Opinion
C. A. N22C-01-186 EMD CCLD
11-29-2022
CONNOREX-LUCINDA, LLC, a South Carolina limited liability company, Plaintiff, v. REX RES HOLDINGS, LLC, a Delaware limited liability company; RES HOLDINGS IV (ERISA), LLC, a Delaware limited liability company, and REX RESIDENTIAL VENTURE, LLC, a Delaware limited liability company, Defendants.
K. Tyler O'Connell, Esquire, Barnaby Grzaslewicz, Esquire, Samuel E. Bashman, Esquire, Morris James LLP, Wilmington, Delaware, Meryl Macklin, Esquire, Anne Redcross, Esquire, David J. Root, Esquire, Bryan Cave Leighton, Esquire, Paisner LLP, San Francisco, California. Attorneys for Plaintiff Connorex-Lucinda, LLC. Todd C. Schiltz, Esquire, Faegre Drinker Biddle & Reath, LLP, Wilmington, Delaware, Betty M. Shumener, Esquire, Shumener Odson OH LLP, Los Angeles, California. Attorneys for Defendants REX RES Holdings, LLC, RES Holdings IV (ERISA) LLC and REX Residential Venture, LLC.
Submitted: August 26, 2022
Upon Defendants' Motion to Dismiss DENIED
K. Tyler O'Connell, Esquire, Barnaby Grzaslewicz, Esquire, Samuel E. Bashman, Esquire, Morris James LLP, Wilmington, Delaware, Meryl Macklin, Esquire, Anne Redcross, Esquire, David J. Root, Esquire, Bryan Cave Leighton, Esquire, Paisner LLP, San Francisco, California. Attorneys for Plaintiff Connorex-Lucinda, LLC.
Todd C. Schiltz, Esquire, Faegre Drinker Biddle & Reath, LLP, Wilmington, Delaware, Betty M. Shumener, Esquire, Shumener Odson OH LLP, Los Angeles, California. Attorneys for Defendants REX RES Holdings, LLC, RES Holdings IV (ERISA) LLC and REX Residential Venture, LLC.
ERIC M. DAVIS, JUDGE
I. INTRODUCTION
This is a civil breach of contract dispute assigned to the Complex Commercial Litigation Division of this Court. Plaintiff Connorex-Lucinda, LLC ("Connorex") alleges that Defendants REX RES Holdings, LLC ("REX Holdings," originally "Doe No. 1"), RES Holdings IV (ERISA), LLC ("RES"), and REX Residential Venture, LLC ("Venture") (collectively the "Defendants") breached their contractual obligations by failing to reimburse Connorex for expenses in the amount of $1.9 million. Defendants have filed a motion to dismiss (the "Motion"), pursuant to Civil Rules 12(b)(6), 12(b)(7), 17, and 19, all claims asserted by Connorex in its Amended Complaint.
See Am. Compl. 1.
See Defendants' Motion to Dismiss Plaintiff's Amended Complaint (hereinafter "Mot.").
The Court held a hearing on the Motion on August 26, 2022. At the end of the hearing, the Court issued a partial ruling and GRANTED the Motion as to Counts III, IV and V. The Court then reserved decision as to Counts I and II. For the reasons set forth below, the Court will DENY the Motion with respect to REX Holdings and Venture as to Counts I and II.
II. RELEVANT FACTS
A. The Parties
Connorex is a South Carolina limited liability company.
See Am. Compl. 1.
REX Holdings is a Delaware limited liability company. RES is a Delaware limited liability company. Connorex and REX Holdings are the two members of Venture, a Delaware limited liability company. RES is a non-member manager of Venture.
Id. ¶ 10.
Id. ¶ 11.
Id. ¶ 12.
See Pl. Ex. 1, Limited Liability Company Agreement of REX Residential Venture, LLC (hereinafter "JV Agreement") § 5.1.1(a).
B. The Contract
Connorex and REX Holdings entered into the Limited Liability Company Agreement of REX Residential Venture, LLC (the "JV Agreement") on August 11, 2015. The JV Agreement created Venture. Connorex and REX Holdings created Venture to acquire, own, hold, manage, and lease single-family homes (the "Target Properties").
See Am. Compl. ¶ 16.
Id. ¶ 17.
Id.
