`IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE
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`
`ACERO CAPITAL, L.P., a Cayman Islands
`limited partnership,
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`Plaintiff,
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` v.
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`SWRVE MOBILE, INC., et al.
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` Defendants.
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`
`C.A. No. 2020-0876-PAF
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`PLAINTIFF’S REPLY BRIEF IN FURTHER SUPPORT OF ITS
`MOTION TO DISMISS COUNTERCLAIM
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`Dated: September 12, 2025
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`Michael A. Pittenger (#3212)
`David A. Seal (#5992)
`Camilia R. Katkocin (#7216)
`POTTER ANDERSON & CORROON LLP
`1313 N. Market Street
`Hercules Plaza, 6th Floor
`Wilmington, DE 19801
`(302) 984-6000
`
`Attorneys for Plaintiff Acero Capital, L.P.
`
`
`EFiled: Sep 22 2025 12:40PM EDT
`Transaction ID 77126778
`Case No. 2020-0876-PAF
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`i
`TABLE OF CONTENTS
`Page
`TABLE OF AUTHORITIES ..................................................................................... ii
`INTRODUCTION ..................................................................................................... 1
`ARGUMENT ............................................................................................................. 4
`I. SWRVE HAS NOT PLED A BREACH OF THE IMPLIED
`COVENANT OF GOOD FAITH AND FAIR DEALING. ............................ 4
`
`A. THE IMPLIED COVENANT DOES NOT APPLY TO
`ACERO’S EXPRESS CONTRACTUAL VOTING RIGHT. .............. 4
`
`B. ACERO’S ACTIONS DID NOT BREACH THE IMPLIED
`COVENANT. ...................................................................................... 10
`1. Acero Did Not Breach The Implied Covenant Through
`Proposing Unreasonable Terms. ............................................... 10
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`2. Acero Did Not Breach The Implied Covenant By
`Unreasonably Delaying. ............................................................ 11
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`II. ACERO DID NOT BREACH THE IMPLIED COVENANT BY
`ALLEGEDLY COMMITTING FRAUD. ..................................................... 15
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`III. THE STATUTE OF LIMITATIONS REQUIRES DISMISSAL OF
`THE COUNTERCLAIM AS UNTIMELY. .................................................. 20
`CONCLUSION ........................................................................................................ 25
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`ii
`TABLE OF AUTHORITIES
` Page(s)
`CASES
`Amirsaleh v. Bd. of Trade of City of N.Y., Inc.,
`2008 WL 4182998 (Del. Ch. Sept. 11, 2008) ....................................................... 6
`ASB Allegiance Real Estate Fund v. Scion Breckenridge Managing Member,
`LLC,
`50 A.3d 434 (Del. Ch. 2012) .............................................................................. 16
`Baldwin v. New WoodResources LLC,
`283 A.3d 1099 (Del. 2022) ................................................................................... 7
`Bershad v. Curtiss-Wright Corp.,
`535 A.2d 840 (Del. 1987) ..................................................................................... 8
`Buddenhagen v. Clifford,
`2024 WL 2106606 (Del. Ch. May 10, 2024) ...................................................... 22
`DG BF, LLC v. Ray,
`2021 WL 776742 (Del. Ch. Mar. 1, 2021) ....................................................... 6-7
`Dieckman v. Regency GP LP,
`155 A.3d 358 (Del. 2017) ..................................................................................... 8
`DiRienzo v. Lichtenstein,
`2013 WL 5503034 (Del. Ch. Sept. 30, 2013) ..................................................... 13
`In re El Paso Pipeline Partners, L.P. Derivative Litigation,
`2014 WL 2768782 (Del. Ch. June 12, 2014) ...................................................... 17
`Emerald P’rs v. Berlin,
`726 A.2d 1215 (Del. 1999) ................................................................................. 20
