IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
NCP US TERMINALS LP, )
)
Plaintiff, )
)
v. ) C.A. No. 2024-1338-KSJM
)
ODFJELL TERMINALS US )
HOLDINGS, LLC, ODFJELL )
TERMINALS B.V., ODFJELL )
TERMINALS US HOLDINGS AS, )
and ODFJELL TERMINALS )
AMERICAS LLC, )
)
Defendants. )
POST-TRIAL MEMORANDUM OPINION
Date Submitted: April 20, 2026
Date Decided: August 6, 2026
Raymond J. DiCamillo, Brock E. Czeschin, Nicole M. Henry, Kaitlyn R. Zavatsky, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Richard K. Welsh, David Pernas, ALPHA TRIAL GROUP, LLP, Los Angeles, California; Counsel for Plaintiff NCP US Terminals LP.
Martin S. Lessner, Andrew J. Czerkawski, Liam C. Reeves, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; Michael C. Keats, Rebecca L. Martin, Anne S. Aufhauser, Harrison D. Polans, Michael Yoon, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP, New York, New York; Counsel for
Defendants Odfjell Terminals US Holdings, LLC, Odfjell Terminals B.V., Odfjell Terminals US Holdings AS, and Odfjell Terminals Americas LLC.
McCORMICK, C.
The parties are members of Odfjell Terminals US Holdings LLC (“OTUS” or
the “Company”), a Norwegian shipping company. The private equity plaintiff owns
49% of the Company. The defendants own 51% of the Company and operate it. The
plaintiff would like to maximize the value of its investment through distributions or
a sale of its interests, and the defendants would like to buy out the plaintiff. But the
parties are far apart on price, and they have used their respective contractual and
governance rights under the Company’s LLC agreement as bargaining chips in the
larger buyout discussion. The plaintiff refused to amend or extend the existing debt
facility that was set to expire months after the parties’ dispute escalated. And the
defendants refused to approve distributions.
The plaintiff filed this suit claiming that the defendants breached express and
implied terms of the LLC agreement by refusing distributions thereby triggering
plaintiff’s call rights under that agreement. Alternatively, the plaintiff requested
judicial dissolution based on board deadlock. The defendants filed a separate suit,
later consolidated with this action, seeking the appointment of a limited-purpose
custodian to resolve the debt crisis.
At the court’s urging, the parties consented to the appointment of a limitedpurpose custodian to work through the debt crisis. The parties then went to trial on
the plaintiff’s claims of breach of the LLC agreement and judicial dissolution.
The plaintiff failed to prove its claim of breach of the LLC Agreement. At
bottom, the plaintiff asks the court to enforce a contractual right for which they never
bargained—the right to require the defendants to act in the plaintiff’s best interests when determining whether to approve distributions. The plaintiff’s claim for judicial
dissolution similarly fails. The board’s deadlock over leveraged distributions,
distributions to which the plaintiff is not entitled, does not qualify as the sort of
existential issue warranting judicial dissolution. This post-trial decision enters
judgment for the defendants.
I. FACTUAL BACKGROUND
Trial took four days. The record comprises 351 trial exhibits, live testimony
from six fact witnesses, deposition testimony from 12 fact witnesses, and 70
stipulations of fact.1 These are the facts as the court finds them after trial.
A. Northleaf Acquires A Stake In OTUS.
Plaintiff NCP US Terminals LP is an investment vehicle owned by private
equity funds managed by Northleaf Capital Partners Ltd. and its affiliates
(“Northleaf”).2 Northleaf invests in infrastructure and generally holds its
1 This decision cites to: C.A. No. 2024-1338-KSJM docket entries (by docket “Dkt.”
number); trial exhibits (by “JX-” number); the trial transcript, Dkts. 202–05 (“Trial Tr.”); supplemental submissions, Dkt. 253; and stipulated facts set forth in the Parties’ Stipulation and Pre-Trial Order, Dkt. 186 (“PTO”). The parties called the following fact witnesses: John Blanchard (Odfjell Terminals U.S., CEO), Terje Iversen (Odfjell SE, CFO), Adrian Lenning (Odfjell SE, Managing Director of Terminals), Kaushik Ramakrishnan (a/k/a Kash Ramki) (Northleaf Capital, Executive Operating Partner), Jamie Storrow (Northleaf Capital, Co-Head of Infrastructure), and Morris White (Odfjell Terminals U.S., CFO). The parties submitted the deposition transcripts of the witnesses called at trial and called the following witnesses by deposition only: Carmine Falcone (Odfjell Terminals U.S., Board Member), Harald Fotland (Odfjell SE, CEO), Rosalee Hermens (Odfjell Terminals U.S., Board Member), Stian Ommedal (Odfjell SE, Manager of Business Analytics), Arild Viste (Odfjell Terminals U.S., Board Member), and Jared Waldron (Northleaf Capital, Co-Head of Infrastructure). The transcripts of the witnesses’ respective depositions are cited using the witnesses’ last names and “Dep. Tr.” 2 JX-24 (“LLC Agreement”) at 6; Trial Tr. at 283:15–18 (Ramki).
2
investments for seven to eight years.3 To generate returns, the firm targets
investments that both appreciate and generate cash through distributions.4
In 2019, Northleaf acquired a 49% membership interest in the Company for
$115.5 million.5 OTUS owns and operates two liquid bulk storage terminals located
in Houston, Texas and Charleston, South Carolina.6 Northleaf expected to hold its
OTUS interest for about seven years.7 So Northleaf is near the end of its expected
investment horizon in OTUS.8
Defendant Odfjell Terminals B.V. (“OTBV”) held the remaining 51% interest
in OTUS.9 OTBV is a subsidiary of non-party Odfjell SE,10 a publicly traded
Norwegian chemical shipping and terminal group.11 OTBV later transferred its
interest to another Odfjell SE subsidiary, Odfjell Terminals US Holdings AS
(“OTAS”).12 In turn, OTAS transferred the 51% OTUS interest to Odfjell Terminals
Americas LLC (together with OTUS, OTBV, and OTAS, “Odfjell” or “Defendants”).13
3 Trial Tr. at 1015:15–1016:14 (Storrow).
4 Id. at 1016:4–19 (Storrow).
5 PTO ¶¶ 25–26.
6 Id. ¶ 24.
7 Trial Tr. at 465:23–466:8 (Ramki).
8 See id.
9 PTO ¶ 27.
10 Id.
11 Trial Tr. at 670:1–10 (Lenning).
12 PTO ¶ 28.
13 Id.
3
Odfjell is the operating partner of OTUS under a master services agreement.14
Odfjell supports and oversees operations related to safety, engineering, audits, IT
support, and marketing.15
B. The Parties Enter An LLC Agreement.
At the time of its investment, Northleaf entered into a Limited Liability
Company Agreement (the “LLC Agreement”) with OTBV.16 Northleaf and Odfjell
Terminals Americas are the Company’s sole “Members.”17
Under the LLC Agreement, six managers govern OTUS (the “Board”).18
During all relevant periods, the Board comprised Terje Iversen, Adrian Lenning, and
Arild Viste for Odfjell and Kash Ramki, Carmine Falcone, and Rosalee Hermens for
Northleaf.19
Each year, the Board approves a budget under Section 7.2 of the LLC
Agreement.20 The Board also decides whether the Company has “Available Cash” to
make distributions under Section 5.1(a) of the LLC Agreement.21 And Board
decisions bind the Members under Section 6.1(c) of the LLC Agreement.22
14 LLC Agreement § 6.12.
15 Trial Tr. at 674:21–675:10 (Lenning).
16 PTO ¶ 1; LLC Agreement.
17 PTO ¶¶ 1, 27–28.
18 Id. ¶ 31; LLC Agreement § 6.3(a).
19 PTO ¶¶ 31–42.
20 Trial Tr. at 338:5–6 (Ramki); LLC Agreement § 7.2; see also id. § 6.7(g) (requiring
unanimous consent).
21 LLC Agreement § 5.1(a).
22 Id. § 6.1(c).
4
C. OTUS Refinances And Improves Its Operations.
Kash Ramki is an executive operating partner at Northleaf.23 He led
Northleaf’s diligence of OTUS in 2019 and is Northleaf’s lead Board representative.24
Northleaf invested in the Company expecting quarterly distributions.25 But
according to Ramki, “[s]oon after [Northleaf] acquired [its] interest, [it] learned that
the business was . . . underinvested in for many years.”26 The Company had deferred
significant maintenance and capital expenditures.27 John Blanchard, the CEO of
OTUS since May 2019, acknowledged that the Company “was in pretty poor shape.”28
Given OTUS’s condition, the Board deferred distributions.29 And both Members
agreed that earnings should be reinvested.30
To turn around the Company, the Board needed to secure a new credit facility
to fund capital expenditures.31 To do so, the Board first had to approve a financing
option, which is typically done through the annual budgeting process.32 Management
could then go to the market to procure the executable terms.33
23 Trial Tr. at 461:7–10 (Ramki).
24 Id. at 283:19–22, 285:20–24 (Ramki).
25 Id. at 1007:9–12 (Iversen).
26 Id. at 287:14–16 (Ramki).
27 Id. at 287:20–23 (Ramki).
28 Id. at 8:16–18 (Blanchard); PTO ¶ 32.
29 Trial Tr. at 64:20–65:2 (Blanchard).
30 Id. at 291:2–7 (Ramki); id. at 24:3–23 (Blanchard).
31 Id. at 64:16–65:2, 66:1–10 (Blanchard).
32 Id. at 289:21–290:18 (Ramki).
33 Id.
5
The Board considered a new credit facility at a meeting on November 19,
2019.34 At the meeting, the Board approved the 2020 budget for OTUS.35 Separately,
the Board instructed management to seek a bank-led revolving credit facility.36
Management went to the market with those instructions. Morris White, the
CFO of OTUS since 2019, negotiated with lenders.37 During negotiations, OTUS
learned that lenders opposed distributions.38 Because negotiations occurred during
the onset of the COVID-19 pandemic when the credit market had constricted,39 OTUS
had to accept “whatever [the lenders] gave [them] at that point in time.”40 As a result,
the terms of the credit facility limited OTUS’s ability to make distributions.41
The Board executed a written consent to approve the final terms of the credit
agreement on March 16, 2020.42 White then executed the credit agreement on March
18, 2020.43
Over the next several years, OTUS spent over $250 million making capital
expenditures to grow the business.44 One of Odfjell’s most valuable assets was a
34 Trial Tr. at 200:15–201:16 (White); JX-43 at 2, 6–7.
35 JX-43 at 6; Trial Tr. at 201:1–7 (White).
36 JX-43 at 7.
37 Trial Tr. at 153:6–20, 212:2–18 (White); JX-47 at 1.
38 Id. at 291:14–21 (Ramki).
39 Id. at 291:22–292:6 (Ramki); see JX-54.
40 Id.
41 Id. at 13:8–13 (Blanchard); id. at 291:18–21 (Ramki); id. at 1008:7–14 (Iversen).
42 JX-53; see also Trial Tr. at 217:12–219:1 (White); JX-45.
43 JX-54 at 1, 127; see also Trial Tr. at 77:16–78:24 (Blanchard).
44 Trial Tr. at 214:15–20 (White).
6
Houston-based terminal constructed in 1982 under the leadership of Dan Odfjell, the
father of the Company’s current chairman.45 OTUS spent $9.9 million in 2020 and
2021 to upgrade the Houston terminal’s hydraulic power unit.46 The Board also
approved spending $60.6 million on the expansion of the Houston terminal.47 OTUS’s
capital allocation paid off—its investments nearly doubled EBITDA.48
D. Odfjell Launches Project Clemens.
As the Company’s finances improved, Odfjell contemplated buying out
Northleaf’s interest. Adrian Lenning, Odfjell SE’s Managing Director for
Terminals,49 approached Ramki about acquiring Northleaf’s OTUS stake in June
2023.50 The approach was informal—Lenning had not broached the topic with his
superiors.51 According to Lenning, Ramki gave a lukewarm response as Northleaf
was not contemplating an exit, but they always considered inbound interest.52
Lenning, however, gleaned from the conversation that Odfjell could submit an offer
to Northleaf without offending them.53
45 Id. at 670:12–19, 673:7–15, 674:5–18 (Lenning) (testifying that the terminal is
Odfjell SE’s “single most valuable and unique asset” because of its technological capabilities and location at the beginning of one of the world’s largest chemical shipping channels).