REX Holdings agreed to fund 98% of Venture and Connorex agreed to fund 2%. The Target Properties were to be purchased with $150,000,000 Anticipated Capital Commitment, comprising of $50,000,000 of equity financing and $100,000,000 of indebtedness.
Id. ¶ 2.
Id.
Venture sold its assets on March 1, 2021, in the amount of $300,000,360.00. On November 12, 2021, Connorex sent a letter to Venture requesting that Venture and REX Holdings reimburse property-related expenses in the amount of $1,999,275. Venture and REX Holdings declined to reimburse Connorex.
See Pl. Ex. 3, REX Residential Venture, LLC, Consolidated Financial Statements and Independent Auditor's Report, December 31, 2020.
See Am. Compl. ¶ 45.
Id. ¶ 46.
C. Relevant Contractual Provisions
JV Agreement Section 5.1.1, "Non-Member Manager and Administrative Member," details the roles and duties of RES and Connorex. Section 5.1.1(a) designates RES as the "Non-Member Manager" of Venture. Section 5.1.1(a) provides that RES has "the exclusive right and authority" to make business decisions on behalf of Venture.
JV Agreement § 5.1.1.
Id. . § 5.1.1(a).
Id.
JV Agreement Section 5.1.1(b) names Connorex as the "Administrative Member" of Venture. Section 5.1.1(b) delegates Connorex with the authority to direct and supervise Venture's day-to-day business operations and property management duties. Section 5.1.1(b) provides twenty-six (26) circumstances when Connorex is precluded from incurring expenses without the written approval of RES. Section 5.1.1(b), in part, states:
Id. § 5.1.1(b): "'Administrative Member' has the meaning set forth in Section 5.1.1(b)."
Id.
Id.
(b) [Connorex] shall keep [REX Holdings] fully informed regarding the Target Properties and shall also consult with [REX Holdings] on a regular basis regarding all material matters relating to [Venture], [Venture] Subsidiaries and the Target Properties. Notwithstanding the preceding provisions of this Section 5.1.1(b) or anything else to the contrary set forth in this Agreement, each of the following matters shall require the prior written approval (which may be by electronic mail) of [RES] (and may be proposed and implemented only by [RES]) before [Connorex] takes any action with respect thereto (collectively, the "Non-Member Manager Decisions"): …
(iv)(a) any sale, disposition, assignment, transfer, lease or other capital transaction (including any sale or ground lease of the assets of [Venture] or any [Venture] Subsidiary or any portion thereof) (including, without limitation, a Target Property); (b) any decision to enter into, obtain, amend, modify, prepay or supplement any Project Financing or other financing for [Venture] or any [Venture] Subsidiary; or (c) any pledge, mortgage, encumbrance, or grant of a security interest in, any assets of [Venture] or any [Venture] Subsidiary.
* * *
(vii) Any agreement, compensation or reimbursement to, or other transaction with any Affiliate of [Connorex].
* * *
(xxiv) Subject to Section 5.1.2, incurring or refinancing of any indebtedness of [Venture] or any [Venture] Subsidiary, or obligating [Venture], and [Venture] Subsidiary, or any Member as a surety, guarantor or accommodation party to any obligation.
Id.
JV Agreement Section 3.2, "Additional Capital Contributions," details the process by which a member may contribute additional capital to Venture. Section 3.2.1 provides that if additional capital is needed to cover any business expense, Connorex must first provide RES with a written request for funds. The written request must describe the need for additional capital and provide documentation in support of the request. Next, the written request must be approved by RES. If the request is approved by RES, then RES must issue a written notice (a "Capital Call Notice"), setting forth (i) the amount of additional capital required to be contributed by the Members and (ii) each Member's share of such additional capital.
Id.
JV Agreement § 3.2.1.
Id.
Id.
Id.
JV Agreement Section 5.1.1(b)(iii) details three (3) situations when Connorex may incur expenses without the prior written approval of RES. Section 5.1.1(b)(iii) states:
Id. § 5.1.1(b)(iii).
