FILED IN
BUSINESS COURT OF TEXAS
BEVERLY CRUMLEY, CLERK
ENTERED
7/14/2026
2026 Tex. Bus. 43
The Business Court of Texas,
First Division
COBALT FALCON, LLC, §
Plaintiff, §
§
v. § Cause No. 25-BC01A-0023
§
AXS INVESTMENTS, LLC, §
Defendant. §
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Memorandum Opinion and Order Granting
Plaintiff’s Motion for Summary Judgment
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¶1 Before the Court is Plaintiff’s Traditional and No Evidence Motion
for Summary Judgment and responsive filings. Upon review of the parties’
pleadings, the motion is GRANTED.
I. Traditional Motion for Summary Judgment on Liability
¶2 Plaintiff (“Cobalt Falcon”) moves for traditional summary
judgment on liability for Count I: breach of contract (Transaction Agreement
as modified by the First Amendment). Mtn. at p. 6. To obtain summary
judgment, Cobalt Falcon must “conclusively prove all essential elements of
its cause of action.” Haddad v. JP Morgan Chase Bank, N.A., No. 01-20-00283-CV, 2021 WL 5056651, at *2 (Tex. App.—Houston [1st Dist.] Nov. 2,
2021).
¶3 Under Delaware law, the essential elements for a breach of
contract claim are “(1) a contractual obligation; (2) a breach of that obligation;
and (3) resulting damages.” Jiggy Puzzles, LLC v. Steelhead Acquisition EE,
Inc., No. N24C-10-212, 2026 WL 465112, at *5 (Del. Super. Ct. Feb. 18,
2026); see VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del.
2003). Because the motion is limited to liability, Cobalt Falcon’s burden did
not include establishing, as a matter of law, the full amount of its damages—
only the existence of damages.
¶4 To satisfy the first element of its claim, Cobalt Falcon cites the
Transaction Agreement between the parties (see Mtn. at pp. 23-58) as a valid
and enforceable contract (see id. at p. 6). The Court has already construed the
Transaction Agreement under Texas Rule of Civil Procedure 166(g) as
imposing a continuing obligation on AXS to make monthly payments to Cobalt
Falcon in perpetuity. Cobalt Falcon, LLC v. AXS Invs., LLC, 2026 Tex. Bus.
30, at ¶ 15 (1st Div.). The first element has been established.
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¶5 To satisfy the second and third elements, Cobalt Falcon puts forth
a Forbearance Agreement noting AXS’s “default” (see Mtn. at p. 81) and a
document listing payments made by AXS to Cobalt Falcon from May 2022 to
March 2026 (see id. at pp. 86-87). In response, AXS does not dispute that it
ceased making the minimum monthly payments required under Section 2.4
and Schedule 2.4 of the First Amendment in December 2024. Instead, AXS
argues solely that each monthly payment constitutes an installment, and that
the absence of an acceleration clause in the contract limits AXS’s liability to
“Minimum Monthly Payments arising prior to June 11, 2025.” Resp. at pp. 4-6.
¶6 Assuming without deciding that AXS is correct, its argument goes
solely to the amount of damages, not their existence. By its traditional motion
for summary judgment, Cobalt Falcon seeks only partial judgment as to
liability. Mtn. at p. 6. Cobalt Falcon has adduced evidence of a contractual
obligation breached by AXS resulting in some damage to Cobalt Falcon, and
AXS has not controverted such evidence. Thus, the record before the Court
supports the granting of summary judgment as to the elements of breach of
contract—specifically, liability—under Delaware law, with the amount of
damages remaining to be tried.
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¶7 However, before such judgment can be granted, the Court must
first determine whether any affirmative defense relied upon by AXS precludes
a judgment on liability. AXS’s affirmative defenses were challenged on a noevidence basis, addressed below.
II. No-Evidence Motion for Summary Judgment on Affirmative Defenses
¶8 Cobalt Falcon moves for no-evidence summary judgment on
AXS’s ten affirmative defenses. By amended answer, AXS nonsuited all but
four: unconscionability, liquidated damages constituting an unenforceable
penalty, failure to mitigate, and limitation of remedies (pleaded as
“overlapping and duplicative recovery”). To prevail on a no-evidence motion
for summary judgment, Cobalt Falcon must “establish that there is no
evidence of an essential element of a . . . defense on which [AXS has] the
burden of proof at trial.” TEX. R. CIV. P. 166a(a)(2). “[U]nless [AXS] produces
summary judgment evidence raising a genuine issue of material fact,” the
Court will grant Cobalt Falcon’s motion. Id. 166a(h)(3).
A. Unconscionability
¶9 Under Delaware law, “[a] finding of unconscionability generally
requires ‘the taking of an unfair advantage by one party over the other.’”
James v. Nat’l Fin., LLC, 132 A.3d 799, 814 (Del. Ch. 2016) (also noting that
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“courts have evoked this doctrine with extreme reluctance” (quoting Ryan v.