46 JX-1071 at 7–9; Trial Tr. at 220:19–221:3 (White); id. at 79:24–80:22 (Blanchard).
47 JX-1042 at 34–35; Trial Tr. at 82:24–84:12 (Blanchard).
48 Trial Tr. at 465:14–22 (Ramki).
49 PTO ¶ 36.
50 Trial Tr. at 690:7–19 (Lenning).
51 Id. at 690:22–691:6 (Lenning).
52 Id. at 691:7–14 (Lenning).
53 Id.
7
Based on the preliminary conversation, Lenning initiated “Project Clemens” to
acquire Northleaf’s OTUS stake.54 On August 14, 2023, Lenning sent a Project
Clemens presentation to Harald Fotland, the CEO of Odfjell SE, and Terje Iversen,
the CFO of Odfjell SE.55
The presentation explained Odfjell’s rationale behind an acquisition.56 Odfjell
believed that Northleaf was likely to seek to exit its investment in OTUS as early as
2024.57 Other pressures made Odfjell believe that Northleaf would consider an
acquisition, including the current challenging fundraising environment.58 By
acquiring Northleaf’s stake, Odfjell avoided the possibility of Northleaf selling to an
incompatible business partner and also created additional merger opportunities. 59
Odfjell further saw “a strong rationale . . . to pre-empt a competitive process”—an
auction of Northleaf’s stake.60 After the presentation, Fotland and Iversen blessed
Lenning’s further outreach to Ramki.61
54 Id. at 691:17–22, 703:2–8 (Lenning).Lenning named the project after legendary baseball player, Roger Clemens, who played for the Toronto Blue Jays (where Northleaf is headquartered) and found further success with the Houston Astros (where OTUS’s Houston terminal is located). Lenning Dep. Tr. at 19:7–19. 55 Id. at 691:17–22 (Lenning); JX-128; PTO ¶¶ 34–35.
56 See JX-128.
57 Id. at 3.
58 Id. at 3, 5.
59 Id. at 6.
60 Id. at 3 (emphasis in original).
61 Trial Tr. at 691:19–692:9 (Lenning).
8
In August 2023, Lenning again broached a potential buyout with Ramki.62
Ramki discussed the issue with his superior, Jamie Storrow, Northleaf’s Co-Head of
Infrastructure.63 Ramki emailed Lenning that he “started an internal discussion
with Jamie and as you would expect, the notion of selling without running a
competitive process is a steep uphill battle.”64
In September 2023, Lenning presented Project Clemens to the full Odfjell SE
board.65 The presentation shared the same strategic rationales as those shared with
Fotland and Iversen.66 Lenning also recommended submitting an offer in 2023
because a “competitive process will likely push the price to levels where Odfjell cannot
compete.”67 The Odfjell SE board approved Project Clemens, allowing Odfjell to
approach Northleaf with a non-binding offer.68
On October 27, 2023, Odfjell offered Northleaf $204 million for their OTUS
stake.69 Northleaf rejected the offer.70 Ramki told Lenning that the offer “was
woefully low.”71 Lenning’s notes on the exchange state: “[Northleaf] feel[s] our price
62 Id. at 692:6–11 (Lenning).
63 See id. at 693:2–4 (Lenning); PTO ¶ 40.
64 JX-134 at 2.
65 JX-749 at 1, 103; Trial Tr. at 705:6–20 (Lenning).
66 See JX-749 at 103, 105.
67 Id. at 107.
68 Trial Tr. at 711:11–19 (Lenning).
69 Id. at 302:23–303:15 (Ramki); id. at 711:11–19 (Lenning); JX-172 at 2.
70 JX-173; Trial Tr. at 1029:19–1030:1 (Storrow).
71 Trial Tr. at 305:17–23 (Ramki).
9
(USD 417 mln for 100%) undervalues (i) the growth potential of the business, (ii) the
value from relevering and (iii) the control premium[.]”72
E. The Board Approves The 2024 Budget.
Meanwhile, business continued. Consistent with the LLC Agreement, the
OTUS Board approves a budget annually.73 The budget “guides how [OTUS]
allocate[s] capital to meet the [C]ompany’s growth initiatives, as well as [] finance
operations.”74 CFO White and his team take months to prepare the annual budget
for Board approval.75
Producing a budget follows a set procedure each year.76 Beginning in May,
White and his team start preparing a budget.77 Next, the Board’s budget
subcommittee vets their work.78 In 2023, both Ramki and Lenning sat on the OTUS
budget subcommittee.79 Last, the budget goes to the full Board for approval.80
Management presented the 2024 budget to the Board at a November 2023
Board meeting.81 For the meeting, management prepared materials and an agenda
72 JX-195 at 6.
73 Trial Tr. at 338:5–6 (Ramki); LLC Agreement § 7.2.
74 Trial Tr. at 155:8–18 (White).
75 Id.
76 See id. at 155:21–156:23 (White).
77 Id. at 155:21–24 (White).
78 Id. at 156:1–6 (White).
79 Id. at 156:9–12 (White).
80 Trial Tr. at 338:5–6 (Ramki); LLC Agreement § 7.2.
81 JX-189 at 3, 22–30.
10
to guide the Board’s discussion.82 The agenda listed the “2024 budget” as an
“approval” item, indicating that management would seek approval of the 2024 budget
at the meeting.83 The Board minutes show that the Board “[a]pproved downside case
one,” a scenario that used lowered EBITDA.84 Because the budget prepared for the
meeting did not reflect that set of assumptions, the Board directed management to
prepare an updated budget presentation reflecting “downside case one” before it
formally approved the budget.85
The Board materials and minutes also cover a proposed refinancing.86 The
minutes indicate that before the meeting, the Board “requested [an] update on the
refinanc[ing] process after vetting with the Board working group.”87 The agenda
listed the refinancing as an informational update.88
In management’s presentation, a slide titled “Debt Refinancing / Credit
Facility Covenant Redesign” gives a detailed update on management’s progress
towards a refinancing.89 The situational overview section states that management
“conducted a debt product overview for the Board working group” and “the working
82 See id.
83 Id. at 8; Trial Tr. at 716:5–717:6 (Lenning); id. at 223:8–19 (White).
84 JX-189 at 3.
85 Trial Tr. at 721:14–19 (Lenning).
86 See JX-189 at 1, 3, 8, 39, 43.
87 Id. at 1.
88 Id. at 8.
89 Id. at 39.
11
group agreed to a limited market test for a potential [term loan] solution.”90 The slide
shows four objectives: (1) “[c]onsummation of refinancing by end of Q1 2024”;
(2) secure an approximately “$350 [million] [f]ive [year] tranche credit facility”;
(3) “[l]everaged distribution upon transaction close”; and, (4) “[c]ovenant redesign.”91
At trial, witnesses disagreed on whether the Board discussed a $350 million
refinancing and leveraged distributions during the meeting. Blanchard testified that
the Board reviewed the refinancing slide.92 Ramki agreed.93 But Lenning testified
that the Board did not.94
The preponderance of the evidence, however, indicates that the Board in fact
discussed a $350 million refinancing during the meeting. Beyond Blanchard’s and
Ramki’s testimony, the Board meeting minutes reflect that Iversen sought additional
information about OTUS’s “liquidity forecast based on the final budget, including the
impact of refinancing.”95 In his testimony, Lenning conceded that management could
not provide a “liquidity forecast” without knowing the refinancing numbers.96
Moreover, the refinancing slide showing the $350 million figure is the only one in the
90 Id.
91 Id. (emphasis added).
92 Trial Tr. at 17:2–7, 19:10–22:9 (Blanchard).
93 Id. at 316:22–24 (Ramki).
94 Id. at 848:2–10 (Lenning).
95 JX-189 at 3.
96 Trial Tr. at 846:9–847:16 (Lenning).
12
presentation’s refinancing update section.97 It is unlikely that the Board skipped an
entire section. The meeting was not rushed. It lasted two days.
Given the testimony and circumstances, the court finds that the Board
considered the $350 million refinancing at the meeting. But there is no evidence that
the Board approved it during the meeting. At most, the Board gave management
approval to seek terms for a financing.
At Lenning’s request, White circulated a written consent for Board approval of
the 2024 budget and a separate deck entitled “2024 Budget Presentation” on
December 12, 2023.98 The Board approved the written consent (the “Written
Consent”). The Written Consent gave management the green light to secure
prospective terms for a $350 million refinancing.99
Five of the six Board members executed the Written Consent by DocuSign.100
The sixth manager—Odfjell’s Arild Viste—had difficulty with DocuSign.101 Viste
signed the consent at the next Board meeting in February 2024.102 Later, Odfjell
questioned whether the Board fully executed the Written Consent.103 When shown
97 JX-189 at 38–40.
98 JX-208; JX-213.
99 Trial Tr. at 19:10–17, 29:18–30:3, 52:11–18 (Blanchard); id. at 172:5–13 (White).
100 JX-266; Trial Tr. at 173:16–174:18 (White).
101 Trial Tr. at 174:2–10 (White); JX-264.
102 Trial Tr. at 174:10–15 (White); JX-266.
103 JX-453 at 2.
13
the documentation, however, Lenning agreed that the Board executed the 2024
Budget.104
F. Management Pursues A Refinancing.
Although the December 2023 written consent authorized management to
secure terms of a $350 million refinancing, both management and the Board
understood that OTUS could not enter into a credit agreement without the Board’s
final approval.105
Still, management believed a refinancing would happen in 2024.106 As White
explained, management believed that Northleaf and Odfjell agreed to seek a $350
million refinancing and a subsequent distribution in 2024.107 And Blanchard’s bonus
depended on securing the refinancing—the Board made the refinancing one of his top
objectives and part of his performance “scorecard.”108
After the November Board meeting, therefore, OTUS management began
contacting “banks about that $350 million structure[.]”109 But the refinancing would
never happen.
104 Lenning Dep. Tr. at 92:9–15.
105 Trial Tr. at 289:24–290:23 (Ramki); id. at 210:7–11 (White); id. at 34:1–24 (Blanchard).
106 Id. at 168:18–23 (White); id. at 34:17–24 (Blanchard).
107 Id. at 168:6–23 (White).
108 Id. at 35:6–13, 36:5–9, 37:7–18 (Blanchard); JX-625.
109 Trial Tr. at 29:18–24 (Blanchard).
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G. Tax Issues Come To Light.