Notwithstanding the foregoing, the consent of [RES] to an expenditure payable to an unrelated third party exceeding the amount specified for such expenditure in the Operating Budget shall not be required in any of the following circumstances: (a) Connorex, in its reasonable judgment, deems there to be an emergency requiring such expenditures to effectuate immediate necessary for the protection of the assets of [Venture] or any [Venture] Subsidiary or to avoid property damage or personal injury; or (b) such expenditure would not (i) cause (or be reasonably expected to cause) the aggregate amount of the monthly expenses for all of the Target Properties (excluding the expenses described in clause (c) below) to exceed the Operating Budget by more than $50,000, or (ii) cause (or be reasonably expected to cause) the amount of the annual expenses for any particular Target Property (excluding the expenses described in clause (c) below) to exceed the annual Operating Budget for such Property by more than $10,000, on a property-by-property basis taking into account the amounts expended to date and reasonably anticipated expenses with respect to any Target Property; or (c) expenditures for real property taxes and assessments and utilities.
Id.
JV Agreement Section 5.2, "Compensation," details the circumstances in which members would be compensated by Venture for performing contractual duties. In pertinent part, Section 5.2.1 provides:
Id. § 5.2.
All costs and expenses owing by [Connorex] (or its Affiliates) to any third party (not an Affiliate of [Connorex]) on behalf of or relating to [Venture] are
reimbursable by [Venture] only to the extent, if any, specifically enumerated and payable under the Operating Budget and otherwise permitted by this Agreement.
Id. . § 5.2.1.
D. The Amended Complaint
Connorex filed the Amended Complaint on April 11, 2022. Connorex seeks compensatory damages in the amount of 98% of $1,999,275 (REX Holdings' share) plus interest, attorney's fees and costs, and declaratory judgment. The Amended Complaint states six claims: (i) Count I-Breach of Contract as against REX Holdings and Venture; (ii) Count II- Breach of Contract as against REX Holdings and Venture; (iii) Count III-Declaratory Relief as against All Defendants; (iv) Count IV-Money Had and Received as against REX Holdings and Venture; and, (v) Count V-Open Book Account as against REX Holdings and Venture.
See Am. Compl.
Id. ¶ 83-86.
See Am. Compl.
As to Counts I and II, Connorex maintains that REX Holdings and Venture breached the JV Agreement by failing to reimburse Connorex for $1.9 million in property-related expenses.At the August 26, 2022 hearing, the Court dismissed Counts III, IV and V.
Id. ¶ 54.
III. PARTIES' CONTENTIONS
A. The Motion
Defendants seek to dismiss the Counts I and II pursuant to Civil Rules 12(b)(6), 12(b)(7), 17, and 19. For Counts I and II, Defendants first argue that Connorex lacks standing, as it did not suffer an injury in fact. Defendants also contend that the claims must be dismissed because Connorex failed to join necessary and indispensable parties as required by Civil Rules 12(b)(7), 17, and 19. Defendants maintain that Connorex's affiliates and Venture's former subsidiaries must be joined to ensure the correct plaintiff filed suit against the correct defendants.Defendants next argue that even if Connorex had standing and joined the necessary and indispensable parties, Connorex failed to state a claim under Civil Rule 12(b)(6). Defendants contend that the Delaware Limited Liability Company Act (the "Act") and the terms of the JV Agreement bar liability.
See Mot.
Id. at 15.
Id. at 19.
Id.
Id. at 20.
Id. at 21.
B. Opposition
Connorex opposes the Motion, claiming it should be denied as to Counts I and II.Connorex claims that it has standing because (i) Connorex is a party to the contract that the Defendants breached, and (ii) it has suffered an injury in fact. Connorex contends that the injury in fact is the obligation to repay $1.9 million to its affiliates. Connorex asserts that Connorex's affiliates and Venture's former subsidiaries are not necessary and indispensable parties that must be joined. Connorex also claims that the affiliates of Connorex have not claimed an interest in the subject of this action.
See Plaintiff's Answering Brief in Opposition to Defendants' Motion to Dismiss the Amended Complaint (hereinafter "Opp.") at 2.
Id.
Id.
Id.
Id. at 18.
Connorex argues that Defendants only assert arguments to dismiss the breach of contract claims against REX Holdings, not Venture. Connorex contends that arguments in support of REX Holdings cannot be construed to also support Venture, as they are two separate entities.Connorex contends that neither the JV Agreement nor the Act preclude claims against Defendants. Connorex claims that Count II is not barred by an integration clause or no-oral modification clause contained in the JV Agreement. Connorex argues that the Act does not shield co-members of an LLC from breach of contract claims.
Id. at 2.
Id. at 19.
Id. at 4.
Id. at 25.
