SPG Greensboro Equities LLC v. Ivy Greensboro I, LLC

majority opinion

COURT OF CHANCERY

OF THE

STATE OF DELAWARE

DAVID HUME, IV COURT OF CHANCERY COURTHOUSE MAGISTRATE IN CHANCERY 34 THE CIRCLE

GEORGETOWN, DE 19947

July 31, 2026

Thad J. Bracegirdle Evan O. Williford

Emily Skaug THE WILLIFORD FIRM LLC

BAYARD, P.A. 1007 N. Orange Street, Suite 235

600 N. King Street, Suite 400 Wilmington, DE 19801

Wilmington, DE 19801 Attorney for Defendant

Attorneys for Plaintiff

RE: SPG Greensboro Equities, LLC v. Ivy Greensboro I, LLC,

C.A. No. 2025-0472-DH

Dear Counsel:

This is the parties’ latest legal exchange over a Greensboro, North Carolina

student housing project. A sole manager of the housing project found a willing

investor to become co-manager. That was likely their last time in agreement as the

prior sole manager refused to relinquish control, mismanaged the housing project,

and eventually led to the investor’s representative being appointed receiver. The

prior sole manager did not contest a default judgment for breaches of contract and

fiduciary duty. But the prior sole manager did not go away quietly. It contested the

alleged damages resulting from the mismanagement and breaches. This is my

decision after a hearing on the parties’ contentious damages dispute.

SPG Greensboro Equities, LLC v. Ivy Greensboro I, LLC,

C.A. No. 2025-0472-DH

July 31, 2026

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I. BACKGROUND 1

The parties are well-aware of the facts. SPG Greensboro Equities, LLC

(“SPG”) and Ivy Greensboro I, LLC (“Ivy”) were the members of 3610 Clifton Road

Associates, LLC (the “Company”). 2 The Company owns and manages a student

college housing project located at 3610 Clifton Road, Greensboro, North Carolina

(the “Property”). 3 Ivy was originally the sole member before SPG agreed to invest.

This union was created through an Operating Agreement. 4 The Operating

Agreement made SPG and Ivy co-managers of the Company with equal control. 5

Shortly after entering into the Operating Agreement, the parties also signed a Letter

Agreement that contemplated SPG investing a total of $6 million in the Company. 6

SPG invested $2,759,000 in the Company. 7 The Letter Agreement accounted for a

I draw the following facts from Docket Item (“D.I.”) 1, Plaintiff’s Verified Complaint (“Compl.”) and Exhibits attached thereto, D.I. 43, the Damages Hearing Transcript (“Tr.”), D.I. 10, the Order of Default Judgment, and D.I. 36 the Pre-Hearing Stipulation and Order (“PHO”) and forty-six joint exhibits, as well as uncontested facts in the parties’ posthearing briefing. I refer to the parties’ briefing as follows: D.I. 41, Plaintiff’s Post-Hearing Opening Brief (“PPOB”), D.I. 46, Defendant’s Post-Hearing Answering Brief (“DPAB”) and D.I. 48, Plaintiff’s Post-Hearing Reply Brief (“PPRB”).

PHO II, 2.

Id.

JX 4.

Id. at § 5.01.

JX 6.

Id. at ¶ 2; Compl. ¶ 6.

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reduced share of the Company for the less than initially conceived $6 million

investment. As a result, SPG holds a 23% interest in the Company instead of a

planned 50% interest. 8 The Letter Agreement also provided that the Company would

return 7% of SPG’s investment for three years from the date of the agreement (the

“preferred return”). 9

After SPG’s investment, things started to fall apart. SPG requested financial

information, but it was not provided. 10 SPG also received only one month’s payment

of the 7% preferred return. 11

SPG filed an action (the “First Action”) against Ivy in this Court on November

21, 2022. 12 On April 17, 2023, the Court granted a Consent Order Staying Contempt

Proceedings. 13 That Order required Ivy to make three “catch up” payments of

$16,094.17 for the preferred return plus ongoing monthly distributions in the same

PHO II, 8–9; JX 6.

JX 6.

Tr. 20:11–17.