A few months after Odfjell initiated buyout discussions with Northleaf, Odfjell
became aware of tax issues with Odfjell SE’s distributions to its wholly owned
subsidiary, OTBV.110
Tax complications were not new to Odfjell.111 As early as 2021, Ernst & Young
evaluated the “tax implications of making distributions” from OTUS to the
Members.112 That year, Odfjell SE discovered two tax issues related to the structure
of OTBV and distributions.113 First, Odfjell learned that distributions to OTBV, the
prior Odfjell SE member of OTUS, would incur a 30% withholding tax, not 5%.114
Second, a sale of OTBV’s 51% membership interest in OTUS would likely trigger a
21% capital gains tax under the Foreign Investment in Real Property Tax Act
(“FIRPTA”), resulting in $40 to 50 million in tax liability.115 In November 2022,
Odfjell SE developed a restructuring plan to minimize taxes incurred in connection
with distributions or a sale of OTUS.116
110 Id. at 727:15–728:1, 882:9–11 (Lenning); JX-234.
111 See JX-77 at 6.
112 Id.
113 JX-670 at 4.
114 JX-1004 at 1.
115 JX-670 at 4–5; JX-1004 at 1.
116 JX-99 at 2; JX-670 at 6. The plan involved “establishing a Norwegian terminal holding company and transferring that holding company to OTBV, which would then contribute its OTUS interest to the Norwegian holding company, which would then contribute the OTUS interest to another newly formed Norwegian subsidiary[.]” JX670 at 5. The restructuring would reduce FIRPTA tax liability triggered by a sale and subject distributions to a 15% withholding rate, not 30%. Id.
15
The restructuring created a new problem.117 Sometime in late 2023, Odfjell
learned that any OTUS distribution during the restructuring would destroy the
restructuring’s cleansing of FIRPTA tax liability.118
The legal concerns posed real problems for Odfjell, but they also created an
opportunity, as Lenning recognized. Lenning offered “an extra ginger cookie” to
anyone who could identify how Odfjell could use the issue to their advantage.119 One
employee suggested using the issue to create timing pressure in negotiations with
Northleaf.120 The employee suggested giving Northleaf an “ultimatum” to “stir things
up and potentially accelerate their decision making—hopefully in [Odfjell’s] favor.”121
In January 2024, Lenning contacted Ramki to explain Odfjell’s concerns with
distributions. He followed up with an email on January 21, 2024.122 In the email,
Lenning explained the current situation, stating that “we understand that
distributions to OTBV would be taxed at a highly punitive rate of 30%. That would
obviously be a show-stopper with respect to receiving dividends from OTUS.”123 The
restructuring would halve the withholding tax rate, placing it “at a level where
117 JX-670 at 6.
118 Id. at 5–6; Dkt. 253, Ex. 1 at OTBV_00045471–73 (“We learnt early that it’s important that OTUS does not distribute any dividends in the three years preceding the restructuring as that would trigger US inversion rules. We recently learned that this also applies to a dividend distribution evenly to both owners based on ownership percentage (as no such dividend has been regularly paid).”).
119 Dkt. 253, Ex. 1 at OTBV_00045471.
120 Id. at OTBV_00045473.
121 Id.
122 JX-232.
123 Id. at 1.
16
[Odfjell is] able to be collaborative when it comes to distributions.” 124 Plus, it would
eliminate the $40 to 50 million capital gains overhang provided Odfjell did not sell its
OTUS stake within 12 months of the restructuring.125
Moreover, a 2024 distribution could trigger U.S. inversion tax rules that
disregard the restructuring (the “Inversion Tax Issue”).126 To avoid that, Odfjell SE
would have to wait 36 months after a distribution before executing a restructuring.127
And a 12-month standstill period would apply after that.128 A distribution would thus
prompt events that would “rule Odfjell out as a potential acquirer of Northleaf’s stake
in OTUS during this period, as it introduces a USD 40-45 [million] tax risk.”129
Lenning concluded that “[c]andidly that is not a position which Odfjell would like to
put itself in” and that the tax issue is “something that we need to resolve before we
can approve a distribution by OTUS.”130
Lenning’s tax advice was not certain. The analysis hinged on whether U.S. tax
authorities would view the restructuring as “related to” Project Clemens or a
distribution.131 Odfjell’s tax advisor recommended waiting on Project Clemens and a
124 Id.
125 Id. at 1–2.
126 Id. at 2.
127 Id.
128 Id.
129 Id.
130 Id.
131 Dkt. 253, Ex. 6 at OTBV_00045333.
17
distribution so the U.S. viewed the transactions as unrelated.132 The restructuring
would reduce Odfjell’s tax overhang provided that Odfjell did not condition either
transaction on the restructuring.133
Northleaf engaged its own tax advisor, Leo Burwick, to consider the Inversion
Tax Issue.134 Through February and March 2024, the firm met with Odfjell and their
tax advisor, Fried Frank.135 The firms disagreed on the gravity of the Inversion Tax
Issue.136 Based on advice from Leo Burwick, Northleaf came to believe that the
Inversion Tax Issue was “either curable or fictional.”137
H. Odfjell Applies “Gentle Force.”
Meanwhile, Odfjell continued to pursue Northleaf’s stake in OTUS.138 Lenning
revisited Odfjell’s initial $204 million offer with Ramki in November and December
of 2023.139 Northleaf maintained that the $204 million offer was “far too low.”140 In
132 Id.
133 Id. (“For example, the decision to pay the dividend should be made after the drop
down, and it should be demonstrated that the dividend was not contingent on the drop down occurring, and the drop down was not contingent on the subsequent dividend being paid. Likewise, negotiations relating to Clemens should begin after the drop down, and it should be demonstrated that Clemens was not contingent on the drop down occurring, and the drop down was not contingent on the subsequent Clemens transaction.”).
134 Trial Tr. at 1028:20–22 (Storrow); JX-757.
135 Trial Tr. at 345:4–7 (Ramki).
136 Id. at 344:10–16 (Ramki).
137 Id.
138 JX-195 at 3; JX-203 at 1.
139 Id.
140 JX-754 at 2.
18
a January 2024 email to Fotland, Lenning stated that Northleaf compared the offer
to a refinancing and dividend in 2024 followed by a sale in late 2024 or early 2025.141
Lenning also stated that the “LLC Agreement provides Odfjell with substantial
influence over a potential [Northleaf] sale process” due to Odfjell’s right of first
refusal, tag-along rights, and disqualified buyers clause.142
In 2024, Odfjell gently dialed up the pressure. Lenning shared a Project
Clemens presentation—dated February 7, 2024 and only a few weeks after Lenning’s
email to Ramki—with Fotland and Odfjell SE’s board.143 The presentation focused
on Project Clemens’ positioning in connection with a restructuring and
distributions.144
The presentation first acknowledged the planned refinancing, stating that
“Odfjell and Northleaf were jointly pursuing a refinancing of OTUS to allow for
dividend distributions in 1 H24.”145 It further stated that “certain tax considerations
relating to the envisaged restructuring . . . may cause Odfjell to change its stance on
near-term distributions from OTUS.”146 From there, a decision tree explains that
Odfjell’s “stance on distributions boils down to what we intend for Clemens and for
the terminal portfolio in the near and medium term[.]”147 If Odfjell pursues an
141 Id. at 2–3.
142 Id. at 3.
143 Trial Tr. at 898:19–899:8 (Lenning).
144 See JX-755.
145 Id. at 2.
146 Id. at 3.
147 Id. at 4.
19
acquisition, the presentation recommends executing a transaction before a
distribution and using “dividends/inversion as [a] ‘bargaining chip.’”148 The next slide
reinforced the recommendation.149 Executing Clemens meant “hold[ing] back on
distributions” and using “inversion issue and dividends as [a] ‘bargaining chip.’”150
The presentation recognized that Odfjell’s “right to ‘block’ dividends in OTUS
may be challenged” and “Northleaf could ‘strong arm’ a distribution, which would
likely put Odfjell at a disadvantaged position with respect to potential tax leakage,
as well as capital gain tax exposure (FIRPTA) and/or potentially acquiring OTUS in
the near/medium term[.]”151
Ultimately, Lenning believed that “using ‘gentle force’” could lead to a
transaction in the $215 and $225 million range.152
Timing was critical. Odfjell knew their “best chance [was] to provoke/simulate
a transaction now rather than to wait for Northleaf to run a sale process.”153
Preempting an auction allowed Odfjell to bring Northleaf down to a price range where
it could compete.154
148 Id.
Odfjell uses the terms “dividends” and “distributions” interchangeably in its communications.
149 See id. at 5.
150 Id.
151 Id. at 6.
152 Id. at 7.
153 Id.
154 See id.
20
The presentation did not mention excessive leverage as a factor to consider for
OTUS distributions.155 But an email exchange between Lenning and Laurence
Odfjell did.156 Responding to Laurence Odfjell’s inquiry on a high-leverage
refinancing, Lenning stated, “we from day 1 have pushed back on both leverage and
structure” and “less dividends should obviously also make Clemens a more attractive
alternative for Northleaf.”157
Then, in a prescient analysis, Lenning explained why he believed failing to
execute on Project Clemens and holding back on distributions would result in a “loselose scenario”:
If we deprive [Northleaf] of a meaningful dividend,
however, we are really throwing down the gauntlet; (i) we
have shown that we are not a contender that will meet
their price expectation on Clemens, (ii) we have signaled
that we would use our governance rights to ensure we end
up with a partner we like, (iii) we hurt their investment
performance . . . by strangling dividends and (iv) we make
OTUS less attractive for prospective buyers as it comes
with a JV partner who obstructs distributions.158
Lenning expanded on this email exchange at trial.159 On leverage, Lenning
explained that Odfjell and its parent company prefer low leverage because of the
cyclicality of their business.160 OTUS maintains leverage at approximately three
155 See id. at 1–11.
156 JX-248.
157 Id. at 1.
158 Id.; Trial Tr. at 732:7–733:10 (Lenning).
159 See Trial Tr. at 734:16–742:10 (Lenning).
160 Id. at 737:1–15 (Lenning).
21
times EBITDA, in line with industrially owned terminal companies.161 Lenning
acknowledged that Odfjell wanted a dividend but they did not want OTUS leverage
to exceed five times.162
The Odfjell SE board discussed the presentation on February 8, 2024.163
According to the board minutes, “Lenning commented that if we intend to proceed
with Project Clemens, then it will be unfortunate to proceed with dividends from
OTUS at this point.”164 Iversen stated, Odfjell has to “put the hand-break on the
dividend in order to first solve the items related to Project Clemens” and Odfjell wants
distributions to show its shareholders the holding company can generate cash.165
A March 21, 2024 presentation explained Odfjell’s financing strategy to the
Odfjell SE board.166 DNB, a Norwegian bank, could provide a $200 million bridge
loan.167 Then Odfjell SE could execute a “full refinancing of OTUS at 5x EBITDA.”168
The presentation also updated the Odfjell SE board on Project Clemens.169 It
stated that if Odfjell pursued Project Clemens, “the recommended approach is to hold
161 Id. at 737:16–738:7 (Lenning).
162 Id. at 737:3–8 (Lenning).
163 JX-252.
164 Id. at 5.
165 Id. at 6.
166 JX-709 at 1, 9.
167 Id. at 9.
168 Id.
169 Id. at 8.
22
back on distributions, actively pursue an agreement with Northleaf and use the
inversion issue and dividends as a bargaining chip.”170
Lenning met Storrow in March to discuss the buyout.171 At the meeting,
Lenning tried spinning the Inversion Tax Issue as a positive pressure point for
Northleaf.172 At trial, he explained: “I believed my stakeholders and my colleagues
understood that [the Inversion Tax Issue] was something we would have to solve. And
it was our problem, and that the acquisition was an elegant way of solving that
problem.”173
At this stage, Ramki wanted to involve senior leadership of Odfjell and
Northleaf.174 Lenning and Ramki arranged a meeting between Fotland and Storrow
for March 8, 2024.175 Lenning prepared call notes for Fotland.176 The notes covered
three areas: the Inversion Tax Issue, distributions, and an acquisition.177
Regarding distributions, the notes charted Odfjell’s evolving stance.178
Lenning stated that Odfjell’s appetite for distributions changed because their
shareholders already received dividends and Odfjell SE wanted to invest more in its
170 Id.
171 Trial Tr. at 749:10–750:12 (Lenning).
172 See id. (explaining that the tax issue could be a “blessing in disguise” because it
could convince Odfjell to pay a higher price).
