

Agreement does not create any obligation for the Equityholders’ Representative to

communicate with Equityholders or inform them about the earnout or any other

payment from K1.

154
The Merger Agreement exempts the Equityholders’ Representative from liability “for
any actions taken or omitted to be taken under or in connection with t[he] [Merger]
Agreement . . . or the transactions contemplated [t]here[in] . . . except for such actions
taken or omitted to be taken resulting from the Equityholders’ Representative’s willful
misconduct.” Merger Agreement § 10.8(b) (emphasis added).
155
Compl. ¶ 414; see also id. ¶¶ 48-50, 52-53, 65-66, 157-59.
30
The third and fourth alleged breaches, however, give rise to a reasonably

conceivable breach of contract claim. Section 2.14(b) of the Merger Agreement sets

a process by which Onit must report the ARR to the Equityholders’ Representative,

including a procedure the Equityholders’ Representative could follow to raise

“questions or concerns” about Onit’s “calculations.”156 More pertinently, Section

2.14(d) states that the Equityholders’ Representative “shall deliver written notice”

to Onit of any “action or omission of [Onit] the effect of which [wa]s to frustrate”

achievement of the ARR threshold.157

Jhaveri alleges that Goyle failed to deliver a notice of dispute after receiving

Onit’s statement that ARR was below the $5.5 million threshold required for an

156
The Merger Agreement contemplated the following procedure:
Within five (5) Business Days following request therefor [sic] by the
Equityholders’ Representative (which request shall not be made more
than once per calendar quarter), the Buyer shall deliver to the
Equityholders’ Representative a statement setting forth in reasonable
detail the ARR of the Company as of the date of such request. Upon
request by the Equityholders’ Representative following the
Equityholders’ Representative’s review of such statements, the Buyer
shall participate in a teleconference to discuss the calculations set
forth in such statements (including any questions or concerns that the
Equityholders’ Representative has with the information set forth
therein). No later than April 5, 2022, the Buyer shall deliver to the
Equityholders’ Representative a statement setting forth in reasonable
detail the ARR of the Company as of the Measurement Date and the
Buyer’s determination of the resulting ARR Realization Payment
Amount.
Merger Agreement § 2.14(b).
157
Id. § 2.14(d) (emphasis added); see Compl. ¶¶ 44, 46.
31
earnout payment.158 According to the Complaint, Goyle knew Onit had “interfered

with company performance and achievement of the” earnout.159 Goyle allegedly

planned to sue for the payments from Onit but opted not to challenge the ARR

statement after he was offered a lucrative “soft landing” by the K1 Defendants.160

Jhaveri argues that Goyle’s willful inaction breached Section 2.14(d) of the Merger

Agreement.161

In Goyle’s view, Jhaveri’s allegations are deficient because the Merger

Agreement did not “permit [Goyle] to challenge the [ARR] payment based on bad

business strategy or execution.”162 This argument ignores Jhaveri’s allegation that

Goyle knew of active “interference” by the K1 Defendants but purportedly made the

self-interested decision to hold back written notice of their improper actions, despite

his obligation in Section 2.14(d).163 Taking these allegations as true, Jhaveri has

identified a viable potential breach of Section 2.14(d).

The motion is denied insofar as Count IX its concerns Goyle’s failure to

challenge the ARR statement and related interference with the earnout. It is granted

158
Compl. ¶ 48.
159
Id. ¶ 52.
160
Id. ¶¶ 52-55, 61 (providing factual allegations in support of this theory).
161
Pl.’s Br. in Opp’n to Goyle 59.
162
Goyle Opening Br. 27.
163
See supra notes 158-160 and accompanying text.
32
insofar as Count IX concerns Goyle’s failure to communicate with other Bodhala

stockholders.

3. Tortious Interference

Jhaveri’s final claim is for tortious interference with contract. To prevail, he

must show “(1) a contract, (2) about which [the] defendant[s] knew, and (3) an

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

without justification, (5) which causes injury.”164 He contends that the K1 Entities,

Elfman, and Velcich tortiously interfered with Goyle’s obligations as Equityholders’

Representative as provided in the Merger Agreement.165

To start, this claim cannot proceed against Onit, which is a party to Merger

Agreement.166 “[A] party to a contract cannot tortiously interfere with that same

contract . . . .”167

164
Bhole, Inc. v. Shore Invs., Inc., 67 A.3d 444, 453 (Del. 2013) (quoting Irwin & Leighton,
Inc. v. W.M. Anderson Co., 532 A.2d 983, 992 (Del. Ch. 1987)).
165
Compl. ¶¶ 417-25; Pl.’s Br. in Opp’n to K1 37-38.
166
Merger Agreement 1; see supra note 47 (defining the K1 Entities to include Onit).
167
Grunstein v. Silva, 2009 WL 4698541, at *16 (Del. Ch. Dec. 8, 2009); see also Kuroda
v. SPJS Hldgs., L.L.C., 971 A.2d 872, 884 (Del. Ch. 2009) (“It is well settled that a party
to a contract cannot be held liable for breaching the contract and for tortiously interfering
with that contract.”); Restatement (Second) of Torts § 766 (1979) (“One who intentionally
and improperly interferes with the performance of a contract . . . between another and a
third person . . . is subject to liability.”).
33
The other K1 Entities, Elfman, and Velcich are all Onit affiliates.168 They

thus potentially fall under the “affiliate exception,” which requires that a defendant

to a tortious interference claim “be a stranger to both the contract and the business

relationship giving rise to and underpinning the contract.”169 This exception grants

a limited “privilege among affiliates to discuss and recommend action” given their

“shared economic interests.”170 But the privilege is “qualified” in that it “arises when