Id. at 20:18–22.

SPG Greensboro Equities LLC v. Ivy Greensboro I, LLC, C.A. No. 2022-1058-JTL. 13

JX 15.

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amount. 14 The parties documented the preferred return payments. 15 As of

December 2025, The Company has paid SPG not less than $553,138.44. 16

The Court appointed Eli Zakay (“Zakay”) as Receiver on March 25, 2024. 17

Zakay replaced all roofs, ensured all units were habitable, and changed 24 HVAC

units, increasing occupancy to 93%. 18 As Receiver, Zakay learned that some units

were damaged and that the Company had received an insurance settlement. 19 Even

so, although the damage had been repaired, some vendors had not been paid. 20

Ultimately, SPG obtained a list of the claims and amount paid for each. 21 As of

April 2024, Ivy’s AP Aging report showed over $952,000 in open balances owed for

work performed. 22

Id.

JX 43.

Id.

PHO II, 11.

Tr. 45:22–46:03

Id. at 28:16–21; JX 11.

Tr. 28:17–21.

JX 39.

JX 25.

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When Zakay became Receiver, BluSky Restoration Contracts, LLC

(“BluSky”) was owed over $300,000 for work performed. 23 On September 19, 2024,

BluSky filed an action against the Company and other entities in North Carolina. 24

On December 31, 2024, BankPlus closed a loan to the Company for $1,300,000.

Zakay knew BluSky was seeking payment but decided not to pay BluSky at that

time. 25 Later, BankPlus loaned the Company an additional $400,000. 26 BluSky’s

bill remains unpaid. 27

On May 27, 2025, the North Carolina Secretary of State revoked the

Company’s Certificate of Authority for failing to file an annual report. 28 On July

16, the Company filed for restoration of the Certificate of Authority. 29 On June 30,

BluSky obtained a default judgment against the Company for $302,130.95. 30

Tr. 33:9–11; JX 35.

PHO II, 13.

Id. at 14.

Id. at 15.

JX 27, 31.

JX 29.

JX 32.

PHO II, 18.

SPG Greensboro Equities, LLC v. Ivy Greensboro I, LLC,

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A. Procedural History

SPG filed a Verified Complaint against Ivy for breach of the Operating Agreement,

the Letter Agreement, and fiduciary duties that Ivy owed to SPG. 31 SPG sought

damages no less than SPG’s investment in the Company, plus the preferred

distributions still owing, plus pre-and post-judgment interest. 32 SPG also sought a

charging order against Ivy’s membership interest in the Company, and its costs and

expenses. 33 The Complaint discusses the Property’s disrepair and the cost of

repairs. 34 The Complaint also summarily reviews the lack of insurance proceeds

paid to vendors hired to repair claims. 35 In several places, the Complaint discusses

the relief sought. For instance, SPG requested, “[a]t a minimum . . .entitle[ment] to

damages from (Ivy) of no less than SPG’s investment in the Company and the

accrued and unpaid distributions still owed to SPG, plus pre- and post-judgment

interest.” 36 As to the Breach of Contract and Breach of Fiduciary Duty counts, SPG

posited the same damage allegation, “Plaintiff has suffered damages in an amount

Compl.

Id. at ¶ 12.

Id. at ¶ 13.

Id. at ¶ 26.

Id. at ¶ 27.

Id. at ¶ 31.

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to be determined at trial, but no less than the amount Plaintiff invested in the

Company plus the total sum of preferred distributions which the Company failed to

pay when due and remain owed to Plaintiff.” 37 Finally, the Complaint requested a

Final Order, “Awarding Plaintiff damages from Defendant in an amount to be

determined at trial, but no less than the total sum of Plaintiff’s investment in the

Company and preferred distributions from the Company which remain due and

owing to Plaintiff.” 38 Ivy did not respond to the Complaint and SPG filed a Motion

for Default Judgment on June 13, 2025. 39 On July 15, the Court granted the Motion

for Default Judgment. 40 On September 9, Ivy’s counsel entered his appearance and

on September 14, Ivy filed an Objection to the Final Judgment and Charging Order. 41

The next day, Ivy filed a Motion to Reconsider the Default Judgment. 42 On

September 30, the Court denied both of Ivy’s motions but determined that a hearing

on the damages should be held. 43 On October 8, the matter was reassigned to me. 44

Id. at ¶¶ 39, 43.