173 Id. at 750:5–9 (Lenning).
174 Id. at 927:21–928:5 (Lenning).
175 Id.; see JX-756 at 2.
176 JX-756 at 2; JX-757.
177 JX-757.
178 Id. at 2–3.
23
terminals platform.179 And Odfjell uncovered the new Inversion Tax Issue associated
with the restructuring.180 As a result, their desire for distributions “is really only
about wanting to accommodate Northleaf” and “[w]ithout a way around the inversion
issue, [any distribution] is really a ‘no-go’ for [Odfjell][.]”181
On April 16, 2024, Ramki emailed Lenning with guidance on the valuation of
OTUS.182 Northleaf expected a buyer to value OTUS at 13 times forward EBITDA or
more.183
Lenning took this guidance back to the Odfjell SE board.184 The executive
summary presented at the May 7, 2024 meeting stated that “Northleaf has expressed
willingness to sell their share in [OTUS]. This is mainly due to our tax situation
which prevents dividends.”185 Odfjell SE management analyzed the different
responses Northleaf could take given “[t]ax issues inhibiting near-term
distributions.”186 Ultimately, Odfjell SE management recommended that Odfjell give
179 Id. at 3.
180 Id.
181 Id. at 3 (emphasis in original).
182 JX-305 at 2.
183 Id.
184 JX-711 at 70.
185 Id. at 3.
186 Id. at 74.
24
Northleaf the option between a standstill agreement and another buyout offer, this
time for $216 million.187 The Odfjell SE board approved this approach.188
On May 14, Lenning gave Northleaf the two options.189 Northleaf rejected
Odfjell’s $216 million offer because it believed a market-driven process would yield a
higher offer.190 But Northleaf wanted to explore the standstill agreement further.191
On August 14, 2024, Lenning sent a draft standstill agreement to Ramki.192
The agreement aimed to reduce OTUS’s leverage and stop distributions for 24
months.193 The Members never agreed on a standstill agreement.194
On September 8, Ramki followed up to provide Northleaf’s perspective on
leverage.195 Northleaf wanted the standstill to target 5.6x debt-to-EBITDA and a
minimum of 4.75x.196 Lenning pushed back.197 On September 13, he replied, “[a]
total leverage approaching 5 times EBITDA is already well above the levels Odfjell
normally would be comfortable with.”198 Their other terminal businesses have
187 Id. at 72, 76.
188 JX-305; JX-710 at 8–9; Trial Tr. at 746:24–747:17 (Lenning).
189 JX-305.
190 JX-312.
191 Id.; Trial Tr. at 374:17–375:1 (Ramki).
192 JX-323 at 1.
193 Trial Tr. at 381:19–382:4 (Ramki).
194 JX-342 at 1; JX-714 at 1.
195 JX-342 at 2.
196 Id.
197 Id. at 1.
198 Id.
25
between zero and three times leverage.199 At trial, Lenning emphasized that Odfjell
prefers a “strong balance sheet.”200 Lenning concluded that Odfjell and Northleaf
were “fundamentally misaligned” on leverage.201
I. Management Learns Of The Members’ Dispute.
Through the first half of 2024, management pursued the $350 million
refinancing.202 Initially, they expected the Board’s approval if they procured terms
in line with their initial discussions at the November 2023 board meeting. 203 White
contacted “commercial banks, as well as . . . longer term [] debt investors, like
insurance companies, [and] private capital credit funds.”204 Those meetings
considered a $350 million refinancing.205 Midway through the year, however,
management learned that Odfjell opposed the refinancing and distributions.206
White believed the Inversion Tax Issue caused Odfjell to change positions.207
White stated Odfjell was “very open to [distributions] towards the beginning of the
year” and, “then they notified us that they had some tax issue, tax inversion issue
199 Id.
200 Trial Tr. at 737:10–738:10 (Lenning).
201 JX-342 at 1.
202 See Trial Tr. at 184:5–19 (White).
203 Id. at 34:17–24 (Blanchard).
204 Id. at 180:22–181:3 (White).
205 Id. at 181:4–7 (White).
206 Id. at 39:10–17 (Blanchard); id. at 184:5–11 (White).
207 Id. at 184:20–185:3 (White).
26
that they needed to deal with, which would require them to potentially
restructure.”208
Blanchard’s testimony supports White.209 When asked why Odfjell changed its
mind, he said, “my recollection was it was related to some tax issues that [Odfjell]
had, and they did not want to go down the road of that full refinancing with a
leveraged distribution.”210
J. Northleaf Declares Default.
On September 23, 2024, Northleaf shared with Odfjell three options to resolve
their dispute over the refinancing and distribution.211 First, Odfjell could buy out
Northleaf for $275 million.212 Second, Northleaf offered to enter into a standstill
agreement committing to either 5.6x debt-to-EBITDA or if that is too high, then 5.0x
with distributions as part of the original refinancing.213 Third, if the first two options
failed, Northleaf would send a notice of default under the LLC Agreement.214
Northleaf and Odfjell remained far apart on the standstill, so they continued
negotiating a buyout.215 Fotland increased Odfjell’s offer to $235 million,216 but
208 Id. at 185:24–186:7 (White).
209 See id. at 39:22–40:3 (Blanchard).
210 Id.
211 JX-353 at 1.
212 Id.
213 Id.
214 Id.
215 JX-356 at 2.
216 Trial Tr. at 1047:21–1048:3 (Storrow); id. at 433:19–21 (Ramki); id. at 744:6–9
(Lenning); JX-356 at 2.
27
Storrow wanted an offer near $260 million217 and viewed $235 million as “just too
low.”218 Storrow viewed the valuation gap as too wide.219 Storrow believed that it
was time to “get legal.”220
On October 8, 2024, Northleaf sent a notice of default to Odfjell (the “October
8 Notice”) under Section 12.2 of the LLC Agreement demanding that Odfjell “cure its
material breaches.”221
The October 8 Notice accused Odfjell of breaching two provisions of the LLC
Agreement: Section 5.1(a) obligating the Board to distribute Available Cash, and
6.1(c) binding Members to Board decisions.222 Both Sections 5.1(a) and 6.1(c) are
quoted in the Legal Analysis.
For present purposes, it suffices to note that Northleaf based its claim of breach
under Section 5.1(a) on the premise that “the Company has millions of dollars of
Available Cash to distribute to the Members, which OTBV has caused the Company
to not distribute[.]”223 And Northleaf based its claim under Section 6.1(c) on the
premise that “the Board unanimously approved the 2024 Budget of the Company
requiring the Company to seek a $350-million refinancing of the Company’s existing
217 JX-395 at 1.
218 JX-395 at 1; see also Trial Tr. at 1072:7–12 (Storrow).
219 JX-395 at 1.
220 Id.
221 JX-433.
222 Id. at 1.
223 Id.
28
credit facility and make certain distributions to the Members thereafter.”224
Northleaf argued that the Board’s decision binds Odfjell, and that Odfjell breached
the LLC Agreement by “caus[ing] the Company to make no effort to secure the
required refinancing despite such Board approval[.]”225
K. Odfjell Responds To Northleaf’s Notice Of Default.
Odfjell responded to the October 8 Notice through its counsel, Fried Frank, on
October 15, 2024 (the “October 15 Letter”).226 The letter raised three points.
First, Odfjell denied Northleaf’s assertion that the Company “has millions of
dollars of Available Cash to distribute to the members[.]”227 It stated that the “mere
presence of cash on the Company’s balance sheet does not mean there is Available
Cash within the meaning of the [LLC Agreement].”228 Odfjell argued that the LLC
Agreement requires that the Board make a determination of Available Cash, which
the Board never made.229 Odfjell also reiterated that “the Company’s largest debt
obligations mature in March 2025,” and “Northleaf categorically refused to consent
to a simple amendment and extension of the Company’s existing credit facilities, even
on an interim basis, creating a potentially devastating liquidity crunch for the
224 Id.
225 Id.
226 JX-453.
227 Id. at 1.
228 Id.
229 Id.
29
Company . . . .”230 For this reason, “the Company requires all available cash resources
on hand[.]”231
Second, Odfjell questioned Northleaf’s assertion that the Board “unanimously
approved the 2024 Budget of the Company requiring the Company to seek a $350
million refinancing of the Company’s existing credit facilities and make certain
distributions to the Members thereafter.”232 Odfjell questioned whether the
December 12 Written Consent was ever finalized, and noted that it does not contain
any “agreement or approval by the Board to execute any refinancing agreements or
to make any specific distributions in any specific amounts over any specific period of
time.”233 Odfjell further noted that “the mere approval of the 2024 Budget, which
does not include any specific line items for a larger credit facility, specific terms and
conditions of that facility, or any specific distributions, in no way committed the
Company to take on substantial additional debt to fund distributions or to pay specific
distributions to the Members as part of a refinancing.”234 The letter detailed Odfjell’s
concerns over “increasing the Company’s leverage solely to fund a distribution,” and
noted “the adverse tax consequence to OTBV of such a transaction.”235
230 Id. at 1–2.
231 Id. at 2 (emphasis in original).
232 Id.
233 Id.
234 Id.
235 Id. at 3.
30
Finally, Odfjell directed Northleaf to the dispute resolution provisions in the
LLC Agreement and stated that, if the parties could not agree, Odfjell would petition
this court for a custodian to break the deadlock.236
L. The Board Holds An Emergency Meeting.
OTUS’s existing credit facilities were set to expire on March 18, 2025.237 On
October 14, 2024, just days after sending the October 8 Letter, Lenning called an
emergency Board meeting to consider an amend-and-extend credit facility and avoid
a “potentially devastating liquidity crunch.”238
In response, Ramki offered two more resolutions for the Board to consider:
(1) secure a $350 million refinancing and (2) make a $3 million distribution to the
Members “on or before October 31, 2024 as Available Cash.”239
Lenning replied, reiterating Odfjell’s position on Available Cash.240 He stated
that “[t]he mere presence of cash on the balance sheet does not equate to Available
Cash under the [LLC Agreement]” and “[a]s [OTUS] is facing a maturity wall in
March 2025, and we have not secured any refinancing of the existing debt . . . all cash
on hand must be preserved.”241
236 Id.
237 Trial Tr. at 113:12–15 (Blanchard); JX-468 at 2.
238 JX-455 at 3.
239 Id. at 2–3.
240 Id. at 1.
241 Id.
31
The Members held the emergency meeting on October 16, 2024, but they did
not vote on the three resolutions.242 The Board would reconvene on those items on
November 19, 2024.243
M. Management Requests Guidance On Refinancing.
Meanwhile, Company CEO Blanchard emailed a letter to the Board on October
20, 2024, seeking guidance regarding the refinancing.244 He wrote:
The Company’s 2024 Budget contemplates a $350-million
refinancing of the current credit facility and that
refinancing has been set as a performance goal to complete
for certain executives of the Company in 2024. However,
after we started working on a potential refinancing earlier
this year, [Northleaf] and [Odfjell] Managers instructed us
to put that work on hold until we receive direction from the
Board. As you know, to date, we have not yet received clear
direction from the Board with respect to the refinancing.