[an affiliated party] pursues lawful action in the good faith pursuit of its profit

making activities.”171 If the affiliate’s alleged “interference was motivated by some

malicious or other bad faith purpose,” the privilege may be overcome.172

Even if the remaining K1 Defendants were sufficiently affiliated with Onit,

Jhaveri’s allegations make it reasonably conceivable that the limited privilege is

inoperative here.173 He alleges that the K1 Defendants undertook “extraordinary

168
See supra notes 14, 47, and accompanying text (describing the relationships between
the various K1 Entities and individuals).
169
AM Gen. Hldgs. LLC v. Renco Group, Inc., 2013 WL 5863010, at *12 (Del. Ch. Oct.
31, 2013) (citing Tenneco Auto. Inc. v. El Paso Corp., 2007 WL 92621, at *5 (Del. Ch.
Jan. 8, 2007)).
170
Shearin, 652 A.2d at 591; AM Gen., 2013 WL 5863010, at *12.
171
Shearin, 652 A.2d at 590.
172
Id. at 591; see also AM Gen., 2013 WL 5863010, at *12 (explaining that to overcome
the affiliate exception, a plaintiff’s allegations must meet a “stringent bad faith standard”
(citing Allied Cap. Corp. v. GC-Sun Hldgs., LP, 910 A.2d 1020, 1039 (Del. Ch. Nov. 22,
2006))).
173
Neither party briefed nor argued the application of the affiliate exception. I need not
resolve whether the K1 Entities (other than Onit) fall within its scope because Jhaveri
sufficiently pleads bad faith.
34
steps to hide payments to Goyle”—including making “material misstatements” to

Jhaveri and other Bodhala stockholders and taking other “bad faith acts”—to

persuade Goyle not to challenge the earnout.174 Based on these facts, Jhaveri

adequately pleads a “malicious or other bad faith purpose” allowing his tortious

interference claim to proceed against Onit’s affiliates—provided that the elements

of the claim are met.175

Jhaveri meets his pleading burden on the first, second, third, and fifth

elements. The other K1 Entities and individuals named in this count are Onit

affiliates who conceivably knew the Merger Agreement’s terms.176 The K1

Defendants purportedly offered Goyle a “sham contract” that was concealed from

Bodhala stockholders, which allowed them to “structure[] payments” to Goyle as a

quid pro quo for withholding a challenge the ARR statement or failed earnout.177

Jhaveri asserts that this agreement with Goyle was “a significant factor in leading

174
Compl. ¶¶ 41-42, 46, 48-54; Pl.’s Br. in Opp’n to K1 39 (arguing that the K1 Defendants
took steps to “undermine[] the very purpose of having an Equityholders’ Representative”
by incentivizing Goyle to breach his contractual duties to other stockholders).
175
See supra note 172 and accompanying text.
176
See Compl. ¶ 419.
177
Id. ¶ 423; id. ¶ 420 (“Elfman lied to shareholders that Goyle was no longer under
contract with Onit and was not reachable . . . .”); id. ¶¶ 421-22 (alleging that Velcich and
Elfman together drafted, and Velcich sent, “a letter . . . with the material misstatement that
there had been no communications with Goyle as [Equityholders’ Representative], despite
his knowledge of the litigation threats made [by] Goyle as [Equityholders’ Representative]
and the K1 Entities’ negotiations with Goyle to structure payments to Goyle”).
35
Goyle to breach his [Equityholders’ Representative] duties.”178 Jhaveri also pleads

that, as a result of these actions, he was deprived of payments he would otherwise

have received.179

The fourth element—whether the interference was “without justification”—is

more complex.180 It “requires the court to engage in a fact-specific inquiry to

determine whether the interference with contract is improper under the particular

circumstances of the case”—a task ill-suited for the pleading stage.181 Jhaveri’s

allegations of “fraudulent, intentional, willful, and malicious” actions by the K1

Defendants are sufficient.182

178
Id. ¶ 423.
179
Id. ¶ 435. The K1 Defendants argue that Jhaveri cannot satisfy the damages element of
his claim because the ARR threshold was unmet. K1 Opening Br. 16; see also K1 Reply
Br. 12-13. But Jhaveri’s theory is that the K1 Defendants convinced Goyle not to challenge
their purported interference with Bodhala’s business that led to it missing the threshold. If
Goyle successfully challenged the ARR statement, it is reasonably conceivable that a
payment might be owed to Jhaveri.
180
See Bandera Master Fund LP v. Boardwalk Pipeline P’rs, LP, 2019 WL 4927053,
at *25 (Del. Ch. Oct. 7, 2019) (describing the “existence of justification” element as
“non-straightforward”).
181
Id. at *26 (explaining that this element involves the weighing of factors such as “(a) the
nature of the actor’s conduct, (b) the actor’s motive, (c) the interests of the other with which
the actor’s conduct interferes, (d) the interests sought to be advanced by the actor, (e) the
social interests in protecting the freedom of action of the actor and the contractual interests
of the other, (f) the proximity or remoteness of the actor's conduct to the interference and
(g) the relations between the parties.” (citing Restatement (Second) of Torts § 767)).
182
Compl. ¶ 424; see also supra notes 174, 177, and accompanying text.
36
The motion to dismiss is therefore denied on Count X against K1, K4 Capital

Advisors, K4 Private Investors, Onit Holdings, Elfman, and Velcich. The motion is

granted on Count X as to Onit.

III. CONCLUSION

The defendants’ motions to dismiss are granted in part and denied in part. The

court lacks jurisdiction over Sugden, who is dismissed from this action. Counts I

through VII of the Complaint were released and are dismissed with prejudice on that

basis. Count VIII fails to state a claim upon which relief can be granted and is

dismissed with prejudice. Count IX states a viable claim in part and fails in part, as

outlined above. Count X survives, except as to Onit. Additionally, punitive

damages are unavailable.

37