Weiner, 610 A.2d 1377, 1381 (Del. Ch. 1992))); Talkdesk, Inc. v. DM Trans,
LLC, No. N23C-08-005, 2024 WL 2799307, at *7 (Del. Super. Ct. May 31,
2024) (“For a court to find unconscionability, ‘there must be an absence of
meaningful choice and contract terms unreasonably favor[] one of the parties.’”
(alteration in original) (quoting Tulowitzki v. Atl. Richfield Co., 396 A.2d 956,
960 (Del. 1978))). A bad bargain is not an unconscionable contract—and only
the latter will not be enforced. See James, 132 A.3d at 827.
¶10 To determine whether unconscionability is present, courts in
Delaware consider ten factors, six relating to substantive unconscionability
and the other four to procedural unconscionability. Id. at 814-15. (citing Fritz
v. Nationwide Mut. Ins. Co., No. 1369, 1990 WL 186448, at *4-5 (Del. Ch.
Nov. 26, 1990)). Consideration of substantive unconscionability “tests the
substance of the exchange.” Id. at 815. Procedural unconscionability, not
invoked here, speaks to the bargaining process. Id. at 826.
¶11 Cobalt Falcon contends that “AXS cannot provide any evidence
that Cobalt had superior bargaining power or used it to take an unfair
advantage over AXS.” Mtn. at p. 8. AXS responds by arguing that the “eternal
obligation [to pay Cobalt $74,062.45/month forever], regardless of whether
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the Fund is open or closed, is unconscionable.” Resp. at p. 8. In AXS’s view,
“a fact issue exists regarding whether there is a ‘gross imbalance’ or ‘gross
disparity’ between the rights in the Fund that AXS acquired and AXS’s
putative obligation to pay Cobalt $74,062.45/month forever.” Id. at p. 7
(emphasis in original).
¶12 AXS’s response does not evidence the factors of substantive
unconscionability under Delaware law. See James, 132 A.3d at 815. By its
argument, AXS appears to rely primarily on the factors concerning whether
the terms of the deal reflect a “significant cost-price disparity or excessive
price” or “[a]n overall imbalance in the obligations and rights imposed by the
bargain.” See id. These factors, like the others, must be considered at the time
of contracting. Id. at 814. Here, the contract conveys perpetual rights in
exchange for perpetual monthly payments. As this Court previously found,
“[t]he idea that a party, holding an asset that may generate revenue in
perpetuity, would trade that asset for a perpetual [payment] obligation, is not
inherently absurd.” Cobalt Falcon, 2026 Tex. Bus. 30, at ¶ 12. In the absence
of evidence that some other circumstance was anticipated (more specifically,
the Fund’s closure), the Court cannot find that these terms are evidence of a
significant disparity, excessive price, or an overall imbalance.
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¶13 Cobalt Falcon and AXS did not contract for simple, lump-sum
consideration, making their bargain distinguishable from the deal struck by
Cobalt Falcon when it first acquired the rights to the Fund. Instead, the parties
contracted for perpetual monthly payments in consideration for the
conveyance of management and control over a Fund that could have existed in
perpetuity. As previously noted, “AXS neglects to factor in that closure of the
Fund was entirely within its own hands.” Cobalt Falcon, 2026 Tex. Bus. 30,
at ¶ 11. Thus, there is no evidence to support these initial factors.
¶14 Further, AXS does not offer evidence or make any argument that
the contract denied AXS basic rights or remedies or contained any penalty
clauses, ruling out reliance on those two factors. See James, 132 A.3d at 815.
And the perpetual payment obligation was “not veiled or obscured in the
contract—it [was] expressly stated, in plain terms.” Cobalt Falcon, 2026 Tex.
Bus. 30, at ¶ 14. Thus, there is no evidence of the final two factors: that the
consideration was inconspicuous or hidden within the “fine print,” or that it
was wrapped in confusing language. See James, 132 A.3d at 815.
¶15 In sum, considering the factors of substantive unconscionability
according to Delaware law, the record before the Court contains no evidence
that Cobalt Falcon took unfair advantage of AXS or that there was an absence
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of meaningful choice. Accordingly, Cobalt Falcon’s motion for summary
judgment on the affirmative defense of unconscionability is GRANTED.
B. Liquidated Damages Constituting an Unenforceable Penalty
¶16 Cobalt Falcon next moves for summary judgment on AXS’s
affirmative defense that the damages sought by Cobalt Falcon are liquidated
damages that constitute an unenforceable penalty. Mtn. at p. 9. Delaware
courts will not enforce a penalty “disguised” as a liquidated damages
provision. Unbound Partners Ltd. P’ship v. Invoy Holdings Inc., 251 A.3d 1016,
1032 (Del. Super. Ct. 2021). “[A] penalty is a ‘punishment for default, rather
than a measure of compensation for . . . breach,’ that inserts with blunt
instruments ‘a stipulated sum . . . irrespective of the damage sustained.’” Id.
(alterations in original).