After reviewing [the October 8 Notice] and [the October 15
Letter], and based on recent discussions with [Northleaf]
and [Odfjell] Managers, it still remains unclear what
direction the Board would like the Company to take with
respect to the current credit facility.245
He explained that he was “deeply concerned about [OTUS’s] ability to address
the current credit facility in a reasonable time period.”246 As a path forward, he
proposed two options: (1) an amend-and-extend that would take approximately eight
242 JX-521 at 2.
243 Id. at 3.
244 JX-468.
245 Id. at 2.
246 Id.
32
weeks and (2) a refinancing that would require “substantially more lead time and a
credit rating, which will take more . . . time and resources to complete.”247
Lenning replied all the next day, informing him that “the Board is actively
discussing the Company’s upcoming debt maturity and the available alternatives”
and that everyone “recognize[d] the time-sensitive nature of this matter[.]”248
Lenning also requested “indicative terms for what [Blanchard] described as option
(1): ‘amend & extend the current credit facility (i) at the current headline size of $250
million.’”249
Two days later, Ramki replied all, stating that Northleaf “is supportive of
management reaching out to the existing lenders to understand the terms for an
amend and extend.”250 But he accused Odfjell of unilaterally directing management
to depart from the 2024 budget, which contemplated the $350 million refinancing.251
He added that a refinancing process should only take six weeks based on prior
discussions with Odfjell’s bank.252
With management still on the email thread, Lenning escalated the
disagreement further, accusing Northleaf of holding OTUS “hostage in the face of an
impending debt maturity.”253
247 Id. at 2–3.
248 JX-485 at 4.
249 Id. at 4.
250 Id. at 3.
251 Id. at 3–4.
252 Id. at 3.
253 Id. at 2.
33
Blanchard responded on October 28, 2024, stating that management would
obtain “indicative terms, timeline and process” for both the amend-and-extend and
the $350 million refinancing option ahead of a November 2024 board meeting.254 And
Blanchard moved the Board meeting to Baker Botts because he did not want
employees hearing “disruptions or loud discussions[.]”255
N. The Parties Clash At A November 19 Board Meeting.
During the November 19, 2024 Board meeting, Odfjell proposed the amendand-extend, and Northleaf continued to press for the $350 million refinancing with a
$3 million distribution.256 Each side voted against the other’s resolution.257 Northleaf
voted against the amend-and-extend.258 And Odfjell voted against the refinancing
and $3 million distribution resolutions.259
Odfjell and Northleaf also did not approve a 2025 budget. The Board working
group had not performed its typical diligence to prepare a 2025 budget. 260 Northleaf
refused to approve a budget if OTUS did not have the same leverage and distribution
levels as contemplated during the November 2024 Board meeting.261
254 Id. at 7.
255 Trial Tr. at 49:2–18 (Blanchard).
256 JX-521 at 3–4.
257 Id.; Trial Tr. at 418:1–22 (Ramki).
258 JX-521 at 4.
259 Id. at 3–4.
260 Trial Tr. at 399:9–17 (Ramki).
261 JX-1017 at 68; Trial Tr. at 131:17–132:1 (Blanchard).
34
O. Mediation Fails.
The Members engaged in mediation on December 20, 2024.262 The mediation
failed. According to Storrow, “the mediation was a total waste of time.” 263 The
Members remained at an impasse over a buyout.264 And they could not make progress
on anything else.265
P. Northleaf Initiates This Litigation.
Northleaf initiated this action on December 23, 2024, seeking judicial
dissolution and claiming breach of the LLC Agreement.266 The same day, Odfjell
initiated an action in this court against Northleaf alleging breach of the LLC
Agreement’s implied covenant of good faith and fair dealing and seeking the
appointment of a limited-purpose custodian to resolve the parties’ dispute over
financing.267 Northleaf then narrowed its claims to a single count for judicial
dissolution.268 Both parties moved to expedite their claims.269
The court granted expedition during a January 17, 2025 hearing.270 The court,
however, suggested appointing a custodian given the challenge of reaching a
262 PTO ¶ 63.
263 JX-1032 at 1.
264 Trial Tr. at 1074:3–1075:17 (Storrow).
265 JX-1032 at 1.
266 Dkt. 1.
267 PTO ¶¶ 5–6.
268 Dkts. 17, 18.
269 PTO ¶¶ 2, 5.
270 Id. ¶ 10.
35
refinancing decision before March 18, the expiration of OTUS’s then-current credit
facility.271
On January 31, the court appointed former Vice Chancellor Joseph R. Slights
III (the “Custodian”) as a custodian to address the Members’ dispute over
refinancing.272 He did a great job. The Custodian directed management to enter into
an amended credit facility.273 Management complied.274
Expedited litigation ensued. The court entered the parties’ jointly proposed
order governing the case schedule for both actions, which set trial for August 5 and
6, 2025.275 Meanwhile, on March 13, Odfjell supplemented its complaint276 and
moved for summary judgment.277 Northleaf moved to dismiss Odfjell’s complaint and
filed its second amended complaint, reviving its prior breach of contract and
declaratory judgment claims.278
271 Id.
272 JX-616.
273 PTO ¶ 12.
274 Id. ¶ 17.
275 Id. ¶ 19.
276 Id. ¶ 14.
277 Id. ¶ 18.
278 Id. ¶ 16, 18.
36
On June 25, the court granted Northleaf’s motion to dismiss Odfjell’s
supplemental complaint and denied Odfjell’s motion for summary judgment.279 The
court also denied Odfjell’s motion to dismiss the second amended complaint.280
Northleaf continued amending its complaint.281 In its operative form,
Northleaf’s complaint contains five counts:
• In Count I, Northleaf seeks judicial dissolution of the Company under
Section 18-802 of the Delaware LLC Act, asserting that it is no longer
reasonably practicable to operate OTUS under the LLC Agreement;
• In Count II, Northleaf claims that Odfjell breached Section 5.1(a) of the
LLC Agreement because it blocked OTUS from distributing Available
Cash;
• In Count III, Northleaf claims that Odfjell breached Section 6.1(c) of the
LLC Agreement because it blocked OTUS, its managers, and employees
from securing the required financing contemplated under the 2024
budget;
• In Count IV, Northleaf claims that Odfjell breached the implied
covenant of good faith and fair dealing when it pursued Project Clemens
and sought to force Northleaf to sell its 49% interest in OTUS; and
• In Count V, Northleaf seeks a declaration that (i) Odfjell has defaulted
on its obligations under the LLC Agreement; (ii) Odfjell failed to cure its
defaults within 60 days; and (iii) Northleaf now has the right to issue a
“Call Notice” and buy out Odfjell’s stake in OTUS at a price equal to 85%
of the “Fair Market Value” as described in the LLC Agreement.282
279 Id. ¶ 20.
280 Id. ¶ 21.
281 Dkt. 188 (“Third Am. Compl.”).
282 Third Am. Compl. ¶¶ 67–115; LLC Agreement §§ 2.1, 12.4. Odfjell moved to dismiss Northleaf’s operative complaint. Odfjell argued that Count I failed for lack of subject matter jurisdiction under Court of Chancery Rule 12(b)(1) because Section 3.12(c) of the LLC Agreement bars dissolution claims. Dkt. 199 at 1. Odfjell also moved to dismiss Count IV under Court of Chancery Rule 12(b)(6). Id. at 2. Odfjell deferred argument on its motion to trial and post-trial briefing under Court of Chancery Rule 12(i). Id.
37
The court rescheduled and held trial on September 2 through 5, 2025.283 The
parties completed post-trial briefing on November 19, and the court held post-trial
argument on December 15, 2025.284
Motion practice continued post-trial. Northleaf moved to compel Odfjell to
produce documents related to the Inversion Tax Issue.285 The court granted the
motion.286 In response, Odfjell moved for a declaration that the trial record was closed
or in the alternative, an order compelling reciprocal production.287 The court denied
the motion after reviewing the reciprocal documents in camera.288 The parties
completed supplemental briefing on the documents produced under Northleaf’s initial
motion to compel on April 15, 2026.289 The trial record closed five days later.290
Q. OTUS’s Recent Operations
Because this case involves dissolution, it is important to reflect on OTUS’s
recent operations.
283 Dkt. 192.
284 Dkts. 225, 227. That cold winter day, the Leonard L. Williams Justice Center lost heat and experienced mild flooding because of the subsequent pipe leaks. Dkt. 230. Post-trial oral argument took place at the office of Young Conaway, located at 1000 North King Street, Wilmington, Delaware 19801. Id. The court appreciates the parties’ flexibility.
