OPINION1

SONTCHI, Bankruptcy Judge.

INTRODUCTION

Before this Court is the defendant Millennium Digital Media Systems, L.L.C.'s (partial) Motion to Dismiss the Verified Amended Complaint (the "Motion") filed by James Cable, LLC. The Complaint, as defined below, alleges, among other things, (i) anticipatory repudiation of the asset purchase agreement,2 (ii) tortious and bad faith breach of the APA, and (iii) civil conspiracy related to the defendant's and Highland's (as defined below) alleged breach of the APA. The defendant argues that the Complaint fails to state a claim upon which relief can be granted. For the reasons set forth below, the Court grants the (partial) motion to dismiss.

JURISDICTION

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B) and (O).

FACTUAL AND PROCEDURAL BACKGROUND

I. Procedural History of Bankruptcy Cases

On March 20, 2008, James Cable, LLC ("James Cable") filed a complaint in the Court of Chancery of the State of Delaware ("Chancery Court") seeking declaratory and injunctive relief related to the anticipatory repudiation of the APA by defendant Millennium Digital Media Systems, L.L.C.'s ("Broadstripe").3 James Cable later amended its complaint (the "Complaint").4 On May 8, 2008, Broadstripe filed a motion to dismiss all counts against it in the Amended Complaint, except for the breach of contract claim. In January, 2009, Broadstripe commenced its Chapter 11 cases by filing voluntary petitions in this Court. In October, 2009, the Chancery Court action was removed to this Court, including the pending partial motion to dismiss filed by Broadstripe. Briefing has been completed, the parties have waived their request for oral argument, and this matter is ripe for the Court's consideration.

II. Factual History

a. The Parties

Plaintiff, James Cable, is a Delaware limited liability company with its principal place of business in Michigan. James Cable owns and operates cable television systems and provides internet service to customers in various geographic markets in the United States.

The remaining defendant in this action is Broadstripe. Broadstripe is a Delaware limited liability company with its principal place of business in Missouri. Like James Cable, Broadstripe owns and operates cable television systems and provides internet services to customers in the United States. Broadstripe is also a provider of telephone services.

Highland Capital Management, L.P. and Highland Capital (collectively referred to herein as "Highland") are alleged to have controlling ownership in Broadstripe.5

b. The Asset Purchase Agreement

On October 31, 2007, James Cable and Broadstripe entered into an asset purchase agreement (the "APA"), pursuant to which Broadstripe agreed to buy substantially all of James Cable's cable and internet assets, as defined in the APA as the "System." The APA includes a formula for calculating the purchase price based, in part, on the number of subscribers to be transferred. At the time of the filing of the amended complaint, James Cable alleged that the value of the System was over $115 million according to the APA's formula.6 The APA does not contain a financing contingency provision in favor of Broadstripe.

In the APA, Broadstripe represented that it had the financial capability to consummate the transaction.7 The amended complaint alleges that Broadstripe and Highland communicated to James Cable that Highland was the source of Broadstripe's financial capability. It further alleges that these representations "were sufficient to convey to a reasonable businessman that Broadstripe possessed the right to require Highland to fund the APA transaction, and that Highland had agreed to be so bound." Highland, however, is not a party to the APA and Highland did not enter into a commitment letter or any other written agreement to fund the transaction.

The APA designates the laws of the State of Delaware as the choice of law in the event of disputes between the parties.8

c. Dispute Arises Between Broadstripe and James

On February 14, 2008, the parties agreed to work towards a closing by the month's end. A week later, Broadstripe's CFO informed James Cable's CFO that Broadstripe would be unable to close at the end of the month because it was unable to deliver the purchase price. James Cable alleges that Highland convinced Broadstripe to breach the APA because Highland no longer liked the economics of the deal and wished to avoid funding the transaction. From late February until mid-March, James Cable and its controlling owner, GoldenTree Asset Management LP, engaged in numerous conversations with Highland and Broadstripe regarding the transaction. James Cable demanded adequate assurances that the deal would close. Highland and Broadstripe told James Cable it had no reason to be insecure, but refused to provide assurances that they would proceed to closing.