¶17 The Court does not reach the question of whether a liquidated
damages provision constitutes an unenforceable penalty as alleged by AXS for
the simple reason that Cobalt Falcon is not seeking to recover any liquidated
damages. Under Delaware law, “[l]iquidated damages are a sum to which the
parties to a contract have agreed, at the time of entering into the contract, as
being payable to satisfy any loss or injury flowing from a breach of their
contract.” S.H. Deliveries, Inc. v. TriState Courier & Carriage, Inc., No. 96CPage 8
02-086, 1997 WL 817883, at *2 (Del. Super. Ct. May 21, 1997). Liquidated
damages reflect “the parties’ best guess of the amount of injury that would be
sustained in a contractual breach,” achieving certainty as to damages that
“would otherwise be uncertain or not easily susceptible of proof.” Id. This
case does not involve a claim for liquidated damages.
¶18 The damages sought to be recovered by Cobalt Falcon are not a
liquidated sum fixed at the time of contracting, reflecting a prospective
estimate of harm that is difficult to quantify. To the contrary, Cobalt Falcon
seeks to recover one or more monthly payments that AXS was contractually
bound to make: the direct damages flowing from AXS’s breach. Because there
is no evidence of a liquidated damages provision, or that Cobalt Falcon seeks
to recover pursuant to one, there is no evidence that such damages constitute
an unenforceable penalty. Accordingly, Cobalt Falcon’s motion for summary
judgment on the affirmative defense of liquidated damages as an
unenforceable penalty is GRANTED.
C. Mitigation of Damages
¶19 Cobalt Falcon moves for summary judgment on the affirmative
defense of failure to mitigate. Mtn. at p. 13. Under Delaware common law, “a
plaintiff has the duty to mitigate his or her damages when feasible.” Dover
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Mall, LLC v. Tang, No. K22C-07-013, 2023 WL 6536975, at *6 (Del. Super
Ct. Oct. 5, 2023). As the party asserting this defense, AXS has the burden of
raising a fact issue as to Cobalt Falcon’s failure. Ancor Holdings, LP v. Landon
Cap. Partners LLC, No. 20-CV-1326, 2022 WL 22890562, at *3 (N.D. Tex.
Nov. 3, 2022).
¶20 Delaware courts have held, inter alia, that a party has failed to
meet that burden when it failed to identify a “specific remedial action[] that
Plaintiff could have taken” and produce evidence quantifying how much
damages may have been mitigated. See, e.g., Westerly Winds USA, Inc. V. Kuhl,
No. N25C-06-139, 2026 WL 1481702, at *5 (Del. Super. Ct. May 20, 2026);
BTG Int’l, Inc. v. Wellstat Therapeutics Corp., No. 12562, 2017 WL 4151172,
at *20 (Del. Ch. Sept. 19, 2017), aff’d, 188 A.3d 824 (Del. 2018) (finding that
defendant failed to meet its burden of proof when it failed to “introduce any
evidence or expert testimony that would quantify how much [plaintiff’s]
damages might be mitigated”).
¶21 At summary judgment, AXS was compelled to come forward with
more than a scintilla of evidence of failure to mitigate by Cobalt Falcon. But
the only evidence cited by AXS is the Transaction Agreement at Sections 10.2,
10. 3, 10.4(j), and a document evidencing a one-million-dollar depreciation
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associated with the Fund. Resp. at pp. 10-11; see also Mtn. at pp. 53-54
(Transaction Agreement Section 10). Section 10 is an indemnification
provision. Subsection 2 discusses the indemnification obligation of the seller,
Subsection 3 discusses the obligation of the buyer, and Subsection 4(j)
imposes on the party claiming indemnification a duty to mitigate.
¶22 AXS presented no argument or evidence as to how reported
depreciation relates to or could be used by Cobalt Falcon to mitigate its
damages. Nor does AXS explain how a contractual provision addressing
indemnification applies to the mitigation of damages in the case of a breach of
contract. Delaware law requires, at a minimum, that the party asserting the
defense of mitigation identify a “specific remedial action” that could have
been taken to mitigate damages caused by a breach. Westerly Winds US, 2026
WL 1481702, at *5. Here, AXS has not shown—in its argument or its
evidence—any specific action Cobalt Falcon failed to take. For these reasons,
Cobalt Falcon’s motion for summary judgment on the affirmative defense of
duty to mitigate is GRANTED.
D. Performance by Payment and Duplicative Recovery
¶23 Cobalt Falcon last moves for summary judgment on an asserted
defense of performance by payment and duplicative recovery. This is not an
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affirmative defense—and AXS admits as much (see Resp. at p. 11 n. 22).
Because the theory advanced by AXS is not a proper affirmative defense,
summary judgment as to this theory is GRANTED.
¶24 With AXS having failed to show a fact issue in support of any
asserted affirmative defense, there are none remaining that could preclude
summary judgment as to liability.
¶25 IT IS THEREFORE ORDERED that Cobalt Falcon’s motion for
traditional summary judgment on liability for Count I is GRANTED. IT IS
FURTHER ORDERED that Cobalt Falcon’s motion for summary judgment on
the affirmative defenses of unconscionability, unenforceable penalty, failure
to mitigate, and limitation of remedies is GRANTED.
SO ORDERED.
ANDREA K. BOURESSA
Judge of the Texas Business Court,
First Division
SIGNED ON: July 14, 2026.
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