inTeam Associates, LLC v. Heartland Payment Systems, Inc.

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE INTEAM ASSOCIATES, LLC, ) ) Plaintiff, ) ) v. ) ) HEARTLAND PAYMENT SYSTEMS, ) INC., a Delaware corporation, ) ) Defendant. ) _______________________________ ) HEARTLAND PAYMENT SYSTEMS, ) INC., ) ) Counterclaim Plaintiff, ) ) v. ) ) LAWRENCE GOODMAN, III, and ) INTEAM ASSOCIATES, LLC, ) ) Counterclaim Defendants. ) C.A. No. 11523-VCMR MEMORANDUM OPINION Date Submitted: June 10, 2016 Date Decided: September 30, 2016 Thad J. Bracegirdle and Andrea S. Brooks, WILKS, LUKOFF & BRACEGIRDLE, LLC, Wilmington, Delaware; Attorneys for Plaintiff and Counterclaim Defendants. Jeffrey L. Moyer, Travis S. Hunter, and Arun J. Mohan, RICHARDS LAYTON & FINGER, P.A., Wilmington, Delaware; Attorneys for Defendant and Counterclaim Plaintiff. MONTGOMERY-REEVES, Vice Chancellor. In this action, two Delaware entities, inTEAM Associates, LLC ( inTEAM ) and Heartland Payment Systems, Inc. ( Heartland ), that own K-12 school meal management software each assert breach of contract claims against the other. inTEAM‘s predecessor, School Link Technologies, Inc. ( SL-Tech ), and Heartland entered into a transaction in which Heartland bought substantially all of SL-Tech‘s assets. The transaction was detailed in three agreements that were executed together and work in tandem. These agreements contain various noncompetition, non-solicitation, exclusivity, and cross-marketing and support obligations. inTEAM alleges that Heartland breached its non-competition obligations as well as its cross-marketing and support obligations. Heartland claims that inTEAM breached its reciprocal non-competition covenant, and inTEAM‘s chief executive officer breached his non-solicitation and non-competition obligations. In this post-trial Memorandum Opinion, I hold that inTEAM did not breach any of its contractual obligations. Heartland, however, breached its non- competition and exclusivity obligations, and inTEAM‘s chief executive officer breached certain of his non-solicitation provisions. No affirmative defense excuses any of the breaches. As a result, both inTEAM and Heartland are entitled to relief. 1 I. BACKGROUND These are my findings of fact based on the parties‘ stipulations, documentary evidence, and testimony of eight witnesses during a four-day trial. I accord the evidence the weight and credibility I find it deserves.1 A. Parties and Relevant Non-Parties inTEAM is a Delaware limited liability company with its principal place of business in Santa Monica, California.2 inTEAM operates in the USDA-driven, funded state and local school district child nutrition programs, primarily in K through 12 schools, offering consulting services, training services and technology at both the state and school district level. 3 Before the parties‘ execution of the Asset Purchase Agreement, dated September 12, 2011 (the Asset Purchase Agreement ), inTEAM was a division of SL-Tech. SL-Tech develop[ed], manufacture[d], [sold], service[d] and maintain[ed] computer software and POS terminal hardware that was designed to facilitate (i) 1 Citations to testimony presented at trial are in the form Tr. # (X) with X representing the surname of the speaker, if not clear from the text. After being identified initially, individuals are referenced herein by their surnames without regard to formal titles such as Dr. No disrespect is intended. Exhibits are cited as JX #, and facts drawn from the parties‘ Joint Pre-Trial Stipulation and Order are cited as PTO ¶ #. Unless otherwise indicated, citations to the parties‘ briefs are to post-trial briefs. 2 PTO ¶ III.A.1. 3 Tr. 11-12 (Goodman). 2 accounting and (ii) reporting of transactional data functions and management of food service operations of K-12 schools (including point-of-sale operations, free and reduced application processing, ordering and inventory, menu planning and entry of meal and other payments by parents via the Internet or kiosk). 4 Chip Goodman is the Chief Executive Officer (the CEO ) of inTEAM and, prior to the parties‘ execution of the Asset Purchase Agreement, was the CEO and Major Shareholder (as defined in the Asset Purchase Agreement) of SL-Tech.5 Janet Luc Griffin is the Director of Business Development at inTEAM and is the contact person for state agency deals, provides consulting services for districts and state agencies, and reviews software implementation.6 Lei Ditch is the Director of Technology at High5LA, LLC, formerly Startech Global Corporation ( Startech ), who was hired by SL-Tech to help develop their software products.7 Heartland is a Delaware corporation with its principal place of business in Princeton, New Jersey.8 Heartland is a credit card payment processor for various 4 PTO ¶ III.A.6 (citing JX 25 at 1). 5 Id. ¶ III.A.3. 6 Tr. 361-62 (Griffin). 7 Tr. 481-84 (Ditch). 8 PTO ¶ III.A.2. 