285 Dkt. 208.
286 Dkt. 238.
287 Dkt. 240.
288 Dkt. 250.
289 Dkt. 258.
290 Dkt. 261.
38
On February 11, the Custodian supported a one-year extension of the credit
facility with the option of an additional year.291 He also supported increasing the
distribution limits under the credit facility.292
Management, however, needed a Board-approved budget to execute the
refinancing.293 Northleaf refused to approve any budget that did not contain the same
leverage levels and distributions as in 2024.294 To compromise, the Board approved
a “Management Plan.”295 Functionally, the Management Plan operates as a shortterm budget.296 It gave management a plan for 2025 EBITDA and capital
expenditures.297 But it did not address any major financing issues or long-term
plans.298
With the Management Plan in place, OTUS refinanced its credit facility.299 On
October 28, 2025, the Custodian ordered OTUS to execute the additional one-year
extension, securing financing until March 2027.300
291 JX-629 at 2, 7.
292 Id. at 8.
293 JX-1017 at 67.
294 Id. at 68.
295 JX-634 at 20–25.
296 Trial Tr. at 129:18–130:7 (Blanchard).
297 Id.
298 Id. at 404:1–3 (Ramki).
299 JX-640.
300 Dkt. 221, Ex. A at 8.
39
On April 1, 2025, Lenning suggested a distribution because OTUS no longer
“fac[ed] an immediate maturity wall.”301 The suggestion, however, devolved into
further argument over the definition of Available Cash and accusations of
manufacturing evidence for the Members’ litigation.302 As part of the discussion,
White showed the Board the impact of a distribution on OTUS’s cash and debt
balances.303 Eventually, the Members agreed on a $17.8 million distribution without
agreeing on what Available Cash means.304 The Board formally approved the
distribution on July 24, 2025.305
At trial, Lenning stated the Board planned to make another distribution of
“$2.2 million at the end of [2025].”306
According to OTUS management, the Members’ dispute has had a limited
impact on daily operations. Blanchard testified that OTUS’s departments still work
together,307 it has maintained its relationships with its banks,308 and employee
turnover remains normal.309 Further, at the time of trial OTUS was considering
301 JX-1018 at 4–5.
302 See id. at 1–3.
303 JX-659 at 2–3.
304 Id. at 1.
305 JX-1028.
306 Trial Tr. at 766:16–21 (Lenning).
307 Id. at 118:3–10 (Blanchard).
308 Id. at 55:5–13 (Blanchard).
309 Id. at 66:18–67:2 (Blanchard).
40
building a new tank at its Charleston terminal.310 White, however, acknowledged
that the Members disagree on compensation for key personnel.311
The Members’ disagreement has harmed long-term planning. In March 2025,
Blanchard wrote Lenning and Ramki explaining the “shareholder misalignment
eliminates our ability to talk through how we manage long term strategic aspects of
the business (Refinancing, long term investment, cash on [balance sheet]—
distribution/leverage/investment, M&A, etc).”312 Blanchard proposed cancelling the
Board’s annual strategy session in 2025.313 At trial, Blanchard testified that the
disagreement between Northleaf and Odfjell “has a huge impact on the long-term
strategy,” because “I don’t know where this business is going to be in a year.”314
Again, White’s testimony tracks Blanchard’s. White stated the Members’ dispute has
impacted management of strategic initiatives.315 But the dispute has had a lesser
impact on day-to-day operations.316
Thus, since this litigation began, OTUS has renewed its credit facility twice,
distributed $17.8 million to the Members, and continued to operate its terminals
business. The Members’ dispute has affected long-term planning but has not
impacted day-to-day operations.
310 Id. at 68:12–21 (Blanchard).
311 Id. at 261:7–24 (White).
312 JX-649 at 4.
313 Id.
314 Trial Tr. at 61:16–62:12 (Blanchard).
315 Id. at 199:4–8 (White).
316 Id.
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II. LEGAL ANALYSIS
Northleaf claims that Odfjell breached Sections 5.1(a) and 6.1(c) of the LLC
Agreement and the implied covenant of good faith and fair dealing. Northleaf also
claims that it is entitled to an order of judicial dissolution because the Members’
dispute renders them deadlocked, making it no longer reasonably practicable to
operate OTUS in conformity with the LLC Agreement. This analysis has two parts.
Part A addresses whether Odfjell breached any express or implied term of the LLC
Agreement. Part B addresses Northleaf’s claim for judicial dissolution.
A. Breach Of The LLC Agreement
The LLC Agreement provides that, upon a finding of “Breach,” a nondefaulting member may issue a call notice to purchase the defaulting member’s units
for 85% of the Fair Market Value.317 Section 12.1 of the LLC Agreement defines
“Breach” as a “material breach of any of [a Member’s] obligations under [the LLC
317 LLC Agreement § 12.4 (providing that “In the event that a final, non-appeallable
order of a court of competent jurisdiction determines that a Breach has occurred (and has not been fully remedied within 60 days of delivery of the Default Notice applicable to such Breach), the Non-Defaulting Member shall . . . be entitled to exercise, upon written notice to the Defaulting Member (the “Call Notice”) . . . such Non-Defaulting Member’s election to purchase all (but not less than all) of the Units held by the Defaulting Member for a cash purchase price equal to 85% of Fair Market Value of such Units (the “Call Price”, and such Units, the “Called Units”). The Defaulting Member shall be obligated to sell, assign, convey and deliver the Units held by such Person to the applicable Non-Defaulting Member (for the Call Price), free and clear of liens and other encumbrances, following the FMV Call Determination; provided that the Non-Defaulting Member shall not be obligated to consummate the purchase of the Called Units earlier than the date that is fifteen (15) Business Days following the FMV Call Determination. The Fair Market Value of such Called Units shall be determined in accordance with Section 12.5.”).
42
Agreement]” that the Member does not remedy “within 60 days.”318 A breach by
Odfjell triggers Northleaf’s call right under the LLC Agreement’s Section 12.4. The
call right entitles Northleaf to purchase Odfjell’s interest in OTUS at 85% of Fair
Market Value.319
Northleaf claims that Odfjell breached Section 5.1(a) by failing to distribute
Available Cash, Section 6.1(c) by obstructing binding Board decisions, and the
implied covenant of good faith and fair dealing by pursuing Project Clemens.
Northleaf further claims each breach constituted a Breach under Section 12.1
triggering Northleaf’s call rights under Section 12.4.
“The first step when analyzing a case involving the internal affairs of an LLC
is . . . to examine the LLC agreement to determine whether it addresses the issue. If
the agreement covers the issue, the agreement controls.”320 The LLC Agreement is
governed by Delaware law, so Delaware’s principles of contract interpretation
apply.321 Delaware courts follow the objective theory of contracts, giving words “their
plain meaning unless it appears that the parties intended a special meaning.”322 In
practice, the objective theory of contracts requires that a court “give priority to the
318 Id. § 12.1.
319 Id. § 12.4.
320 Holifield v. XRI Inv. Hldgs. LLC, 304 A.3d 896, 923 (Del. 2023) (quoting In re
Coinmint, LLC, 261 A.3d 867, 900–01 (Del. Ch. 2021)).
321 LLC Agreement § 15.6.
322 Allen v. Encore Energy P’rs, L.P., 72 A.3d 93, 104 (Del. 2013) (citing AT&T Corp.
v. Lillis, 953 A.2d 241, 252 (Del. 2008)).
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parties’ intentions as reflected in the four corners of the agreement, construing the
agreement as a whole and giving effect to all its provisions.”323
Applying these principles, Odfjell did not breach the LLC Agreement in any of
the three ways Northleaf claims. Counts II, III, and IV thus fail. Count V for
declaratory relief based on the three predicate Counts also fails.
1. Available Cash Distributions
Section 5.1(a) states that “[t]he Board shall cause the Company to distribute
Available Cash with respect to a given Fiscal Quarter promptly following the
conclusion thereof.” 324 Under the LLC Agreement, “Available Cash” means:
as of any date of determination with respect to cash
distributions to be made to the Members as determined by
the Board, the following, without duplication: (a) all cash
and cash equivalents of the Company from any and all
sources as of the time of such determination less (b) as of
the time of such determination, the portion thereof, as
determined by the Board in good faith, which will be used
to pay or establish appropriate reserves for all Company
expenses and costs, including, without limitation, in
respect of Company indebtedness or which are
contemplated by the Initial Budget or any then-applicable
Budget or the Business Plan.325
Latching on to the “shall cause” language of Section 5.1(a), and the “good faith”
requirement of the definition of “Available Cash,” Northleaf argues that Odfjell
breached Section 5.1(a) because it did not cause the Company to make quarterly
323 In re Viking Pump, Inc., 148 A.3d 633, 648 (Del. 2016) (quoting Salamone v.
Gorman, 106 A.3d 354, 368 (Del. 2014)).
324 LLC Agreement § 5.1(a) (emphasis added).
325 Id. § 2.1, “Available Cash” (emphasis added).
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distributions and instead blocked them.326 According to Northleaf, the Company had
millions of Available Cash in early 2024. The Board was obligated to cause quarterly
distributions of Available Cash.327 But Odfjell knew that “strangling dividends”
would be “highly value destructive” to Northleaf and would cause Northleaf to sell its
interest at a “gentle force” discount.328 So Odfjell implemented its “no dividend” plan
in bad faith to further Project Clemens.329
There are many problems with Northleaf’s argument. The first is that the
existence of Available Cash requires a Board determination. By referencing a Board
“determination” three times, the definition of Available Cash reflects that
distributions come after a Board determination. And determining Available Cash
requires that the Board consider many factors. As Ramki acknowledged at trial,
determining “Available Cash” is “not a . . . straight calculation. It’s not pluses and
minuses” left to management.330 Rather, calculating “Available Cash” involves
“judgment calls” made by the Board.331
Northleaf’s complaint regarding distributions spans a period beginning “[i]n
early 2024.”332 For most of the period, however, there was no Board meeting nor
326 Dkt. 214 (“Northleaf’s Post-Trial Opening Br.”) at 51–53.
327 Trial Tr. at 911:5–14 (Lenning) (admitting that “shall cause” is mandatory).
328 JX-248 at 1; JX-755 at 7.
329 Dkt. 225 (“Northleaf’s Post-Trial Reply Br.”) at 21.
330 Trial Tr. at 484:22–485:7 (Ramki).
331 Id.
332 See, e.g., Northleaf’s Post-Trial Opening Br. at 52.
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Board determination on Available Cash. Because there was no Board determination
on Available Cash, Odfjell did not breach any obligation to distribute Available Cash.
Northleaf’s Board members could have forced a determination. Northleaf
argues that they did not do so because it would have been futile, and Delaware law
does not require that directors engage in futile acts.333 Effectively, Northleaf argues
that they did not need to call a vote because Odfjell would not have made a
determination in the best interest of OTUS. But forcing the issue would have forced
the discussion. Had Odfjell voted against distributions, they would have had to state
why. Because there was no discussion, there is no certainty as to what Odfjell would
have done or why they would have done it.
Northleaf also argues that it impliedly forced a Board determination on
Available Cash at the November 2024 Board meeting. But even then, Northleaf’s
proposed resolution was elliptically worded. Northleaf did not propose that the Board
determine the amount of Available Cash. Rather, Northleaf proposed that the Board
direct management to secure a $350 million refinancing and distribute $3 million to
the Members “as Available Cash.”334
Even if the Board’s November 2024 vote on Northleaf’s proposed resolution
served as a determination of Available Cash, Northleaf has not proven that Odfjell
breached Section 5.1(a) by voting against the resolution. Northleaf argues that OTUS
had plenty of cash on the books, citing a document prepared by management
333 Id. at 52–53 (citing Ford v. VMware, Inc., 2017 WL 1684089, at *13 (Del. Ch. May
2, 2017) (“Delaware law does not require that directors engage in futile acts.”)). 334 JX-521 at 2.
46
reflecting Available Cash.335 But that document assumed an extension of the existing
debt that Northleaf was then blocking.336 And Odfjell voted against distributions
because it was not certain that OTUS would extend its current debt, and Odfjell
wanted to reserve the Company’s cash in the event it defaulted on the debt facility in
March 2025.337
Northleaf denies that Odfjell had a legitimate fear of default—Odfjell
understood that the Company could fully refinance if needed in six weeks.338 Rather,
Odfjell took the position because cutting off distributions served its goal under Project
Clemens to force Northleaf into selling on the cheap. But Odfjell had no way of
knowing that Northleaf would back down and agree to extend OTUS’s existing credit
facility.339 In fact, the parties did not execute an amended credit facility until March
14, 2025, four days before default.340
Beneath Northleaf’s claim regarding Available Cash is its position that the
parties always intended leveraged distributions. Northleaf argues that the LLC
Agreement endorsed leveraged distributions by including in the definition of
Available Cash “all cash and cash equivalents of the Company from any and all
335 Northleaf’s Post-Trial Opening Br. at 52 (citing JX-1061).
336 JX-1061 (“The analysis assumes . . . an amend and extend refinancing in Q4
[2024]”).