d. The Original Complaint

On March 20, 2008, James Cable filed its original complaint in this action in the Court of Chancery for the State of Delaware ("Chancery Court") seeking a declaration that Broadstripe committed a material anticipatory breach and repudiation of the APA. The Chancery Court held a hearing on James Cable's motion to expedite on March 27, 2008.9 At the hearing, Broadstripe argued that it had not repudiated the APA and indicated a willingness to close as soon as the closing conditions were met. Also at the hearing, Broadstripe stated that the representation about its financial capability to complete the transaction was true when made and that it then had the financial capability to finance the deal through existing equity investors, such as Highland Capital, new equity investors, and through the debt markets. The Chancery Court denied James Cable's motion to expedite and suggested that the parties set a date certain for closing.10

e. The Disputes Continue

From late-March until mid-April, the parties exchanged a series of letters regarding various disputes related to the APA. This exchange came to an end on April 16, 2008, when Broadstripe sent a letter to James Cable purporting to terminate the APA. Broadstripe's letter claimed that James Cable was in material breach of the APA by (1) giving away free premium channels in the Westlake-Moss area and (2) dramatically raising its number of subscribers by materially increasing its use of door-to-door contractors, materially increasing its use of free installations, and introducing an amnesty program. In its April 16 letter, Broadstripe also stated that because of those breaches it could not rely on the preliminary adjustment report by James Cable identifying 66,997 KRGU's. James Cable alleges that these purported breaches are not grounds for termination of the APA and are merely excuses by Broadstripe and Highland to avoid their obligations related to the APA. James Cable asserts that Broadstripe knew about the Westlake-Moss area subscriber issue since June 2007 and that the efforts to increase subscribers were made in the ordinary course of business.

f. The Amended Complaint

On April 21, 2008, James Cable responded to Broadstripe's April 16 letter and stated that if Broadstripe did not rescind its letter within 48 hours it would deem Broadstripe's repudiation as final and would treat the repudiation as a breach of the APA. Broadstripe failed to rescind its letter and, on April 24, 2008, James Cable filed its amended complaint.

In its amended complaint, James Cable claims that Broadstripe breached the APA by a complete and final repudiation the APA.11 James Cable also claims that Broadstripe breached the APA tortiously and in bad faith.12 Lastly, James Cable claims civil conspiracy against Broadstripe and Highland who alleged acted in confederation and combination to dishonor the APA in bad faith and tortiously.

James Cable also asserted various claims against Highland. James Cable claimed that Highland tortiously interfered with the APA and engaged in civil conspiracy with Broadstripe to dishonor the APA. James Cable also alleged that Highland acted in bad faith in an attempt to insulate itself from its alleged obligation to fund the transaction. Furthermore, James Cable claimed that it is entitled to recovery against Highland based on a promissory estoppel theory due to Highland's statements that allegedly amount to a promise to provide funding for the transaction. Lastly, James Cable claims that Highland breached an agreement with Broadstripe to provide funding for the transaction and alleged that James Cable was a third party beneficiary of that agreement.

g. The Motions To Dismiss

Both Broadstripe and Highland filed motions to dismiss the Complaint. In November 2008, the Chancery Court heard argument on the defendants' motions to dismiss and reserved judgment. On January 2, 2009, Broadstripe filed a voluntary petition with the United States Bankruptcy Court for the District of Delaware seeking protection under Chapter 11 of the Bankruptcy Code. Consequently, all claims against Broadstripe in the Chancery Court were automatically stayed under 11 U.S.C. § 362(a). James Cable filed a motion for relief from stay to continue the Chancery Court action against both Broadstripe and Highland. On March 3, 2009, the Court denied the stay relief motion thereby continuing the stay against Broadstripe, and ruled that the litigation between James Cable and Highland was not stayed pursuant to § 362 of the Bankruptcy Code.13

h. The Chancery Court Dismisses the Claims Against Highland

Thereafter, the Chancery Court dismissed all claims against Highland finding that the allegations against Highland were conclusory, unsupported by specific facts, and inconsistent with the structure of the APA.14 The Chancery Court found that the facts in the Complaint did not support the allegation that Highland was obligated to fund the transaction.15 The Chancery Court further held that James Cable failed to allege any "definite and certain" promise Highland made that could have possibly induced James Cable to enter into the APA.16 The Chancery Court continued that James Cable did not adequately allege facts to support the existence of a contract between Highland and Broadstripe under which the Chancery Court could analyze James Cable's purported rights as third party benefactor.17 Lastly, the Chancery Court dismissed the civil conspiracy claim against Highland as the claim of civil conspiracy is not an independent cause of action and must arise from some underlying wrong, none of which survived the motion to dismiss.18

i. James Cable's Claims Against Broadstripe Currently Pending in the Bankruptcy Court

In October 2009, the action as against Broadstripe was removed to this Court, including the pending partial motion to dismiss filed by Broadstripe. Briefing has been completed, the parties have waived their request for oral argument, and this matter is ripe for the Court's consideration.