3 industries, including K-12 schools.9 Heartland also offers computer software products designed to help customers manage school meal programs for the K-12 foodservice industry in the United States.10 These products perform menu planning, create recipes, monitor inventory, process orders, analyze nutrients, generate production records, and facilitate USDA compliance.11 Michael Lawler currently serves as the President of the Strategic Markets Group for Heartland and is responsible for the School Solutions division, among others.12 Terry Roberts is the Senior Vice President of Heartland‘s School Solutions division; he served as SL-Tech‘s Chief Operating Officer ( COO ) before its acquisition by Heartland.13 Tyson Prescott is the Director of Research and Development for Heartland and was a software development manager at SLTech before its acquisition by Heartland.14 9 Tr. 611-12 (Lawler). 10 Id. 11 Id. at 618. 12 Id. at 608-11. 13 Tr. 982-83 (Roberts). 14 Tr. 789-90 (Prescott). 4 B. Facts The federal government provides funding to schools that participate in and comply with certain meal nutrition programs for students.15 The United States Department of Agriculture (the USDA ) issues national regulations for these meal nutrition programs, and state agencies monitor compliance with the regulations through an administrative review process.16 As part of these programs, the federal government subsidizes meals at various rates that are set each year.17 Until 1977, the regulations focused on four menu components: meat, vegetables/fruits, grains, and milk.18 By the 1990s, the focus shifted to certain nutrient targets, and the government introduced Nutrient Standard Menu Planning, which required schools to keep track of extensive nutrition information for various food offerings.19 This spurred the development of software programs to assist schools in managing this information. The USDA approves software programs 15 DOROTHY PANNELL-MARTIN & JULIE A. BOETTGER, SCHOOL FOOD & NUTRITION SERVICE MANAGEMENT FOR THE 21ST CENTURY 5 (6th ed. 2014). 16 Id. at 6-8. 17 Id. at 13 (showing base rates for SY2014 are $0.34 for paid lunch, $2.59 for a reduced-price lunch, and $2.99 for a free lunch). 18 Id. at 77. 19 Id. 5 that perform the required nutrient analysis. 20 This software, Nutrient Analysis Software Approved for Nutrient Analysis Required in the School Meal Programs ( Nutrient Analysis Software ),21 analyzes calories, saturated fat, sodium, protein, Vitamin A, total fat, dietary fiber, carbohydrates, water, and iron, among other nutrients, either by utilizing manual data entry of all menu items or by retrieval of nutrient data from an approved database.22 In 2010, the federal government promulgated the Healthy, Hunger-Free Kids Act of 2010 (the HHFKA ).23 Later that year, the Institute of Medicine‘s Committee on Nutritional Standards for National School Lunch and Breakfast Programs, of which inTEAM consultant Mary Jo Tuckwell was a member, issued new recommendations for changes to related USDA regulations (the IOM Report ).24 The IOM Report suggested an integration of the pre-1977 menucomponent model with the 1990s nutrient-focused model, which would emphasize 20 JX 400. 21 Id. 22 Tr. 910 (Fox); JX 400. 23 42 U.S.C. § 1751 et seq.; PANNELL-MARTIN & BOETTGER, supra note 15, at 7880. 24 INST. OF MED. OF THE NAT‘L ACADS. COMM. ON NUTRITION STANDARDS FOR NAT‘L SCH. LUNCH AND BREAKFAST PROGRAMS, SCHOOL MEALS: BUILDING BLOCKS FOR HEALTHY CHILDREN v, 194-95, 235 (2010), http://www.fns.usda.gov/sites/default/files/SchoolMealsIOM.pdf; JX 248, at 1. 6 food-based menu planning and deemphasize nutrient analysis.25 The USDA followed these recommendations and issued proposed rule changes on January 13, 2011 that stated, nutrient-based menus will be eliminated and only food-based menu planning will be permitted . . . . 26 The new regulations create five main food groups (meat/high protein foods, whole grains, vegetables, fruit, and fatfree/low-fat milk), which have specified subcategories and nutrient targets for calories, saturated fat, trans fat, and sodium.27 Under the HHFKA, the USDA also introduced performance-based funding to foster compliance with the new meal standards.28 Currently, a school district may receive an additional six cents per reimbursable meal if it complies with the meal pattern requirements promulgated under the HHFKA ( six cent 25 INST. OF MED. OF THE NAT‘L ACADS. COMM. ON NUTRITION STANDARDS FOR NAT‘L SCH. LUNCH AND BREAKFAST PROGRAMS, supra note 24, at 194-95 ( [The] USDA could consider . . . approaches [that] would move away from the current emphasis on completing nutrient analysis and documenting compliance. The initial approach might address fewer elements at a time but occur on a more frequent basis. . . . Focusing on Meal Requirements rather than the Nutrient Targets in planning and assessing school meals fits with the goals of both CRE and SMI reviews. ); JX 58, at 4-5; Tr. 58 (Goodman). 26 Nutrition Standards in the National School Lunch and School Breakfast Programs, 76 Fed. Reg. 2494, 2536 (proposed January 13, 2011). 27 PANNELL-MARTIN & BOETTGER, supra note 15, at 78, 80-81. 