337 JX-453 at 2; JX-521 at 3–4.
338 Trial Tr. at 868:23–869:5 (Lenning); JX-258 at 9.
DNB’s illustrative refinancing
timeline, however, acknowledged that credit approvals may take up to three to four additional weeks for new banks. Id.
339 JX-337 at 1; JX-448 at 1; Trial Tr. at 53:5–1, 125:22–24 (Blanchard).
340 JX-640; Trial Tr. at 125:4–10 (Blanchard).
47
sources.”341 But the LLC Agreement deducts from Available Cash amounts “used to
pay or establish appropriate reserves . . . in respect of Company indebtedness.”342
Northleaf also argues that Odfjell historically indicated its agreement to leveraged
distributions. But at trial, Odfjell witnesses credibly testified Odfjell SE had
historically taken a conservative stance towards leverage, preferring a “strong
balance sheet.”343 As Lenning said, “from day 1” Odfjell has pushed back on
leverage.344 When negotiating the standstill agreement, Lenning stated, “[a] total
leverage approaching 5 times EBITDA is already well above the levels Odfjell
normally would be comfortable with.”345 Lenning testified that Odfjell prefers assets
with low leverage to weather the inevitable downturns in the cyclical terminals
business.346
Ultimately, the Board had an obligation to determine Available Cash in good
faith. The LLC Agreement defines “good faith” as “the reasonable belief that a
determination, action or omission is in the best interests of the Company.”347 Odfjell
may have had additional motivations for voting against distributions related to
341 LLC Agreement § 5.1 (emphasis added); Northleaf’s Post-Trial Opening Br. at 51; see also JX-76 at 8–11 (discussing “$70M of distribution to shareholders through 2025, starting in 2022” and “Debt funding options to increase leverage . . . to support distributions and growth”).
342 LLC Agreement § 2.1, “Available Cash.”
343 Trial Tr. at 737:3–15 (Lenning).
344 JX-248 at 1.
345 JX-342 at 1.
346 Trial Tr. at 737:10–738:14 (Lenning).
347 LLC Agreement § 15.16.
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Project Clemens. But on the issue of good faith, the nature of a leveraged distribution
works against Northleaf. Borrowing money to pay distributions does not benefit the
Company itself. It benefits its owners.348 Thus, declining leveraged distributions did
not breach any good faith obligation of Odfjell to the Company.
Odfjell did not breach Section 5.1(a) of the LLC Agreement.
2. Binding Board Decisions
Section 6.1(c) of the LLC Agreement provides: “[d]ecisions or actions taken by
the Board in accordance with the provisions of this Agreement shall constitute
decisions or actions by the Company and shall be binding on each Member . . . .”349
Plaintiff argues Odfjell breached Section 6.1(c) by disavowing the 2024 budget
and “obstructing” management from seeking refinancing terms.350 Each argument
rests on a faulty factual proposition.
Odfjell did not disavow anything. Northleaf bases this claim on the October 15
Letter. In that letter, Odfjell challenged Northleaf’s assertion that the Board
“unanimously approved the 2024 Budget of the Company requiring the Company to
seek a $350 million refinancing of the Company’s existing credit facilities and make
348 See In re Appleseed’s Intermediate Hldgs., LLC, 470 B.R. 289, 294, 303 (D. Del.
2012) (“[T]he [leveraged] dividend, by definition, provided no substantial benefit to the corporation, but instead benefitted the shareholders . . . Defendants appropriated a large portion of the funds for themselves while returning no value to the corporation.”).
349 LLC Agreement § 6.1(c).
350 Northleaf’s Post-Trial Opening Br. at 54 (citing Trial Tr. at 168:6–169:5, 188:4–
189:1 (White); id. at 52:11–18 (Blanchard)).
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certain distributions to the Members thereafter” in two ways.351 Odfjell first
questioned whether the December 12 Written Consent was fully executed and further
questioned whether the Board approved a $350 million refinancing with
distributions. As discussed above, the Board approved the 2024 budget by written
consent.352 The written consent instructed the “officers and employees . . . to do all
such acts as may be necessary to carry out the deeds intended in the budget.”353 And
the 2024 budget considered a $350 million refinancing. 354 But it did not require or
approve one. Nor did the Board’s approval of the 2024 budget commit the Company
to take on substantial additional debt to fund distributions or to pay specific
distributions to the Members as part of a refinancing. The letter does not constitute
a breach of Section 6.2.
Odfjell did not “obstruct” management in any event. Both Blanchard and
White testified that management worked on the refinancing as the 2024 budget
contemplated.355 They further testified that they decided to stop work due to Odfjell’s
Inversion Tax Issue. Because the budget did not require them to execute a
refinancing, pausing pursuit of the financing does not evidence Odfjell’s breach of
Section 6.1(a). Northleaf cites Lenning’s response to Blanchard’s request for
351 JX-453 at 2.
352 See supra Section I.D.
353 JX-266 at 2.
354 See JX-189 at 1, 3, 8, 39, 43.
355 Trial Tr. at 168:6–169:5, 188:4–189:1 (White); id. at 52:11–18 (Blanchard).
50
refinancing guidance as evidence of interference.356 But Lenning only requested
“indicative terms for what [Blanchard] described as option (1): ‘amend & extend the
current credit facility (i) at the current headline size of $250 million.’”357 And in a
follow-up email, Ramki stated Northleaf “is supportive of management reaching out
to the existing lenders to understand the terms for an amend and extend.” 358 If
anything, both Members agreed on management’s pursuit of a potential amend-andextend.
Odfjell did not breach Section 6.1(a) of the LLC Agreement.
3. Implied Covenant
“The implied covenant of good faith and fair dealing inheres in every contract
and ensures that neither party acts arbitrarily or unreasonably to frustrate the fruits
of their bargain.”359 “It authorizes a court to imply terms only ‘where obligations can
be understood from the text of a written agreement but have nevertheless been
omitted in the literal sense,’ and only to protect the ‘reasonable expectations’ that the
parties shared at signing.”360 Delaware courts will not use the covenant to “rewrite
the contract to appease a party who later wishes to rewrite a contract [it] now believes
to have been a bad deal.”361 “Rather, the covenant is a narrow gap-filling tool of last
356 Northleaf’s Post-Trial Opening Br. at 54 (citing JX-484).
357 JX-485 at 4.
358 Id. at 3.
359 Johnson & Johnson v. Fortis Advisors LLC, 352 A.3d 229, 253 (Del. 2026).
360 Id. (quoting Cincinnati SMSA Ltd. P’ship v. Cincinnati Bell Cellular Sys. Co., 708
A.2d 989, 992 (Del. 1998)).
361 Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010).
51
resort.”362 The key inquiry is “whether it is clear from what was expressly agreed
upon that the parties who negotiated the express terms of the contract would have
agreed to proscribe the act later complained of as a breach of the implied covenant of
good faith—had they thought to negotiate with respect to that matter.”363
Northleaf claims that Odfjell breached the covenant of good faith and fair
dealing implied in the LLC Agreement by pursuing Project Clemens. 364 Northleaf
argues that Project Clemens was a coercive negotiating strategy, and that Odfjell
used the Inversion Tax Issue as a pretense to block dividends and position itself to
buy out Northleaf’s stake on the cheap.365
Northleaf’s appeal to fairness is understandable. The record reflects that
Odfjell recommended “hold[ing] back on distributions” and using the “inversion issue
and dividends as [a] ‘bargaining chip.’”366 Lenning acknowledged that depriving
Northleaf of dividends would “hurt their investment performance . . . by strangling
dividends” and “make OTUS less attractive for prospective buyers as it comes with a
JV partner who obstruct distributions.”367 And Odfjell projected that by using “gentle
force,” it could achieve a discounted transaction in the $215–$225 million range.368
362 Johnson & Johnson, 352 A.3d at 253.
363 ArchKey Intermediate Hldgs. Inc. v. Mona, 302 A.3d 975, 1003 (Del. Ch. 2023)
(citation modified).
364 Northleaf’s Post-Trial Opening Br. at 54–57.
365 Id. at 55.
366 JX-755 at 5.
367 JX-248 at 1; Trial Tr. at 732:24–733:10 (Lenning).
368 JX-755 at 7.
52
At base, however, Northleaf seeks to imply a requirement concerning
distributions, which Section 5.1 of the LLC Agreement expressly covers. Section 5.1
establishes the parties’ distribution obligations. It does not require leveraged
distributions nor require OTUS to borrow money to fund distributions. Within
Section 5.1 sits an express gap-filler—the obligation to determine Available Cash in
good faith. The LLC Agreement defines good faith as “the reasonable belief that a
determination, action or omission is in the best interests of the Company.” 369 As
discussed above, Odfjell did not breach its contractual obligation to act in the best
interest of the Company. Section 5.1 contains no obligation that Odfjell act in the
best interests of the Members when voting on distributions and determining Available
Cash. And the court cannot imply it. Rather, the court must conclude that the parties
intended to exclude from the definition of “good faith” determinations, actions, or
omissions in the best interests of the Members.370
Odfjell did not breach the implied covenant of good faith and fair dealing.
B. Judicial Dissolution
Northleaf seeks judicial dissolution under Section 18-802 of the LLC Act based
on Board deadlock over leveraged distributions. In response, Odfjell asserts a
contractual defense and argues against deadlock. As its contractual defense, Odfjell
claims that Section 3.12(c) of the LLC Agreement prevents Northleaf from seeking
369 LLC Agreement § 15.16.
370 See Vintage Rodeo Parent, LLC v. Rent-a-Ctr., Inc., 2019 WL 1223026, at *21 (Del.
Ch. Mar. 14, 2019) (“As a matter of contractual interpretation, I should refrain from writing a provision into a contract when the parties could have done so themselves, but chose not to.”).
53
judicial dissolution. It does not. Section 3.12(c) limits only the Company and the
Board, not a Member exercising its independent statutory right to seek judicial
dissolution. But Odfjell prevails on the merits. Northleaf has not shown the severe
dysfunction required under 6 Del. C. § 18-802 for dissolution: OTUS continues to
operate, manage its business, maintain key relationships, and pursue investments
despite the Members’ disputes. Because OTUS can still carry out its contractual
purpose of operating a specialty chemical storage business, the dissolution claim fails.
1. Odfjell’s Contractual Defense
Section 3.12 states:
[n]otwithstanding anything to the contrary in this
Agreement, the Company shall not take, and it shall cause
each of its Subsidiaries not to take, and the Board shall not
approve or otherwise delegate its power or authority to any
other Person to take or approve, any of the following
actions without unanimous consent of the Members: . . .371
Section 3.12(c) then lists dissolution as an action.372 The provision thus restricts the
Company and the Board from seeking dissolution without unanimous Member
consent.