`In re Gen. Motors (Hughes) S'holder Litig.,
`897 A.2d 162 (Del. 2006) ................................................................................... 11
`Glaxo Gp. Ltd. v. DRIT LP,
`248 A.3d 911 (Del. 2021) ........................................................................... 4, 5, 20
`
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`
`
`
`
`iii
`In re IAC/InterActive Corp.,
`948 A.2d 471 (Del. Ch. 2008) .............................................................................. 9
`Kelly v. Blum,
`2010 WL 629850 (Del. Ch. Feb. 24, 2010) ........................................................ 12
`Kim v. Coupang, LLC,
`2021 WL 3671136 (Del. Ch. Aug. 19, 2021) ..................................................... 25
`Kraft v. Wisdom Tree Invs., Inc.,
`145 A.3d 969 (Del. Ch. 2016) ............................................................................ 21
`The Liquor Exchange, Inc. v. Tsaganos,
`2004 WL 2694912 (Del. Ch. Nov. 16, 2004) ....................................................... 7
`Merrill v. Crothall-American, Inc.,
`606 A.2d 96 (Del. 1992) ..................................................................................... 16
`Miller v. HCP Trumpet Invs., LLC,
`194 A.3d 908 (TABLE), 2018 WL 4600818 (Del. Sept. 20, 2018) ....................... 6
`Mladosich v. Progressive Cas. Ins. Co.,
`2008 WL 11342468 (C.D. Cal. Sept. 8, 2008) ................................................... 21
`Murray v. Rolquin,
`2023 WL 2421687 (Del. Ch. Mar. 9, 2023 ......................................................... 22
`Nemec v. Shrader,
`991 A.2d 1120 (Del. 2010) ................................................................................... 4
`Stephenson v. Capano Dev., Inc.,
`462 A.2d 1069 (Del. 1983) ................................................................................. 16
`Thorpe v. CERBCO, Inc.,
`1993 WL 443406 (Del. Ch. Oct. 29, 1993) .......................................................... 9
`Trifecta Multimedia Holdings Inc. v. WCG Clinical Servs. LLC,
`318 A.3d 450 (Del. Ch. 2024) ............................................................................ 14
`
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`Plaintiff Acero Capital, L.P. respectfully submits this Reply Brief in Further
`Support of its Motion to Dismiss Counterclaim (the “Motion”).
`INTRODUCTION
`As Plaintiff’s Opening Brief in Support of its Motion to Dismiss Counterclaim
`(the “Opening Brief” or “OB”) explained, Swrve’s1 Counterclaim should be
`dismissed both because Swrve has failed to state a claim for breach of the implied
`covenant and because the Counterclaim is time-barred. The Answering Brief of
`Defendant Swrve Mobile, Inc. in Opposition to Plaintiff Acero Capital, L.P.’s Motion
`to Dismiss Counterclaim (the “Answering Brief” or “AB”) fails to show otherwise.
`While Swrve spends much of the brief repeating or explaining its factual allegations,
`it cannot explain away the legal deficiencies of its Counterclaim. Nor can Swrve
`provide a basis for the Court to ignore its nearly five year wait to bring suit.
` First, Swrve tries to invoke the implied covenant to restrict Acero’s express
`contractual voting right. However, the Delaware Supreme Court has made it
`abundantly clear that the implied covenant cannot limit express contractual rights.
`Swrve attempts to recast Acero’s voting right as a discretionary right subject to the
`implied covenant, but that voting right does not fit into the types of rights that
`Delaware law holds are discretionary. Moreover, Swrve relies on inapposite cases
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`1 Capitalized terms not otherwise defined herein have the same meaning ascribed to them
`in the Opening Brief.
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`2
`concerning drastically different types of contractual rights or misstates the holdings
`of key cases. Swrve’s attempt to impose the implied covenant on Acero’s
`stockholder voting right is an impermissible attempt to expand the implied covenant
`and impose a fiduciary framework on Acero’s actions as a stockholder. Thus, the
`Court should dismiss the implied covenant Counterclaim because, as a matter of law,
`the implied covenant does not apply.