Id. at 22 (citing Kuroda v. SPJS Holdings, LLC, 971 A.2d 872, 881 (Del. Ch. 2009)).
Applying applicable legal standards to the Amended Complaint, the Court finds that Connorex may proceed on Counts I and II. The parties may develop a record that warrants summary judgment; however, this civil action is at is very initial stages and, as plead, the Amended Complaint states breach of contract claims.
IV. STANDARD OF REVIEW
A. 12(b)(6): Failure to State A Claim Upon Which Relief Can Be Granted
Upon a motion to dismiss pursuant to Civil Rule 12(b)(6), the Court (i) accepts all well-pled factual allegations as true, (ii) accepts even vague allegations as well-pled if they give the opposing party notice of the claim, (iii) draws all reasonable inferences in favor of the non-moving party, and (iv) only dismisses a case where the plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances. However, the court must "ignore conclusory allegations that lack specific supporting factual allegations."
See Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 227 A.3d 531, 536 (Del. 2011); Doe v. Cedars Academy, No. 09C-09-136, 2010 WL 5825353, at *3 (Del. Super. Oct. 27, 2010).
Ramunno v. Crawley, 705 A.2d 1029, 1034 (Del. 1998).
B.12(b)(7): Failure to Join a Party Under Rule 19; Rule 17
When considering a motion to dismiss pursuant to Civil Rule 12(b)(7) for failure to join an indispensable party under Civil Rule 19, the Court undertakes a two-prong analysis based on the pleadings. First, the Court must determine whether the person or entity is a necessary party under Rule 19(a). A party is necessary if:
Roberts v. Delmarva Power & Light, 2007 WL 2319761, at *2-3 (Del. Super. Aug. 6, 2007).
Id. at *2; O'Rangers v. Cadia Rehabilitation Silverside, 2019 WL 1531520, at *4 (Del. Super. Apr. 8, 2019).
(1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest.
Super. Ct. Civ. R. 19(a).
Civil Rule 17(a) further explains, "Every action shall be prosecuted in the name of the real party in interest. The real party in interest is the party who actually possesses the right being asserted and has a legal right to enforce the claim." Second, the Court must determine the appropriate resolution if the party is necessary. "If the party is 'necessary' under [Civil] Rule 19(a), but joinder is not feasible, then the Court must determine whether 'in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent party being thus regarded as indispensable.'"
Super. Ct. Civ. R. 17(a)(1).
Roberts, 2007 WL 2319761, at *2.
Id.; Super. Ct. Civ. R. 19(a).
When reviewing a Civil Rule 12(b)(7) motion to dismiss, the Court places the initial burden on the moving party "to show that the person who was not joined is needed for a just adjudication." However, when an initial assessment of the facts reveals the possibility that a non-party whose joinder is required under Civil Rule 19 exists, the burden shifts to the nonmoving party to negate this conclusion. Failure of the nonmoving party to meet that burden "will result in the joinder of the party or dismissal of the action."
Roberts, 2007 WL 2319761, at *3.
Id.
Id.
V. DISCUSSION
A. Counts I and II-Breach of Contract as against REX Holdings and Venture
Connorex contends that REX Holdings and Venture breached the JV Agreement by failing to reimburse Connorex for the $1.9 million loan to Venture. Connorex claims that Venture had "expended all of the Anticipated Capital Commitment and therefore did not have the necessary funds" to cover various property management expenses. Connorex maintains that it borrowed $1.9 million from its unnamed affiliates to cover the property-related expenses. Connorex now has an obligation to repay its affiliates the $1.9 million.
See Am. Compl. ¶ 54.
Id. ¶ 32.
Id. ¶ 27.
Id. ¶ 6.
Defendants first argue that Connorex lacks standing, as it did not suffer an injury in fact. Second, Defendants contend that the claims must be dismissed because Connorex failed to join necessary and indispensable parties as required by Rules 12(b)(7), 17, and 19. Third, Defendants argue that even if Connorex had standing and joined the correct parties, the Complaint must still be dismissed for failure to state a claim under Rule 12(b)(6). Defendants contend that the Act and the terms of the JV Agreement bar liability.
See Mot. at 15.
Id. at 19.
Id. at 20.
Id. at 21.
1. Connorex has standing.
The party "invoking the jurisdiction of a court bears the burden of establishing the elements of standing." For a plaintiff to have standing:
Dover Hist. Soc. v. City of Dover Plan. Comm'n, 838 A.2d 1103, 1109 (Del. 2003) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, (1992)).