Id. at A.

D.I. 4.

D.I. 10.

D.I. 14, 15.

D.I. 16.

D.I. 20, 21.

D.I. 22.

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A Damages Hearing was held on February 9, 2026. 45 Zakay and Ivy’s owner and

manager, Shangxuan Tan (“Tan”), testified at the hearing. 46 The parties submitted

post-hearing briefing. 47

II. ANALYSIS

SPG seeks pro rata damages in four areas: Lost Investment in the Company,

Lost Property Value, Insurance Proceeds, and Preferred Returns.

A. SPG Has Not Demonstrated Lost Investment in the Company.

SPG argues that it invested $2,607,373.09 for its membership interest in the

Company. 48 During the pre-investment negotiation, Zakay had an “understanding”

that his investment would be used “to own part of the company and to better the

property in order to make money.” 49 SPG contends that Ivy failed to make capital

improvements and the Company obtained loans to make repairs. 50 For this, SPG

asks for the return of its entire $2,607,373.09 investment. SPG does not explain how

the entire investment has been eliminated. Nor does SPG indicate what will happen

D.I. 43.

Tr. 74:03–08.

D.I. 41, 46, 48.

PPOB at 13.

Tr. 11:14–20.

PPOB at 13–14.

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to its interest in the Company if its complete investment plus distributions are

provided. There is no request for rescission. For its part Ivy contends that SPG did

not plead a breach of the Letter Agreement, and it could not show a promise outside

the Letter Agreement justifying return of the investment. 51

In my view, Ivy takes too myopic a stance on the relationship between the

Operating Agreement and Letter Agreement. They are unequivocally related. The

Letter Agreement begins with the heading “Letter Agreement” but below reads “Re:

Amended and Restated Limited Liability Company Agreement (“Operating

Agreement”) of 3610 Clifton Road Associates, LLC (the “Company”).” The Letter

Agreement references the Operating Agreement internally, including applying the

Operating Agreement’s term definitions to the Letter Agreement and reiterating the

“full force and effect” of the Operating Agreement. 52 “Delaware law allows for

agreements related to the same business transaction and subject matter, and entered

into in close temporal proximity of one another, to be read together as one overall

agreement.” Ashland LLC v. Samuel J. Heyman 1981 Continuing Tr. for Heyman,

2017 WL 1224506, at *6 (Del. Super. Mar. 30, 2017) (citing E.I. du Pont de

Nemours & Co. v. Shell Oil Co, 498 A.2d 1108, 1115 (Del. 1985) (stating that the

DPAB at 19–23.

JX 6.

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agreements and the “interrelationship thereof ma[d]e it clear that the parties intended

[them] to operate as two halves of the same business transaction.”)). The Operating

Agreement and Letter Agreement are related. Ivy’s attempt to parse the breach of

one interrelated document versus another is unavailing.

But SPG does not succeed. On its best day, SPG can argue that Zakay was

told that SPG’s contributions would be used “to better the property in order to make

money.” 53 That says very little. Vague pre-execution assertions comprise too thin

a reed to bear such a weighty damage request. SPG also misapprehends section 4.01

of the Operating Agreement that it cites in its Reply Brief. 54 There, “Each Member

acknowledges and agrees that such all or part of the Capital Contributions are

intended to be invested in the Company for the Company’s purchase of that certain

Student Housing Project in Greensboro, North Carolina known as “Spring Place,”

and otherwise in accordance with this limited liability company agreement.” 55

Operating Agreement Section 4.01 specifically contemplates that only a portion of

the Capital Contributions would be invested in the Company. It does not say how

the contributions will be invested (e.g., repairs, upgrades, new construction, staffing,

Tr. 11:18–24.

PPRB at 8.

JX 4, § 4.01(a).