` Second, even if the implied covenant applies, Swrve has not pled that Acero’s
`actions breached it. Swrve alleges that Acero breached the implied covenant by
`proposing terms that favored Acero and other holders of Series B preferred stock
`over other Swrve stockholders. But Acero was negotiating in its own best interest,
`a right it had as a stockholder without any fiduciary duties. The allegation that Swrve
`unreasonably delayed also fails, because it relies on incoherent allegations and
`Swrve cannot plead any harm from the delay.
` Swrve places significant emphasis on Acero’s supposedly false statements
`about being tied up on “time sensitive matters” that affected the timing of its delivery
`of an Excel model to Swrve. While Acero disagrees that its statements were false
`and with Swrve’s mischaracterization of those statements, which relies on an
`inaccurate reading of Mr. Elkhatib’s deposition, Swrve cannot show that these
`statements breached the implied covenant either way. Swrve effectively admits that
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`3
`the statements did not induce it to act or harm it in any way. Thus, it cannot form
`the basis for an implied covenant claim.
` Third, the statute of limitations bars Swrve’s claim. Swrve attempts to dodge
`this argument by completely ignoring a key element of Acero’s argument: that
`Swrve’s December 2020 motion to dismiss and the accompanying declaration of
`Lisa Cleary showed that Swrve knew the facts and theory underlying its claim at that
`time. Instead, Swrve argues that laches should apply instead of the statute of
`limitations, even though the implied covenant is a legal claim. Additionally, Swrve
`contends the doctrine of fraudulent concealment tolls the limitations period because
`Acero allegedly hid the reason behind its delay in delivering an Excel model
`concerning a counterproposal to Swrve, which Swrve argues it was unable to learn
`until discovery. But Delaware only requires that a party be on inquiry notice for the
`limitations period to run. As its own filings confirm, Swrve was aware of the terms
`of Acero’s proposals and its alleged improper delay in delivering the model in 2020,
`which was all it needed to be on inquiry notice, as evidenced by Swrve’s
`characterization of these matters in its 2020 motion to dismiss briefing and the
`accompanying Cleary declaration. Yet Swrve waited nearly five years to file its
`Counterclaim, and the three-year statute of limitations mandates dismissal (as does
`laches should the Court determine the statute of limitations is inapplicable).
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`4
` For the reasons stated in Acero’s Opening Brief and herein, the Court should
`dismiss the Counterclaim with prejudice.
`ARGUMENT
`I. SWRVE HAS NOT PLED A BREACH OF THE IMPLIED
`COVENANT OF GOOD FAITH AND FAIR DEALING.
`A. THE IMPLIED COVENANT DOES NOT APPLY TO ACERO’S
`EXPRESS CONTRACTUAL VOTING RIGHT.
`Despite the Answering Brief’s overdramatic characterization of Acero’s
`actions, the Court does not need to even consider them to dismiss Swrve’s implied
`covenant Counterclaim. As Acero explained in its opening brief, Delaware law
`holds that the implied covenant cannot restrict an express contractual right like the
`voting right in dispute. See OB at 17. As the Supreme Court stated, “[t]he implied
`covenant imposes a good faith and fair dealing obligation when a contract confers
`discretion on a party. It should not be used to imply terms that modify or negate an
`unrestricted contractual right authorized by an agreement.” Glaxo Gp. Ltd. v. DRIT
`LP, 248 A.3d 911, 920–21 (Del. 2021); Nemec v. Shrader, 991 A.2d 1120, 1127 (Del.
`2010) (“The implied covenant will not infer language that contradicts a clear
`exercise of an express contractual right.”). Swrve attempts to turn the implied
`covenant on its head, arguing that, despite the holding of cases like Glaxo and
`Nemec, “it is exactly… the presence of an express right and the absence of express
`conditions on its exercise—that leaves the ‘gap’ that is the predicate for application
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`5
`of the implied covenant.” AB at 33. That is inconsistent with the long-standing
`guidance that the implied covenant is a cautious enterprise. Swrve asks the Court to
`throw caution to the wind.