(1) the plaintiff must have suffered an injury in fact-an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or
imminent, not conjectural or hypothetical; (2) there must be a causal connection between the injury and the conduct complained of-the injury has to be fairly traceable to the challenged action of the defendant and not the result of the independent action of some third party not before the court; and (3) it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.
Id.
Connorex claims that it has standing because Connorex is a party to the contract that the Defendants breached, and it has suffered an injury in fact. Connorex contends that the injury in fact is the obligation to repay $1.9 million to its affiliates. Connorex claims that it was "essentially forced" to borrow $1.9 million from its affiliates to cover necessary property-related expenses. Defendants argue that Connorex lacks standing because it did not suffer any harm.
See Opp. at 12.
Id.
See Am. Compl. ¶ 27.
See Defendants' Reply Brief in Support of Their Motion to Dismiss Plaintiff's Amended Complaint (hereinafter "Reply Brief) at 2.
The Court finds that, at this stage of the proceedings, Connorex has standing to bring this claim. First, Connorex has a particularized, actual injury in fact. The injury is Connorex's responsibility to repay $1.9 million to its affiliates. Second, Connorex has established a causal connection between the complained-of injury and the challenged action of the Defendants. Defendants argue that a purported injury to Connorex's affiliates does not convey standing to Connorex. However, as alleged, Connorex is the entity that owes $1.9 million to its affiliates. The third-party affiliates did not borrow money from any party in this matter. Third, the complained-of injury will be redressed by a favorable decision. If Connorex is successful in recovering $1.9 million from this action, it will be able to fulfill its obligation to repay its affiliates.
Id.
2. Joinder of third parties is not required.
As previously stated, the Court may dismiss a claim for failing to join a party pursuant to Civil Rules 12(b)(7) and 19. The Court must first determine whether the person or entity is a necessary party under Rule 19(a). Then, the Court must determine the appropriate resolution if the party is necessary.
See Roberts, 2007 WL 2319761, at *2.
Id.; See O'Rangers v. Cadia Rehabilitation Silverside, 2019 WL 1531520, at * 4 (Del. Super. Apr. 8, 2019).
Id.
Defendants argue that Connorex's affiliates and Venture's former subsidiaries must be joined as necessary and indispensable parties. Defendants contend that joinder will ensure the correct plaintiff filed suit against the correct defendants. Defendants allege that Connorex has not met its burden of demonstrating that the non-parties need not be joined. Defendants rely on Ritchie CT Opps, LLC v. Huizenga Managers Fund, LLC, and Martinez v. E.I. DuPont De Nemours and Co., Inc. to argue that unnamed affiliates and subsidiaries are necessary and indispensable parties. Defendants argue that Martinez and Ritchie demonstrate that if unnamed entities are not joined then the Court will be faced with concerns like prevention of complete relief and the possibility of multiple suits with inconsistent results.
See Mot. at 19.
Id.
See Reply Brief at 8.
Id. at 9 (citing Ritchie CT Opps, LLC v. Huizenga Managers Fund, LLC, 2019 WL 2319284 (Del. Ch. May 30, 2019), Martinez v. E.I. DuPont De Nemours and Co., Inc., 82 A.3d 1 (Del. Super. 2012)).
Id.
Connorex asserts that Connorex's affiliates and Venture's former subsidiaries are not necessary and indispensable parties that must be joined. Connorex argues that it is not required to join creditor subsidiaries because complete relief can be granted without their presence. Further, Connorex contends that the affiliates of Connorex have not claimed an interest in the subject of this action.
See Opp. at 2.
Id. at 17.
Id. at 18.
The Court finds that Connorex's affiliates and Venture's former subsidiaries are not parties that must be joined, as complete relief can be accorded among those already named as parties. The JV Agreement is between Connorex and Defendants, not Connorex and its affiliates or Venture's former subsidiaries. Connorex has alleged that it, and not Defendants, is liable on the loan from the affiliates and subsidiaries. Connorex has plead that it has satisfied the debts to the third parties through the loan from the affiliates and subsidiaries. As pled, the Court will not dismiss Counts I and II pursuant to Rule 12(b)(7) for failure to join necessary parties.