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etc.). Thus, despite Zakay’s pre-execution “understanding”, the Operating

Agreement disabused the notion that the complete capital contribution would be

sunk into the physical property. See generally Freeman v. Qualizza, 2022 WL

3330377, at *7 (Del. Ch. Aug. 12, 2022) (“All conversations and parol agreements

between the parties prior to the written agreement are so merged therein that they

cannot be given in evidence for the purpose of changing the contract or showing an

intention or understanding different from that expressed in the written

agreement.”). 56

SPG’s request suffers from other problems. First, there is no evidence of how

diminished its capital investment is. It mentions its total investment of over $2

million, Zakay’s understanding, and the spreadsheets showing $738,000 in proposed

capital expenditures over four years. Yet SPG seeks the return of all of its

investment. SPG has offered no concrete means to evaluate a loss, if any. But there

is a second problem. SPG does not explain what would happen to its interest in the

Company if it received its investment back. It has not sought rescission. The

Company, through the Property, retains significant value. SPG would receive a

windfall if it received its investment proceeds while retaining an interest in the

The operating agreement includes both a merger clause and an anti-reliance clause. See JX 4, §§ 18.05 (“No Reliance”), 18.09 (“Entire Agreement”).

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property. SPG has neither proven a loss in the value of its investment nor why it is

entitled to its return while maintaining the interest in the company.

B. SPG is Not Entitled to Damages for Lost Property Value

SPG presented two appraisals to show lost property value. The first appraisal

took place on December 17, 2021 and valued the Property at $34.5 million. 57 The

second appraisal took place on April 29, 2024 and valued the Property at $24.8

million. 58 SPG seeks to recover the difference between valuations. 59 SPG urges me

to follow the Superior Court’s holding in State v. Ellery, compare the two appraisals,

and find that the difference, $9.7 million, is the lost property value. 1992 WL

179411, at *3 (Del. Super. Ct. July 16, 1992). SPG seeks its pro rata share of this

difference, $2,231,000. 60 Conversely, Ivy argues that the appraisals are not a valid

measure because they are the bare reports of persons who were not qualified as

experts and not subject to cross-examination for their opinions. 61 Ivy contends that

the appraisals lack a sufficient nexus to SPG’s damages request because the

appraisals do not show a connection between the differing values and Ivy’s

JX 3.

JX 26.

PPOB at 13.

PPOB at 17.

DPAB at 33–39.

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conduct. 62 Ivy urges me to not consider the appraisals because they come from nontestifying experts. Zohar II 2005-1, Ltd. v. FSAR Hldgs., Inc., 2017 WL 1732334,

at *1 (Del. Ch. May 3, 2017) (“Expert opinions should be subject to crossexamination except in limited circumstances . . . .”).

But before I can consider the parties’ arguments on the appraisals, I must

consider Ivy’s preliminary argument that the relief sought in the Damages Hearing

exceeds the relief requested in the Complaint under Court of Chancery Rule 54(c)

and Winklevoss Capital Fund, LLC v. Shaw. 2024 WL 3888757 (Del. Ch. Aug. 21,

2024). Rule 54(c) states, “A judgment should grant the relief to which each party is

entitled, even if the party has not demanded that relief in its pleading. But a

judgment by default must not grant relief different in kind from or greater in amount

than the relief sought in the pleading.” Winklevoss applied this Rule in the default

judgment context. The Court identified the important policy underpinnings of Rule

54(c). First, default judgments may be the result of a defendant’s tactical decision.

Winklevoss, 2024 WL 3888757, at *12. As the Court explained, “If a defendant

calculates that his maximum liability for a default judgment is less than what he

would owe by litigating through a post-trial judgment, taking into account his own

Id. at 36.

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attorneys’ fees to get to such a judgment, it may be economically rational for a

defendant simply to default (assuming settlement is not a viable option).” Id. at *12.

If a defendant so elects, this practice also preserves the Court’s limited resources

while granting the plaintiff the relief requested in the pleadings, and providing a

defendant with a known liability exposure. Id. With this backdrop, a plaintiff’s

damage request must give the defendant a degree of notice about the defendant’s

exposure. Id. While this does not require a plaintiff to plead damages with unerring

specificity, some notice to a defendant is required. Id. Very general requests, like

“such other and further relief as the Court deems just and appropriate” are

insufficient. Id.