`To reach its conclusion, Swrve misstates Glaxo’ s holding, claiming that “[d]ue
`to [] express conditions, the Delaware Supreme Court rejected the appellee’s
`argument that the implied covenant applied because the parties had not contemplated
`a disclaimer.” AB at 40. But the Supreme Court did not reach that holding or say
`that an express contractual right is one that is subject to express conditions. Rather,
`in Glaxo, the Supreme Court held that “the implied covenant should not have been
`deployed in this case” and that “there was no gap to fill in the Agreement,” affirming
`that the parties agreed that GSK could voluntarily disclaim patents, but disagreeing
`“with the Superior Court’s characterization of GSK’s right to disclaim patents as a
`discretionary act that GSK had to exercise in good faith.” Glaxo, 248 A.3d at 920.
`Swrve also incorrectly attempts to distinguish Glaxo by claiming that the issue there
`was the exercise of the disclaimer right in dispute, not whether the right was
`exercised in bad faith, as Swrve asserts Acero did with respect to its voting right.
`AB at 40. But the appellee in Glaxo specifically “asserted claims for breach of
`contract and breach of the implied covenant of good faith and fair dealing for what
`it described as GSK’s bad faith disclaimer of the ‘092 Patent.” Glaxo, 248 A.3d at
`916 (emphasis added). The Court should reject Swrve’s misinterpretation of Glaxo
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`6
`and instead follow the clear instruction the Supreme Court provided: the implied
`covenant does not apply to express rights like the voting right at issue in the
`Counterclaim.
`To get around Glaxo’s clear holding, Swrve argues that Acero’s voting right
`was discretionary. AB at 33. The Court of Chancery has explained that “[t]he
`implied covenant is particularly important in contracts that endow one party with
`discretion in performance; i.e., in contracts that defer a decision at the time of
`contracting and empower one party to make that decision later.” Amirsaleh v. Bd. of
`Trade of City of N.Y., Inc. , 2008 WL 4182998, at *8 (Del. Ch. Sept. 11, 2008)
`(applying implied covenant where merger agreement gave defendants discretion to
`decide when stockholders were required to submit election forms). The Certificate
`does not do that or anything similar. This is not a situation where the contract
`specifically says that the right at issue is given to a party to exercise in its sole
`discretion. See, e.g., Miller v. HCP Trumpet Invs., LLC , 194 A.3d 908 (T ABLE),
`2018 WL 4600818, at *1 (Del. Sept. 20, 2018) (applying implied covenant where
`operating agreement “explicitly vest[ed] the Board with sole discretion as to the
`manner in which a sale is conducted”). Instead, it is just a right to vote.
`The authorities Swrve cites for the proposition that the implied covenant
`applies to Acero’s voting right do not support Swrve’s argument. None of those
`cases concerns the exercise of an express contractual right. In DG BF , LLC v. Ray,
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`7
`the Court implied an obligation to participate in good faith in a specified process for
`appointing an independent manager of an LLC. 2021 WL 776742, at *16 (Del. Ch.
`Mar. 1, 2021). But Swrve does not allege that Acero failed to participate in a
`contractually-mandated negotiation.2 In fact, DG BF states that a voting right for a
`series of units in an LLC is an express contractual right to which the implied
`covenant does not apply:
`Plaintiffs fail to state a claim that the Individual Defendants’ actions
`associated with Menashe’s removal as the Series D Manager breached
`the implied covenant of good faith and fair dealing. Section 5.3(b)(i)
`provides that the Series D Manager may only be removed “by and only
`by the affirmative vote or written consent of” the Series D Unitholders.
`This provision makes no mention of the Board, its members, or either
`Individual Defendant. Rather, it grants the Series D Unitholders an
`“express contractual right.”