LEGAL DISCUSSION

I. The Standard Regarding Sufficiency of Pleadings When Evaluating a Motion to Dismiss for Failure to State a Claim Upon Which Relief Can Be Granted

A motion under Rule 12(b)(6)19 serves to test the sufficiency of the factual allegations in the plaintiff's complaint.20 "Standards of pleading have been in the forefront of jurisprudence in recent years."21 With the Supreme Court's recent decisions in Bell Atlantic Corp. v. Twombly22 and Ashcroft v. Iqbal,23 "pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss."24

In Iqbal, the Supreme Court makes clear that the Twombly "facial plausibility" pleading requirement applies to all civil suits in the federal courts.25 "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements" are insufficient to survive a motion to dismiss.26 Rather, "all civil complaints must now set out sufficient factual matter to show that the claim is facially plausible."27 A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."28 Determining whether a complaint is "facially plausible" is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.29 But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but not shown—that the pleader is entitled to relief."30

After Iqbal, the Third Circuit has instructed this Court to "conduct a two-part analysis. First the factual and legal elements of a claim should be separated. The [court] must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions."31 The court "must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a plausible claim for relief."32

II. The Plausibility of Plaintiff's Claims for Relief

a. Count I: The Claim of Anticipatory Repudiation Against Broadstripe

Count I of the Complaint is based on breach of contract claims. James Cable asserts various theories of breach of the contract,33 including anticipatory repudiation of the APA in February 2008. Broadstripe moves to dismiss the anticipatory repudiation portion of Count I of the Complaint arguing that (i) the Chancery Court already ruled against James Cable on this issue when deciding the motion to expedite; (ii) even if the Chancery Court's ruling was not directly on point, the Chancery Court made conclusions, including ruling that no closing date was established by the parties in February 2008, that would make establishing a claim for anticipatory repudiation impossible; and (iii) even if this Court disregarded the Chancery Court's findings at the hearing on the motion to expedite, Broadstripe did not make any express or unequivocal statements that it would not proceed with the sale in February 2008 and, in fact, continued to work towards closing with James Cable.

James Cable responded arguing that the Chancery Court did not make substantive findings at the hearing on the motion to expedite, and if the Chancery Court did make substantive rulings those rulings were only preliminary and were not made on a complete factual record. James Cable then further details its claim of anticipatory repudiation against Broadstripe.

i. Doctrine of Law of the Case

The doctrine of law of the case is as follows: once a matter has been addressed in a procedurally appropriate way by a court, it is generally held to be the law of that case and will not be disturbed by that court unless compelling reason to do so appears.34 This doctrine is one of both fundamental fairness and judicial efficiency.35 "The law of the case doctrine provides that when a court actually decides a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case. However, that doctrine only applies to issues that were actually litigated and decided by the court."36 Law of the case directs a court's discretion, it does not limit the tribunal's power.37 "The law of the case doctrine does not act as an absolute bar on relitigation (in contrast to the doctrines of claim and issue preclusion). Rather the law of the case doctrine merely directs the court's discretion not to rehear matters ad nauseam."38

The Chancery Court made various comments and rulings in relation to James Cable's motion to expedite the proceedings; however, the facts and rulings were made in a preliminary posture.39 In deciding a motion to expedite proceedings, the Chancery Court considers a balancing test to decide whether the plaintiffs have sufficiently articulated a threat of irreparable injury that would justify an expedited hearing.40 Also when considering a motion to expedite, the Chancery Court also determines whether monetary damages would compensate the plaintiff for their (alleged) injuries, if so, a motion to expedite is unwarranted.41 As a result, the application of the doctrine of the law of the case would be inequitable to the merits of James Cable's claims. The Chancery Court did not fully litigate James Cable's claims against Broadstripe nor make findings of law or fact on the merits of James Cable's claims. As a result, the Court will consider the merits of James Cable's anticipatory repudiation claim against Broadstripe.

ii. Anticipatory Repudiation

Delaware law supports the principle that "a party [to a contract] is excused from performance . . . if the other party is in material breach" of his contractual obligations.42 Anticipatory repudiation is a breach occurring before there has been any breach by non-performance.43 "A party confronted with [anticipatory] repudiation may respond by (i) electing to treat the contract as terminated by breach, (ii) by lobbying the repudiating party to perform, or (iii) by ignoring the repudiation. Although perhaps counterintuitive, whether repudiation amounts to a present breach is predicated on the promisee's response."44

Broadstripe argues that the Complaint fails to state a claim for anticipatory repudiation in February 2008. Although Broadstripe refused to give James Cable adequate assurances, Broadstripe informed James Cable that "James [Cable] had no reasonable grounds to be insecure that Broadstripe will not perform under the APA."45 Furthermore, after the hearing on the motion to expedite the proceedings, Broadstripe continued to work with James Cable towards closing.