In Winklevoss, the Court confronted a damages request in the complaint for

“compensatory damages” plus relief “as the Court deemed just and appropriate.” Id.

at *11. The plaintiff later sought rescissory damages post-default. Id. The Court

declined to grant rescissory damages because the rescissory damages were “different

in kind” from the complaint’s requested compensatory damages. Id. at *12.

Despite the different factual scenario presented here, Winklevoss’s legal

conclusions prove beneficial and probative. The Complaint includes claims for

Breach of Contract and Breach of Fiduciary Duty. Each of those claims contains

identical, general requests for damages, “in an amount to be determined at trial, but SPG Greensboro Equities, LLC v. Ivy Greensboro I, LLC,

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no less than the amount Plaintiff invested in the Company plus the total sum of

preferred distributions which the Company failed to pay when due and remain owed

to Plaintiff.” 63 The Complaint’s summative request for damages is just as general,

“Awarding Plaintiff damages from Defendant in an amount to be determined at trial,

but no less than the total sum of Plaintiff’s investment in the Company and preferred

distributions from the Company which remain due and owing to Plaintiff, plus preand post-judgment interest at the legal rate, compounded quarterly.” 64 I do not look

to Winklevoss’s “different in kind” analysis because SPG did not request

compensatory versus rescissory damages. Indeed, SPG does not specify the source

of the damages. It is clear to me from the Complaint and default judgment that Ivy

bears some burden for damages. I look deeper at the Complaint in an effort to see if

SPG can support its request. The Breach of Contract claim contends that Ivy

unilaterally managed the Company in violation of the Operating Agreement and

failed to make the 7% distributions consistent with the Letter Agreement. 65 SPG

pled that Ivy mismanaged the Company “including but not limited to squandering

and misappropriating Plaintiff’s capital investment in the Company and other assets”

Compl. ¶¶ 39, 43.

Id. at A.

Id. at ¶¶ 34–38.

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and refused to pay SPG the distributions. 66 On the clearest of days, I cannot see

where SPG put Ivy on notice of lost property value. There is no mention of the

difference in appraised value or the appraisals themselves. The difference between

the two appraisals is $9.7 million—not an insignificant sum. SPG’s alleged pro rata

share is $2,231,000. This amount nearly equals SPG’s total capital investment in

the Company. I do not find that SPG put Ivy on notice of this sum as potential

damages. Moreover, SPG’s damages request does not suggest a limitation for

damages. The pleading “no less than the amount Plaintiff invested in the Company

plus the total sum of preferred distributions which the Company failed to pay when

due and remain owed to Plaintiff” is a damages floor, not a ceiling. It does not create

a limitation that would lead Ivy to believe it would be responsible for lost property

value, especially in the amount requested. It would be inequitable to grant damages

that are not even inferred in the Complaint and that nearly equal SPG’s total capital

investment. Try as I might, the Complaint does not guide me to the damages SPG

requests. SPG’s request for Lost Property Value damages is denied.

Id. at ¶¶ 37–38.

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C. SPG is Entitled to a Pro Rata Share of the Insurance Proceeds for the

BluSky Work.

SPG alleged in the Complaint that Ivy filed insurance claims with the

Company’s carrier, received funds for those claims, but those claims remain

unpaid. 67 One of the entities who performed work on the Property was BluSky,

which was not paid. SPG seeks the pro rata share of the proceeds that were intended

to pay BluSky. The total amount owed to BluSky is $321,849, so SPG seeks a 23%

pro rata share equaling $74,025.35.

Ivy contends that it owes no repayment of insurance proceeds because it seeks

a different (although lesser) amount than found in Zakay’s affidavit, it did not

request the damages in the Complaint (as it argued with regard to the lost property

value), and it did not “connect the dots” between the harm suffered and the

Complaint. Winklevoss, 2024 WL 3888757, at *9. Ivy takes issue with SPG’s

wording in the Complaint that “it appears that (Ivy) either wasted the insurance

proceeds or pocketed them for its own use.” 68 Finally, Ivy notes that the default

Id. at ¶ 27.