`
`DG BF , LLC, 2021 WL 776742, at *16.
`
`Baldwin v. New WoodResources LLC , 283 A.3d 1099, 1120 (Del. 2022)
`suggested that a good faith requirement existed with respect to a discretionary right
`to determine whether the standard of conduct for indemnification had been met. See
`id. (“Here the LLC Agreement calls for either the managers, legal counsel, or the
`majority of the then-outstanding unitholders to make a subjective discretionary
`determination as to whether an indemnitee has met a specific standard of conduct.”).
`
`2 The same logic applies to The Liquor Exchange, Inc. v. Tsaganos , which concerned
`whether a landlord had to offer terms in good faith to a tenant where the tenant had the
`right of first refusal to lease additional space. 2004 WL 2694912, at *4 (Del. Ch. Nov. 16,
`2004).
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`8
`But there is no condition or factual predicate that Acero has the discretionary right
`to determine in connection with its vote.
`In Dieckman v. Regency GP LP, the Court found that the voluntary issuance
`of a false and misleading proxy statement intended to induce stockholders to approve
`a transaction, thereby allowing a general partner to invoke contractual safe harbors,
`breached the implied covenant. 155 A.3d 358, 368 (Del. 2017). Here, Acero has
`made no false statement that induced Swrve to act nor has Swrve alleged that Acero
`attempted to invoke any safe harbors. Swrve has not identified a single case that
`applied the implied covenant to a right like Acero’s voting right.
` Swrve’s position makes little sense when considered in the context of other
`Delaware law concerning stockholder voting rights. The Delaware Supreme Court
`has said that “[s]tockholders in Delaware corporations have a right to control and
`vote their shares in their own interest. They are limited only by any fiduciary duty
`owed to other stockholders. It is not objectionable that their motives may be for
`personal profit, or determined by whim or caprice, so long as they violate no duty
`owed other shareholders.” Bershad v. Curtiss-Wright Corp., 535 A.2d 840, 845 (Del.
`1987). Here, Acero was neither a majority nor controlling stockholder and,
`therefore, owed no fiduciary duties, and Swrve does not contend it did. The Court
`of Chancery has recognized a stockholder’s right to vote its shares in its own interest
`is so fundamental that it even applies to stock-owning directors when deciding how
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`9
`to vote their shares as stockholders. See Thorpe v. CERBCO, Inc., 1993 WL 443406,
`at *5 (Del. Ch. Oct. 29, 1993) (“Therefore, since the law confers a veto right upon
`the Eriksons qua shareholders over any transaction that constitutes a sale of
`substantially all of the corporation's assets, and since the law permits shareholders
`qua shareholders to act selfishly in deciding how to vote their shares, I conclude that
`if a sale of CERBCO’s class B stock in East constituted a sale of substantially all of
`CERBCO’s assets, then the public shareholders [have] no right to require them as
`directors to pursue a transaction over which they rightfully held a veto as
`shareholders.”).
`Swrve, however, asks that Acero, a non-controlling stockholder with no
`fiduciary duties, satisfy a higher standard when deciding how to vote its shares.
`What Swrve is doing is asking the Court to use the implied covenant to impose a
`fiduciary overlay to Swrve’s voting right. Delaware law does not permit that. See
`In re IAC/InterActive Corp., 948 A.2d 471, 507 (Del. Ch. 2008) (“If this court were
`to rely on the implied covenant of good faith and fair dealing Liberty suggests to
`read in a broad fiduciary obligation, it would undermine the bargain reached by the
`parties.”).
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`10
`B. ACERO’S ACTIONS DID NOT BREACH THE IMPLIED
`COVENANT.
