In denying a motion to dismiss, the Court of Chancery held that the plaintiff pled reasonably conceivable claims for breach of contract. The Court rejected defendant’s challenges to the claims on both procedural and substantive grounds.
The plaintiff brought claims for breach of contract in his capacity as the contractually designated representative of the former stakeholders, who sold their shares to the defendant. The plaintiff claimed that the defendant breached the relevant purchase agreement by failing to pay post-closing milestone consideration. First, the defendant argued that the right to the consideration belonged to the company’s former stakeholders, not their designated representative. The defendant argued that the representative party here was incapable of pursuing declaratory relief on behalf of those whom he purported to represent. The Court explained, however, that “the contractual appointment of a stockholder representative to bring certain actions makes that representative the real party in interest in those actions.” Further, the Court pointed out that it routinely entertains declaratory judgment actions brought by parties in a representative capacity. Similarly, the Court denied the defendant’s contention that the former stockholders were all necessary parties that had to be joined in the action. The Court explained that even though the former stockholders might have had an interest in the subject matter of the suit, they had no interest in individually pursuing relief. Finally, the Court ruled that the plaintiff had adequately pled legally sufficient claims for breach of contract, which were supported by the statement of facts. The Court reasoned that the defendant’s reading of the contractual provisions was not the only reasonable interpretation.