James Cable's responds that its anticipatory repudiation claim is based on the request for adequate assurances and the subsequent refusal by Broadstripe to provide them. James Cable also defensively asserts that their subsequent efforts to close the APA transaction did not undermine their anticipatory repudiation claim.

(a) Restatement (Second) of Contracts § 251

The Restatement (Second) of Contracts (the "Restatement") states:

The comments to § 251 state: "When, therefore, an obligee reasonably believes that the obligor will commit a breach by non-performance that would of itself give a claim for damages for total breach (§ 243), he may, under the rule stated in this Section, be entitled to demand assurance of performance."47 The comment continues to advise that this rule may be modified by agreement of the parties.48

Section 251 of the Restatement has not been squarely adopted by the Delaware Courts. As such, it is a matter of unsettled/undecided state law whether a party to a contract may demand adequate assurances of future performance for non-Uniform Commercial Code ("UCC") contracts.

1. Adequate Assurance Pursuant to Restatement § 251

Although the Delaware Courts have not squarely adopted Restatement § 251, the Chancery Court has relied on the guidance provided by the comments to Restatement § 251.49 Thus, this Court will also look to Restatement § 251 for guidance rather than presuming to adopt Restatement § 251 on behalf of the Delaware state courts.50

Similarly, the Second Circuit certified a similar question regarding Restatement § 251 to the Court of Appeals of New York.51 The Court of Appeals of New York was presented with a long-term contract regarding the purchase of electricity between an independent power producer and a public utility provider.52 The Court of Appeals was persuaded that the UCC § 2-609 bridged an important gap in the sale of goods context in relieving the uncertainty regarding a parties' performance.53 Ultimately, the Court of Appeals found that its jurisprudence was an incremental common-law development process rather than a process that encouraged promulgation of a sweeping a change and proposition in contract law.54 The Court of Appeals was persuaded that the policy underlying Restatement § 251 should apply with a similar cogency as UCC § 2-609, the sale of goods counterpart.55 The court then found that the contract at issue was sufficiently analogous to a sale of goods (such as oil and gas, which would be governed by the UCC).56 Therefore, although the Court of Appeals did not adopt Restatement § 251, it did find that the parties were entitled to demand adequate assurances as the contract at issue was similar to a sale of goods and as such, was persuaded that UCC § 2-609 and Restatement § 251 were applicable to the case presented.57

In the James Cable/Broadstripe dispute, the APA contemplates the sale of KRGU's, which is analogous to the electricity sold in the Norcon line of cases and the sale of goods under the UCC. The Court finds that the sale of goods and Restatement § 251 apply in this instance. As Restatement § 251 applies, the Court must then determine if James Cable appropriately demanded adequate assurances from Broadstripe.

2. Did James Cable Appropriately Demand Adequate Assurances?

James Cable claims that Broadstripe anticipatorily repudiated the APA because it failed to give adequate assurances in response to James Cable's reasonable request for such assurances. Broadstripe responds that James Cable's claims fail on two grounds: (i) Broadstripe was not obligated at all times to have the adequate funds to close the APA; and (ii) no closing date was set on February 29, 2008, so James Cable's concerns regarding Broadstripe's ability to close could not have made James Cable insecure.

Viewing James Cable's factual statements in the Complaint as true,58 James Cable's insecurity concerning Broadstripe's statements59 appears facially plausible. Furthermore, although the parties contractually agreed that Broadstripe had the financial capability to close the transaction;60 James Cable was not demanding adequate assurances related solely to the closing price, James Cable was seeking adequate assurances related to Broadstripe's performance under the APA.61 However, no closing date had been set by James Cable at the end of February,62 and James Cable specifically agreed to forego financing language in the APA.63 Therefore, based on the factual assertions set forth in the Complaint, it does not appear that Broadstripe was under any obligation to perform in February 2008. Therefore, although it is plausible that James Cable to have reasonable grounds to believe that Broadstripe did not have the financing to close the transaction, Broadstripe was under no obligation to provide proof of financial ability to close the transaction nor was the closing of the transaction imminent as no closing date was set in February 2008.