`Even if Swrve were correct that the implied covenant applied to Acero’s
`voting right, it still must state a claim that Acero’s actions actually breached the
`implied covenant. Swrve alleges three types of actions Acero took that were
`allegedly arbitrary or unreasonable: 1) proposing unreasonable terms; 2) delaying in
`negotiations with Swrve; and 3) supposedly lying about the reason for delaying in
`providing an Excel model concerning Acero’s September 12 counterproposal. None
`are sufficient to survive the motion to dismiss.
`1. Acero Did Not Breach The Implied Covenant Through
`Proposing Unreasonable Terms.
`Swrve argues that Acero acted unreasonably and breached the implied
`covenants through the terms it proposed. Swrve complains that Acero’s second
`proposal would “extract concessions that would benefit Acero to the detriment of
`Swrve’s other stockholders who, unlike Acero, had invested money since December
`2019 in an effort to ensure Swrve’s survival.” AB at 19. Swrve even goes as far to
`suggest that Acero was asking its directors to breach their fiduciary duties or violate
`the Certificate if they accepted Acero’s proposal. Id. at 29. But Swrve never actually
`explains how Acero’s proposal would do that in the Answering Brief. Its
`Counterclaim makes no mention of this. “A trial court is not, however, required to
`accept as true conclusory allegations ‘without specific supporting factual
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`11
`allegations.’” In re Gen. Motors (Hughes) S'holder Litig., 897 A.2d 162, 168 (Del.
`2006). That a transaction would be more beneficial to some stockholders relative to
`others does not make the transaction a breach of fiduciary duty.
`Regardless, Swrve’s complaint is that Acero wanted to negotiate a deal that it
`thought was better for itself. 3 That is precisely what Delaware law permits. See
`supra at 8-9. And Swrve also ignores that the other classes of stockholders would
`need to consent to any modified transaction that Swrve negotiated with Acero. Thus,
`Swrve could have gone to those stockholders and asked for their approval. And, just
`like Acero, they would have had the right to vote against the proposal if they were
`not satisfied with it and a right to seek to negotiate terms that were more favorable
`to them.
`2. Acero Did Not Breach The Implied Covenant By
`Unreasonably Delaying.
`Swrve next argues that Acero breached the implied covenant by delaying in
`negotiations with Swrve. As an initial matter, as the Opening Brief explained,
`regardless of whether Acero delayed or not, Swrve would have had to incur costs in
`connection with structuring the transaction as a merger. Thus, it cannot plead harm,
`
`3 Swrve also spins a yarn about how Acero was worried about losing its influence because
`of TEP coming in through the transaction and contends that was a motivating factor. AB
`at 31-32. Ignoring that this purported motivation is inconsistent with Swrve’s allegation
`that Acero wanted to (Countercl. ¶¶86, 88; AB at 31-32,44-
`45), even if potential loss of influence were Acero’s motivation, Acero would have been
`free to consider it when deciding how to vote its shares.
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`12
`a necessary element. Kelly v. Blum, 2010 WL 629850, at *13 (Del. Ch. Feb. 24,
`2010) (“To state a claim of breach of the implied covenant of good faith and fair
`dealing, a party must allege [1] a specific implied contractual obligation, [2] a breach
`of that obligation by the defendant, and [3] resulting damage to the plaintiff.”). Now,
`in its Answering Brief, Swrve claims that it was damaged because “Acero’s delay
`increased the urgency with which Swrve was required to act and increased the costs
`of doing so.” AB at 46. The Counterclaim simply does not support this
`assertion. Rather, the Counterclaim makes clear that Swrve decided early on to
`restructure the deal as a merger because it feared Acero would exercise its blocking
`rights. Countercl. ¶77; Answer ¶76; Cleary Decl. ¶34.