Id.

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judgment BluSky obtained against the Company was $302,130.95 and 23% of that

amount is $69,490.12. 69

I am cognizant of the concern present in default judgments:where a defendant

contests damages, that defendant may also seek to collaterally attack the default

judgment. This is not allowed. Ivy elected not to contest the Complaint and the

Court entered a default judgment. Under Court of Chancery Rule 55(a)(2), “a party

in default admits and cannot present evidence to contest the allegations of the

complaint.” “The effect of a default in answering, however, is to deem admitted all

the well-pleaded facts in the complaint.” Hauspie v. Stonington Partners, Inc., 945

A.2d 584, 586 (Del. 2008). SPG pled that Ivy filed insurance claims for the

Property’s damage with the insurance carrier but those funds were not used to pay

BluSky. 70 It pled that Ivy appeared to either waste the insurance proceeds or pocket

them for its own use. 71

These well-pleaded facts indicate to me Ivy filed insurance claims for the

Company and the insurance carrier paid them, but that when Zakay took over, the

DPAB at 25.

Complaint ¶ 27 does not mention BluSky but does reference that the vendor is owed 70

more than $320,000. It is apparent that this references BluSky.

Id.

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funds were no longer present and the bills remain unpaid. The reasonable

interpretation is that Ivy used those funds for something other than paying the repair

bills. Ivy’s attempts to now parse the colloquial terms in the Complaint come too

late. Ivy elected to allow the default judgment to occur. It received a benefit because

SPG was held to its damage request in the Complaint. But SPG also gets the benefit

of its pleading. SPG’s Complaint is sufficient to connect the dots between the harm

(unpaid billing for property repair) and the Complaint (Ivy, as manager, sought and

received insurance proceeds for damage to the property).

Ivy has also argued “that insurance only pays for work that has already been

done and paid for.” 72 In support of this, Ivy points to Tan’s testimony that BluSky

is owed nothing because payments are made to BluSky by the insured first followed

by the insurance company compensating the insured. 73 That is illogical in this

situation. Had BluSky been paid, it would not and could not have obtained a default

judgment against the Company. The Company is a Delaware LLC and Ivy, as

manager, owed duties of loyalty and care. Triple H Fam. Ltd. P’ship v. Neal, 2018

WL 3650242, at *18 (Del. Ch. July 31, 2018) (citations omitted). “The duty of care

requires that managers avoid ‘conduct that constitutes reckless indifference or

DPAB at 28.

Tr. 91:03–13.

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actions that are without the bounds of reason.’” Id. (quoting McPadden v. Sidhu, 964

A.2d 1262, 1274 (Del. Ch. 2008)). Ivy breached its fiduciary duty when it neglected

to meet the Company’s financial obligations to vendors from insurance proceeds.

Ivy owes damages to SPG for the failure to satisfy payments from the insurance

proceeds.

SPG provided documents in support of the amounts owed to BluSky. 74 While

these amounts and the amount in Zakay’s affidavit may vary, BluSky obtained a

default judgment for $302,130.95. This is the most concrete evidence of what is

owed. SPG is entitled to an award of 23% of that amount, $69,490.12.

D. SPG is Entitled to the Distributions Set Forth in the Letter Agreement.

The Letter Agreement required that for three years from its execution date, the

Company was to return 7% of SPG’s investment. 75 The Letter Agreement defines

SPG’s investment in the Company as $2,759,000. 76 Yet both the Pre-Hearing Order

and SPG’s Opening Brief list SPG’s investment as $2,607,373.09. 77 In the

companion case to this one, the parties agreed to a Consent Order that required three

JX 11, 13, 39.

JX 6, ¶ 5.

Id. at ¶ 2.

PHO § 2, ¶ 3; PPOB at 7.