Furthermore, this finding is consistent with the Chancery Court's ruling on the motion to expedite when it found that no closing date had been set by the parties, which would give rise to James Cable's claims of anticipatory repudiation.64

(b) Anticipatory Repudiation By Clear and Precise Statements Concerning Non-Performance

"The law generally has acknowledged for more than one hundred years that an unequivocal statement by a promisor that he will not perform his promise gives the injured party an immediate claim to damages for total breach, in addition to discharging the remaining duties of performance."65

An expression of doubt as to whether the ability to perform in accordance with the contract will exist when the time comes is not a repudiation.67 The Delaware Chancery Court has held that the statement must have sufficient clarity and precision in order to meet the test for anticipatory repudiation.68

James Cable has not plead a plausible claim for an unequivocal statement by Broadstripe concerning their non-performance. James Cable has established that they had doubt as of February 2008 that Broadstripe would not perform, but have not plead facts, taken as true,69 that Broadstripe made clear and precise statements concerning their nonperformance as of that time. Therefore, the Court finds that there is no facially plausible claim for anticipatory repudiation by clear and precise statements by Broadstripe that it would not perform in February 2008.

(c) Conclusion

Even if this Court were to apply Restatement § 251 entitling James Cable to demand adequate assurance of future performance, James Cable failed to establish a closing date in February 2008 which would trigger Broadstripe's duty to perform. Furthermore, there is no facially plausible claim that Broadstripe made any clear and precise statement giving rise to a claim for anticipatory repudiation. As such, the Court dismisses the anticipatory repudiation claim.70

b. Count II: The Claim of Bad Faith Breach of Contract Against Broadstripe

In count II of the Complaint, James Cable asserts that Broadstripe's refusal to honor the APA was done tortiously and in bad faith,71 and as a result James Cable has been damaged by such breach.72 Broadstripe counters in its motion that a "bad faith breach of contract" claim does not exist under Delaware law. James counters that "bad faith breach" exists and works in tandum with a claim of civil conspiracy. As discussed infra, the claims for civil conspiracy must be dismissed as all claims against Highland were dismissed by the Chancery Court. However, the Complaint does not limit the claim to the civil conspiracy count nor does it allege that such claim is related to Broadstripe's actions in relation to Highland.

James Cable argues that Broadstripe engaged in a plan to obfuscate and delay closing under the APA to avoid its obligation to pay the purchase price, and that these actions constituted a breach of the implied covenant of good faith and fair dealing. James Cable seeks damages in the amount in excess of $25 million related to this breach. Broadstripe advocates dismissing this count because (i) the implied covenants of good faith and fair dealing are employed to analyze unanticipated developments or fill gaps in a contract's provisions, and in this case there were no unanticipated developments; and (ii) James Cable is seeking the same damages under its breach of contract claims and its bad faith claim, only allowing James Cable broader access in discovery yet attaining no different a result. James Cable responds that Broadstripe's actions went beyond a simple breach of contract in that Broadstripe knowingly put forth legally and factually baseless claims that James Cable breached the APA in order to avoid closing the transaction.

Delaware courts have "recognized the occasional necessity of implying contract terms to ensure the parties' reasonable expectations are fulfilled."73 The "implied covenant of good faith and fair dealing is recognized only where a contract is silent as to the issue in dispute."74

Taking all the facts in the Complaint as true,76 it appears that James Cable has alleged behavior that may give rise to a breach of contract claim, including whether Broadstripe breached the contract by raising inappropriate grounds for terminating the APA. While such actions, taking the allegations in the Complaint as true, create a plausible breach of contract claim there are not facts that give rise to another cause of action nor are the elements of such cause of action enumerated in the Complaint. It is not facially plausible that James Cable has a claim for implied breach of good faith and dealing.

c. Count IV: The Claim of Civil Conspiracy Against Broadstripe

The Complaint also contains various claims against Highland, however these counts were dismissed by the Chancery Court, including the claim of civil conspiracy (Count IV). A prima facie showing of civil conspiracy requires proof of "(1) [a] confederation or combination of two or more persons; (2) [a]n unlawful act done in furtherance of the conspiracy; and (3) [a]ctual damage."77 The Chancery Court has held that James Cable failed to adequately allege that Highland engaged in any wrongdoing and dismissed the Complaint as against Highland, including the claim of civil conspiracy.78 The Court, through principles of judicial comity, should not disturb the Chancery Court's opinion. As such, James Cable cannot assert claims of "civil conspiracy" solely against Broadstripe; therefore, the Court dismisses the civil conspiracy claim peremptorily.

CONCLUSION

For the foregoing reasons, the Court dismisses the portion of Count I of the Complaint for anticipatory repudiation, dismisses Count II of the complaint for bad faith breach of contract, and dismisses Count IV of the Complaint for civil conspiracy.

The Court issued an order consistent with the findings set forth herein on May 4, 2010.79