` Further, Swrve’s argument that Acero’s delay until September 29, 2020 in
`providing Swrve with an Excel model relating to Acero’s earlier September 12
`proposal fails because Swrve’s allegations are inconsistent. As the Opening Brief
`explained, Swrve also contends that it could not have accepted the terms Acero
`proposed on September 12 because Swrve believed they were not reasonable. OB
`at 26-27. Swrve’s response is to say that the Court must accept as true its allegations
`that it needed additional information, even though it had already concluded the
`proposed terms were unreasonable. AB at 47. Swrve, however, does not address
`the logical inconsistency in its pleadings. Swrve cannot have it both ways and claim
`it needed information to evaluate a proposal to which it knew it could never agree,
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`13
`and then claim that the delay in receiving that information harmed it. The Court can
`and should reject inconsistent allegations. See DiRienzo v. Lichtenstein, 2013 WL
`5503034, at *16 (Del. Ch. Sept. 30, 2013) (dismissing claim where “[t]he
`contradictory allegations preclude a finding that it was reasonably conceivable that
`the Special Committee had an obligation to act as directors of the General Partner
`Board when there was no General Partner Board.”).
`Swrve’s entire theory about delay fails to hold up to scrutiny. Swrve contends
`that “Acero’s actions demonstrate that it never intended to agree to the proposed deal
`with TEP and was merely stringing Swrve along in the hopes that it could drive
`Swrve into insolvency and achieve the exit event that Elkhatib had first advocated
`for six months earlier.” AB at 45. That allegation is entirely conclusory and
`illogical. Acero did not need to delay if its goal was to force an exit. If Acero’s no
`vote was all that was necessary to ensure that outcome, it could have just said it
`would not vote in favor of the transaction at the very beginning. Swrve offers no
`reason Acero would waste time engaging in negotiations if it intended to vote no in
`all circumstances. The Court can and should reject inconsistent allegations. See
`DiRienzo, 2013 WL 5503034, at *16.
`Indeed, the allegations of the Counterclaim further undermine Swrve’s
`argument. Swrve offered proposals, and Acero counter proposed. Countercl. ¶¶63-
`73. Acero said that it would support a transaction if Swrve agreed to its proposals.
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`14
`Id. ¶¶63, 69. But Swrve never actually agreed to Acero’s proposals. As Swrve’s
`Counterclaim acknowledges, when Acero provided its first counterproposal it had
`two conditions, and the proposal did not state that Swrve’s agreement to only one
`condition would guarantee Acero’s approval. Id. ¶63. Swrve was only willing to
`meet one of Acero’s conditions. AB at 19. Therefore, Acero came back and counter
`proposed. And Swrve never responded to Acero’s second proposal, even though
`Acero stated it would vote in favor of the transaction if Swrve agreed to its proposal.
`Countercl. ¶69. Nor does Swrve allege that it followed up on its request for a model
`from Acero after September 17 despite the supposed urgency. Neither side was
`willing to agree to what the other side proposed, but Acero continued to engage with
`Swrve, despite the allegation that Acero wanted to force an exit and planned to vote
`against the transaction no matter what. What that shows is that negotiations failed,
`not that Acero never intended to reach an agreement or acted in bad faith.4 It would
`not be reasonable to draw an inference from Swrve’s pleaded facts that Acero never
`intended to reach an agreement or that Acero acted in bad faith. Trifecta Multimedia
`Holdings Inc. v. WCG Clinical Servs. LLC, 318 A.3d 450, 463 (Del. Ch. 2024) (“The
`court need not, however ... draw unreasonable inferences in favor of the non-moving
`party.”).
`
`4 Swrve’s speculation that Acero was using the time it was negotiating with Swrve to
`prepare a complaint, AB at 24, is wholly unsupported by facts, and Acero will show that
`allegation is false at trial if necessary.
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`15
`II. ACERO DID NOT BREACH THE IMPLIED COVENANT BY
`ALLEGEDLY COMMITTING FRAUD.