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monthly “make-up” payments of $16,094.17 followed by a monthly payment of

$16,094.17 each month. 78 Evidence presented in the hearing shows that this amount

was paid monthly, when payments were made, up to a total of $553,138.44. 79

Multiplying the $16,094.17 payment by the thirty-six months in the Letter

Agreement provides a total of $579,390.12. 80 As readers might expect by now, SPG

urges me to consider the higher investment amount found in the Letter Agreement

and the Complaint while Ivy implores me to take the amount from the Pre-Hearing

Order and SPG’s Opening Brief. I cannot ignore that the $2,759,000 figure SPG

supports was found in the foundational documents in this case, the Letter Agreement

and the Complaint. The Complaint provided Ivy with notice of the amount in

controversy. I accept $2,759,000 as the accurate figure. This analysis was certainly

made more difficult by the parties’ unexplained insertion of $2,607,373.09 via the

Pre-Hearing Order and SPG’s Opening Brief. But I cannot countenance reliance on

the lower figure not mentioned in the Letter Agreement or Complaint. This is a

SPG Greensboro Equities LLC v. Ivy Greensboro I, LLC and 3610 Clifton Road Associates, LLC, C.A. No. 2022-1058-JTL (Del. Ch. Apr. 17, 2023).

JX 43.

Resulting in a difference of $26,251.68 between the Letter Agreement total and payments 80

made as of the Damages Hearing.

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Court of Equity. Our bedrock is the fair, rational, and just. Hypertechnical

arguments that defy these tenets ring hollow.

Turning to Ivy’s next argument, it suggests that it does not owe distributions

because Zakay was Receiver for the final 15 months of the term. 81 Again, Ivy resorts

to a nuanced view. It argues (without acknowledging its own failure to pay that

resulted in the Receiver’s appointment and Consent Order) that the three-year

investment return period was to end in July 2025. 82 Zakay was appointed receiver

in April 2024, so the Company was exclusively controlled by Zakay for the last 15

months of the term. 83 Courts are permitted to use “conscience and reason” in

estimating and assessing imprecise damages. S’holder Rep. Servs. LLC v. Alexion

Pharm., Inc¸ 341 A.3d 513, 542–43 (Del. Ch. 2025) (citations omitted). Delaware

Courts follow the “wrongdoer rule” when determining damages:

Doubts [about the extent of damages] are generally resolved against the

party in breach. A party who has, by his breach, forced the injured party

to seek compensation in damages should not be allowed to profit from

his breach where it is established that a significant loss has occurred. A

court may take into account all the circumstances of the breach,

including willfulness, in deciding whether to require a lesser degree of

certainty, giving greater discretion to the trier of the facts. Damages

DPAB at 17.

Id.

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need not be calculable with mathematical accuracy and are often at best

approximate.

Id. (citations omitted) (emphasis in original). Ivy elected default judgment. In doing

so, I accept all well-pleaded facts as true. The facts, as previously set forth in this

letter and in the Complaint, support that Ivy breached the contracts and its fiduciary

duties. Ivy quibbles with the timing as Zakay became Receiver fifteen months

before the distributions’ end date. Ivy chooses to ignore that the contractually

obligated distribution payments were not made on its watch as the entity controlling

the Company. It walled off SPG from control. Ivy’s argument that SPG is

responsible when Ivy created the problem is hypocrisy. Ivy decided not to make

payments. Zakay became Receiver. Ivy decided not to contest the Complaint. Any

question about responsibility here is resolved against the party in breach, Ivy. Ivy

owes $26,251.68 for unpaid distributions to SPG.

E. SPG is Entitled to Pre-Judgment Interest.

SPG seeks pre-judgment interest. Ivy argues that if any interest should be

awarded, it should be simple interest on SPG’s breach of contract claim. 84 “In

Delaware, prejudgment interest is awarded as a matter of right” and “computed from

the date payment is due.” In re Bremerton Cellular Tel. Co. Litig., 328 A.3d 330,

Id. at 44.

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353 (Del. Ch. 2024) (citations omitted). “In the absence of an express contract rate,

Delaware courts use the ‘legal rate’ as a default rate.” Id. (citations omitted). Ivy

argues that I should depart from the legal rate because of the “debatable and

contentious circumstances” surrounding the relationship. 85 But these

“circumstances” were created by Ivy. I see no reason to depart from the legal rate.