Odfjell argues that Section 3.12(c) prohibits Northleaf from seeking
dissolution. But Section 3.12(c) does not apply to Members. Northleaf petitioned this
court for judicial dissolution as a Member. Thus, Section 3.12(c) does not prohibit
Northleaf’s claim for judicial dissolution.373
371 LLC Agreement § 3.12 (emphasis added).
372 Id. § 3.12(c).
373Contrary to Odfjell’s position, Northleaf did not waive its response to this argument in briefing. See Dkt. 221 (“Odfjell’s Post-Trial Answering Br.”) at 61. And
54
Section 13.1 of the LLC Agreement governing dissolution supports the
conclusion that the LLC Agreement does not preclude Members from seeking judicial
dissolution. That provision states that “[t]he Company shall dissolve and its affairs
shall be wound up the first to occur of the following: (a) the unanimous consent of all
Managers to dissolve the Company; and (b) the entry of a decree of judicial dissolution
of the Company under Section 18-802 of the Act.”374 In other words, OTUS can
dissolve in one of two ways—by unanimous Board consent or by court decree. For a
court to decree dissolution, someone must file a petition. Thus, a reading that allows
a Member to petition for judicial dissolution is consistent with Section 13.1.
Odfjell argues that Section 13.1 is conjunctive, meaning that it requires
unanimous written consent of Members and a judicial decree.375 But this court must
attempt to give meaning to each term when interpreting a contract.376 Reading the
“and” in Section 13.1 to require both conditions violates this canon by rendering the
phrase “first to occur” meaningless.
Section 3.12 does not defeat Northleaf’s claim for judicial dissolution.
it properly addressed Odfjell’s arguments in its reply. Northleaf’s Post-Trial Reply Br. at 22–28.
374 LLC Agreement § 13.1.
375 Odfjell’s Post-Trial Answering Br. at 64–66.
376 Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393, 396–97 (Del. 2010)
(“We will read a contract as a whole and we will give each provision and term effect, so as not to render any part of the contract mere surplusage.”).
55
2. The Merits
Section 18-802 of the LLC Act authorizes the court to enter an order of judicial
dissolution “on application by or for a member or manager . . . of a limited liability
company whenever it is not reasonably practicable to carry on the business in
conformity with a limited liability agreement.”377 “The court will not dissolve an LLC
merely because the LLC has not experienced a smooth glide to profitability or because
events have not turned out exactly as the LLC’s owners originally envisioned[.]”378
“Given its extreme nature, judicial dissolution is a limited remedy that this court
grants sparingly.”379
This court has held that managerial deadlock renders it reasonably
impracticable to carry on the business of an LLC.380 Even profitable businesses may
find themselves in a managerial deadlock that justifies dissolution.381
“In the context of judicial dissolution, deadlock refers to the inability to make
decisions and take action.”382 When applied to a vote of a board, “deadlock” means a
377 6 Del. C. § 18-802.
378 In re Arrow Inv. Advisors, LLC, 2009 WL 1101682, at *2 (Del. Ch. Apr. 23, 2009).
379 Id.; see also Mehra v. Teller, 2021 WL 300352, at *19 (Del. Ch. Jan. 29, 2021).
380 Vila v. BVWebTies LLC, 2010 WL 3866098, at *7 (Del. Ch. Oct. 1, 2010) (noting
“deadlock has classically provided the basis for a dissolution”).
381 See, e.g., Seokoh, Inc. v. Lard-PT, LLC, 2021 WL 1197593, at *8 (Del. Ch. Mar. 30,
2021) (explaining “dissolution may be warranted even where an LLC is ‘technically functioning’ and ‘financially stable’” (quoting Fisk Ventures, LLC v. Segal, 2009 WL 73957 (Del. Ch. Jan. 13, 2009), aff’d, 984 A.2d 124 (Del. 2009))); Haley v. Talcott, 864 A.2d 86, 96 (Del. Ch. 2004) (finding dissolution appropriate even though LLC had ongoing business).
382 In re GR BURGR, LLC, 2017 WL 3669511, at *6 (Del. Ch. Aug. 25, 2017) (quoting
Meyer Nat. Foods LLC v. Duff, 2015 WL 3746283 (Del. Ch. June 4, 2015)).
56
failure to meet a voting threshold.383 Depending on the applicable voting standard,
a failure to meet a voting threshold can result from the presence of negative votes or
the lack of affirmative votes.384
Here, Odfjell and Northleaf each appoint one-half of the OTUS Board, which
requires either majority or unanimous approval to act, and the LLC Agreement has
no term designed to break a deadlock. Thus, there is plenty of opportunity for
deadlock.
But “[n]ot all deadlocks justify dissolution, as courts will seldom find that
deadlock over an insignificant business decision warrants terminating the entity.”385
For a deadlocked decision to justify judicial dissolution, the decision at issue must be
qualitatively significant. Delaware business statutes capture this qualitative
requirement in various ways. Relevant here, the LLC Act provides for judicial
dissolution “whenever it is not reasonably practicable to carry on the business.” 386
383 Duff, 2015 WL 3746283, at *3 (defining deadlock as an “inability to make decisions
and take action, such as when an LLC agreement requires an unattainable voting threshold”); see also Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and Commercial Practice in the Delaware Court of Chancery § 9.10[c][3] (2d ed. 2022) (“[T]he deadlock must stem from the inability of the board to muster sufficient votes to take curative action due to the division of opinion.”).
384 See Licht v. Storage Tech. Corp., 2005 WL 1252355, at *1 (Del. Ch. May 6, 2005)
(affirming the “widely-accepted notion” that abstentions are negative votes); In re Del Monte Foods Co. S’holders Litig., 2011 WL 2535256, at *6 (Del. Ch. June 27, 2011) (holding in the context of stockholder votes under 8 Del. C. § 251(b) that “not voting is the same as voting against” a corporate action).
385 Teller, 2021 WL 300352, at *19.
386 6 Del. C. § 18-802; see also 6 Del. C. § 17-802 (providing for the dissolution of a
limited partnership “whenever it is not reasonably practicable to carry on the business in conformity with the partnership agreement”); 8 Del. C. § 273(a) (providing
57
“Serious managerial issues, such as strategic visions, major initiatives, and the
operation and control of a company, will typically satisfy the qualitative requirements
imposed by statute and common law.”387
Northleaf identifies a single issue on which the parties are deadlocked—
leveraged distributions. When the court asked Ramki point blank to identify “the
decision points that you say the board is deadlocked on,”388 he pointed to leveraged
distributions only.389 The problem for Northleaf is that there is no current Board
deadlock over distributions. In July 2025, the Board approved $17.8 million in
distributions.390
Moreover, a dispute over leveraged distributions does not threaten the
Company’s business purpose.391 Delaware courts will dissolve an LLC “where the
defined purpose of the entity was fulfilled or impossible to carry out.”392 “When
for dissolution of corporate joint ventures if the “stockholders shall be unable to agree upon the desirability of discontinuing such joint venture”).
387 Teller, 2021 WL 300352, at *19.
388 Trial Tr. at 595:7–10 (Ramki).
389 See id. at 590:14–600:20, 393:18–394:9 (Ramki); see also JX-588 ¶ 4 (“In sum, the
Members are now deadlocked because OTBV, at its parent’s direction, has refused to perform the approved 2024 Budget to seek refinancing . . . and has opposed making any distributions for at least the next two or more years.”); Ramki Dep. Tr. at 17:17– 19:15 (identifying as deadlock issues only “refinancing,” “distributions,” and matters derivative of refinancing and distributions).
390 JX-1028.
391 See Appleseed’s, 470 B.R. 289, 303 (“[T]he [leveraged] dividend, by definition, provided no substantial benefit to the corporation, but instead benefitted the shareholders . . . . Defendants appropriated a large portion of the funds for themselves while returning no value to the corporation.”).
392 Duff, 2015 WL 3746283, at *3 (quoting In re Seneca Invs. LLC, 970 A.2d 259, 262–
63 (Del. Ch. 2008)).
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analyzing purpose, the court looks to the parties’ foundational contractual agreement
and asks whether it is reasonably practicable to carry on the business in line with
that purpose, not whether ‘the purpose . . . has been completely frustrated.’” 393
OTUS’s LLC Agreement defines its “Business” as “the construction, operation,
maintenance, commercialization and management of independent tank storage and
associated services for liquid chemicals, oil, biofuels, edible oils and gases.” 394 No
evidence suggests that OTUS has been rendered incapable of fulfilling this mission
due to a lack of leveraged distributions.395 As explained above, the Board has
continued to manage OTUS throughout the Members’ disagreement over a leveraged
distribution.
In briefing, Northleaf argues that deadlock extends “far beyond” the issue of
leveraged distributions. According to Northleaf, the Board cannot agree on the
“meaning of ‘Available Cash,’” and “cannot approve budgets,” and cannot “even hold
meaningful budgeting or strategy session meetings.”396
But again, Northleaf’s arguments lack factual support. When the Board issued
distributions in 2025, the Board did not dispute the meaning of Available Cash. And
Ramki admitted that there’s no current dispute as to the amount of cash available for
distribution because all agree that “it’s a high enough number that [the Board] didn’t
393 Id. (quoting Segal, 2009 WL 73957, at *4).
394 LLC Agreement § 2.1, “Business.”
395 Trial Tr. at 199:4–8 (White).
396 Northleaf’s Post-Trial Opening Br. at 60–61.
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have to calculate it.”397 There is also no current dispute over financing. The
Custodian solved the Company’s debt crisis. OTUS successfully refinanced its debt
in March 2025, and the Custodian later directed management to enter into a
financing extension into 2027.398 Claims that a future deadlock may arise in 2027
cannot justify dissolution.399
Northleaf argues that the Board’s disagreement on how to finance the
Company400 is preventing management from planning for the Company’s future, 401
and that this alone justifies dissolution.402 Yet Northleaf cites no authority for the
proposition that management’s inability to plan further out justifies judicially forced
dissolution of an otherwise healthy company.
In the end, Northleaf wants out of what it describes as “an under-levered,
minimally yielding asset with no practical exit mechanism.”403 But it is not the
397 Trial Tr. at 597:16–598:21 (Ramki).
398 Dkt. 221, Ex. A at 8.
399 See In re Doehler Dry Ingredient Sols., LLC, 2022 WL 4281841, at *8 (Del. Ch.
Sept. 15, 2022), aff’d sub nom., In re Dissolution of Doehler Dry Ingredient Sols., LLC, 294 A.3d 64 (Del. 2023) (“[Petitioner’s] argument fails to identify any existing deadlock. Rather, it concerns prospective deadlock if the petitioner withholds future consent. This contrived attempt to manufacture deadlock cannot support a claim for judicial dissolution.” (emphasis in original)).
400 Id. at 59–60.
401 Trial Tr. at 62:5–12 (Blanchard); JX-649 at 4.
402 Northleaf’s Post-Trial Opening Br. at 60 (citing Seokoh, 2021 WL 1197593, at *10
(finding deadlock justifying dissolution where managers were evenly divided over “the financing of the Company’s operations and its dissolution”)).
403 Northleaf’s Post-Trial Opening Br. at 61.
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court’s obligation to rescue Northleaf. Certainly, Northleaf’s predicament does not
justify the extreme relief of judicial dissolution.
III. CONCLUSION
Judgment on all Counts is entered in favor of Defendants. The parties are
ordered to submit a form of order or competing forms of order implementing this
decision within ten business days.
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