`Swrve’s brief devotes much of its time to Acero’s supposed deception about
`the reason for its delivery of the Excel model to Swrve. AB at 41-44. The reason
`for this is obvious: the only way Swrve can avoid dismissal under the statute of
`limitations is to claim that it could not bring its Counterclaim because it did not know
`of that alleged deception until it took discovery. As explained below, that argument
`fails. See infra at 20-25. Regardless, the claim that Acero breached the implied
`covenant through the anodyne statement “
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` ” fails on its own merits.5 Countercl. ¶72;
`AB at 21; OB Ex. 1, at 191:6-23. This was an after-the-fact statement explaining
`why Acero had taken longer to provide the financial model than expected. Even if
`the reason offered was untrue (it was not), Swrve fails to identify how it relied
`(detrimentally or otherwise) on the statement or any other material impact the
`alleged deceptive statement had on it and also does not explain how the allegedly
`false statement was in any way material to the contract.
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`5 Swrve also claims that Acero was “concealing the fact that it never intended to invest
`additional funds in Swrve.” AB at 45. But the proposals at issue did not require Acero to
`invest in Swrve.
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` While Swrve cites cases that it says stand for the proposition that false
`statements to a contractual counterparty is a breach of the implied covenant, those
`cases make clear that the statements had to be material to the contract and have
`caused the counterparty to act. Swrve cites Merrill v. Crothall-American, Inc., in
`which the Supreme Court held that, in the context of an at-will employment, “[a]n
`employer acts in bad faith when it induces another to enter into an employment
`contract through actions, words, or the withholding of information, which is
`intentionally deceptive in some way material to the contract.” 606 A.2d 96, 101
`(Del. 1992). Swrve offers no allegation that the statements in the September 29
`email induced it to act (or to refrain from acting) or were material to the contract.
` Moreover, Delaware law holds that a party can prove a breach of the implied
`covenant through a showing of fraud: “Proving fraud thus offers one way of
`establishing a breach of the implied covenant.” ASB Allegiance Real Estate Fund v.
`Scion Breckenridge Managing Member, LLC , 50 A.3d 434, 444 (Del. Ch. 2012),
`aff’d in part, rev’d in part on other grounds, 68 A.3d 665 (Del. 2013). Showing
`fraud requires, among other elements, “the plaintiff’s action or inaction taken in
`justifiable reliance upon the representation; and 5) damage to the plaintiff as a result
`of such reliance.” Stephenson v. Capano Dev., Inc. , 462 A.2d 1069, 1074 (Del.
`1983). Swrve has failed to plead any action or inaction it contends it took in
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`justifiable reliance on the September 29 statement, let alone that such reliance
`resulted in harm or damage to Swrve.
` In addition, while Swrve talks about the use of the implied covenant to imply
`terms that were “obvious,” contracting parties would not think that a requirement
`that any inaccurate statement regarding a counterparty’s reasons for delay would be
`a breach of contract, regardless of materiality or effect, would be an obvious term. 6
`The Court should not impose one here.
`Any contention that Acero’s statement in the September 29 email regarding
`its reasons for delay in providing the Excel model to Swrve somehow induced Swrve
`to act or refrain from acting or was in any way material is disproved by Swrve’s own
`Answer. The Answer states that “Elkhatib eventually provided a model on
`September 29 supporting his proposal first made on September 12 for a deal that
`would extract benefits for the Series B Preferred Stock at the expense of the Series
`C through Series F Preferred Stock, and that, by that time, the Company had
`determined to restructure the financing as a merger to negate Acero’s veto power,
`give all stockholders a voice in the transaction, and facilitate TEP representatives
`transitioning into leadership roles at Swrve.” Answer ¶76. The Counterclaim has
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`6 Swrve also cites In re El Paso Pipeline Partners, L.P . Derivative Litigation , 2014 WL
`2768782 (Del. Ch. June 12, 2014). But in El Paso, the allegation was that a general partner
`misrepresented information about credit quality of counterparties to a conflicts committee
`to acquire approval of a transaction. Id. at *17. Thus, once again, the issue was whether a
`party misrepresented material information to induce action.
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`no allegations about any response that Swrve had to the September 29 email or any
`action that it took as a result. In view of the C