Ivy owes pre-judgment interest at the legal rate.

F. SPG is Not Entitled to Fee-Shifting

SPG contends that the Court should award SPG its attorneys’ fees based on the

bad faith exception to the American Rule. 86 “Under the American Rule, absent

express statutory language to the contrary, each party is normally obliged to pay

only his or her own attorneys’ fees.” Gatz Props., LLC v. Auriga Cap. Corp., 59

A.3d 1206, 1222 (Del. 2012) (quoting Johnston v. Arbitrium (Cayman Is.) Handels

AG, 720 A.2d 542, 545 (Del. 1998)). When applying the American Rule, this

Court “do[es] not award attorneys’ fees to a prevailing party absent some special

circumstance.” Arbitrium (Cayman Islands) Handels AG v. Johnston, 705 A.2d

225, 231 (Del. Ch. 1997). When the alleged circumstance is bad faith, the plaintiff

is required to show by clear and convincing evidence that the defendant acted in

Id.

PPOB at 20.

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bad faith. Shawe v. Elting, 157 A.3d 142, 150 (Del. 2017) (citing Lawson v. State,

91 A.3d 544, 552 (Del. 2014)).

Bad faith “must derive from either the commencement of an action in bad

faith or bad faith conduct taken during litigation, and not gave rise to the underlying

cause of action.” Versata Enterprises, Inc. v. Selectica, Inc., 5 A.3d 586, 607 (Del.

2010) (citing Johnston at 546; see Keen-Wik Ass’n v. Campisi, 2020 WL 6162957

at *6 (Del. Ch. Oct. 19, 2020) (“[F]ailure to respond to the action prior to the entry

of default judgment, alone, is not evidence of bad faith.”), adopted 2020 WL

6507267 (Del. Ch. Nov. 4, 2020). But turning a blind eye to litigation or

intentionally allowing a default judgment to occur does not equal bad faith. “[E]ntry

of default judgment, alone, is not evidence of bad faith. Otherwise, every defaulted

party would be acting in bad faith, which contravenes the higher standard set for bad

faith conduct.” Id. “Thus, even with a default judgment, fees will not be shifted

absent clear evidence of subjective bad faith." Sachs v. Sachs, 2023 WL 2379389, at

*18 (Del. Ch. Mar. 7, 2023) (quoting Keen-Wik Ass’n, 2020 WL 6162957, at *6

(cleaned up)). As Vice Chancellor Cook definitively explained in Winklevoss,

parties may opt for the certainty and efficiency of default judgment. Winklevoss

Cap. Fund, LLC v. Shaw, 2024 WL 3888757, at *12 (Del. Ch. Aug. 21, 2024). He

stated most pithily, “default judgments are not inherently bad.” Id.

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SPG attempts to bootstrap Ivy’s punished conduct in the First Action to this

one. SPG argues that Ivy incurred a fee-shifting sanction in the First Action. 87 True

enough. But there, Ivy was found in contempt of the Default Judgment Order and

failure to comply with the Show Cause Order or Lift Stay Order. 88 SPG asks me to

consider this punished conduct again to sanction otherwise legitimate conduct here.

I will not. Here, as in the First Action, Ivy defaulted. But Ivy has not failed to

comply with the Default Judgment Order nor any other order in this case so far. Ivy

made a choice. That choice has consequences, like Ivy’s liability for the insurance

proceeds and Letter Agreement distributions. But the default judgment here has not

involved bad faith. The request to shift fees is denied.

Id. at 20–21.

2022-1058-DH.

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III. CONCLUSION

For the reasons explained above, I recommend that Ivy be assessed damages

for the insurance proceeds and unpaid distributions, along with pre-judgment

interest. I do not recommend fee-shifting. This is a report pursuant to Court of

Chancery Rule 144.

Sincerely,

/s/ David Hume, IV

David Hume, IV

Magistrate in Chancery

cc: All counsel of record (by File & ServeXpress)

SPG Greensboro Equities LLC v. Ivy Greensboro I, LLC

Authorities cited

Opinion · public domain