3. Counts I and II are well-pled.
The Court will grant a motion to dismiss pursuant to Civil Rule 12(b)(6) if the "[Connorex] would not be entitled to recover under any reasonably conceivable set of circumstances." Defendants argue that even if Connorex had standing and joined the necessary and indispensable parties, the Complaint must still be dismissed for failure to state a claim under Civil Rule 12(b)(6). Defendants argue that the terms of the Act and the JV Agreement bar liability.
Super. Ct. Civ. R. 12(b)(6).
See Mot. at 20.
Id. at 21.
Defendants claim that Section 18-303(a) of the Act "expressly states that neither a member nor a manager of a Delaware limited liability company is responsible for the debts, obligations or liabilities of the company absent an agreement to the contrary…." Here, the JV Agreement is the "agreement to the contrary" which controls this issue.
Id.
JV Agreement Section 5.2 details the circumstances in which members would be compensated by Venture for performing contractual duties. In pertinent part, Section 5.2.1 states:
JV Agreement § 5.2.
All costs and expenses owing by [Connorex] (or its Affiliates) to any third party (not an Affiliate of [Connorex]) on behalf of or relating to [Venture] are reimbursable by [Venture] only to the extent, if any, specifically enumerated and payable under the Operating Budget and otherwise permitted by this Agreement.
Id. § 5.2.1.
Defendants argue that the terms of the "plain terms" of the JV Agreement demonstrate that REX Holdings and RES are not liable for Venture's debts-here, the $1.9 million claim.Defendants argue that Connorex failed to comply with JV Agreement Section 3.2, titled "Additional Capital Contributions." Section 3.2 details the process by which a member may contribute additional capital to Venture. Section 3.2 requires the prior written approval of RES before contributing additional capital. Defendants also argue that Connorex failed to follow Section 5.1.1(b), which provides those situations when Connorex is precluded from incurring expenses without the written approval of RES.
See Mot. at 22.
See Reply Brief at 18; JV Agreement § 3.2.
Id.
JV Agreement § 5.1.1(b).
Connorex relies on JV Agreement Section 5.1.1(b)(iii). Section 5.1.1(b)(iii) provides three situations when Connorex may incur expenses without the prior written approval of RES.The three are as follows: (i) An emergency requiring expenditures to be immediately necessary for the protection of the assets of Venture; (ii) The expenditure amount is under a certain monetary threshold; or (iii) Expenditures for real property taxes and assessments and utilities.Connorex charges that it was "essentially forced" to borrow $1.9 million from its affiliates to cover necessary property-related expenses. Connorex alleges that the expenses included property taxes, Homeowner Association (HOA) dues, materials purchased at Lowe's and Home Depot, landscaping, utilities, insurance, plumbing, heating, and labor. Connorex asserts that failure to pay these expenses "would have resulted in, among other things, significant penalties for late payment of taxes and degradation of, and lower rental income from, the properties owned by Venture." Connorex has pled that these expenses were incurred under Section 5.1.1(b)(iii).
Id. § 5.1.1(b)(iii).
Id.
See Am. Compl. ¶ 27.
Id. ¶ 31.
Id. ¶ 27.
Id. ¶ 28.
JV Agreement Section 5.2, "Compensation," details the circumstances in which members would be compensated by Venture for performing contractual duties. In pertinent part, Section 5.2.1 states:
JV Agreement § 5.2.
All costs and expenses owing by [Connorex] (or its Affiliates) to any third party (not an Affiliate of [Connorex]) on behalf of or relating to [Venture] are reimbursable by [Venture] only to the extent, if any, specifically enumerated and payable under the Operating Budget and otherwise permitted by this [JV] Agreement.
Id. . § 5.2.1 (emphasis added).
Connorex has alleged that it incurred expenses permitted by Section 5.1.1(b)(iii). As a result, Connorex argues that it has pled that Defendants had an obligation to reimburse Connorex under the JV Agreement and breached that obligation.
See Am. Compl. ¶ 28.
Id. ¶ 1.
Therefore, at this early stage of the proceedings, the Court finds that neither the Act nor the JV Agreement shield Defendants from liability. The Court also finds that there is a "reasonably conceivable set of circumstances" presented in the Amended Complaint that would entitle Connorex to recover.
VI. CONCLUSION
For the reasons stated above, the Court DENIES the Motion as to Counts I and II.
IT IS SO ORDERED.