28 JX 321, at 12. 7 certification ).29 The governing state authority must make an initial certification determination and, thereafter, monitor each school district‘s ongoing compliance with meal pattern requirements through administrative reviews that occur every three years.30 In 2012, the USDA provided three options to school districts to submit information to their state agencies for six cent certification. Option 1 involved submitting menus, a USDA worksheet, and a nutrient analysis.31 This option allowed school districts that already owned Nutrient Analysis Software for their other needs to use it towards six cent certification as well. Option 2 allowed districts to submit menus, the USDA worksheet, and a Simplified Nutrient Assessment in lieu of nutrient analysis.32 The Simplified Nutrient Assessment only analyzes calories, saturated fat, and sodium.33 It does not require the data entry of all menu items or the use of a nutrient database.34 School districts using this option could purchase another category of USDA-approved software, called Menu 29 See PANNELL-MARTIN & BOETTGER, supra note 15, at 43; see also 42 U.S.C. § 1753(b)(3)(C)(i) & (D). 30 See JX 401, at 5. 31 Id. at 10. 32 Id. at 12. 33 Id. 34 Id. 8 Planning Tools Approved for Certification for Six Cent Reimbursement ( Menu Planning Tools ),35 which performs the necessary functions under this option. Under Option 3, the state agency would conduct an on-site review.36 1. The parties prior to the transaction Prior to the transaction, SL-Tech owned software and hardware to help K-12 schools monitor their food service operations‘ compliance with applicable regulations.37 Three of these products are relevant in this dispute: WebSMARTT, mylunchmoney.com ( MLM ), and the Decision Support Toolkit ( DST ). WebSMARTT, a USDA-approved Nutrient Analysis Software, provided the endto-end functionality to allow schools to monitor children‘s nutrition in school meals.38 WebSMARTT encompassed point of sale, free and reduced meal eligibility tracking, menu planning, nutrient analysis, and production records functionalities.39 MLM, a proprietary online payment-processing product, had approximately 10,000 schools as users.40 35 Tr. at 393-94 (Griffin); JX 400. 36 Tr. at 393-94 (Griffin). 37 PTO ¶ III.A.6 (citing JX 25, at 1); Tr. 20-22 (Goodman). 38 Tr. 793-94 (Prescott). 39 Id. 40 JX 12. 9 In 2007, SL-Tech began building DST Phase 1 as a prototype, and in 2009, SL-Tech engaged Startech to develop and write the functional design documents for the full software product, DST Phase 2, which SL-Tech published on January 11, 2011 (the Functional Design Documents ).41 In Phase 1, DST developed data analytics of sales and meal count data.42 In Phase 2, DST would become cloudbased software that would allow schools and districts to menu plan and project the menus‘ effects on staffing, equipment, and other costs, and state administrators would be able to view this data simultaneously.43 SL-Tech also owned inTEAM, which was a 15-year-old management consulting company known historically for its hands-on workshops in financial management for school nutrition programs. 44 Additionally, inTEAM provided comprehensive assessments of school nutrition programs. 45 Heartland primarily acted as a credit card processor that provided terminals and software to enable merchants to accept credit cards.46 In 2010, Heartland 41 Tr. 487-90 (Ditch). 42 Tr. 30 (Goodman). 43 Id. at 33, 54. 44 JX 58, at 4. 45 Id. 46 Tr. 611-12 (Lawler). 10 began entering the K-12 school market because it saw an opportunity [to] acquir[e] these companies that provided [] food management software. 47 Owning these products would allow Heartland to make money when the parents of students used their credit cards to pay for their children‘s lunches.48 This strategy became the Heartland School Solutions division.49 2. The transaction As part of their new School Solutions strategy, Heartland approached SLTech about a potential acquisition.50 Goodman prepared an Outline of Key Terms in April 2011.51 Goodman proposed that Heartland pay $17 million at closing (representing 60% of a low-end valuation of SL-Tech) plus earn-out payments (calculated as a percentage of a multiple of gross profit or EBITDA realized by Heartland) on each of the first five anniversaries of closing to compensate SL-Tech for the remaining 40% of the value of the company.52 In addition, Goodman would become CEO of Heartland‘s School Solutions 47 Id. 48 Id. at 613. 49 Id. at 612-13. 50 Tr. 738 (Lawler); Tr. 60 (Goodman). 51 Tr. 62 (Goodman). 52 JX 9, at 3. 11 business.53 Heartland, however, did not want inTEAM‘s consulting business, including DST, which it felt was outside their strategy of acquiring companies that provided the point-of-sale solutions to K through 12 schools.54 Eventually, the two companies agreed that Heartland would purchase substantially all of SL-Tech‘s assets, excluding the inTEAM Business, among others.55 Goodman would remain the owner and CEO of inTEAM as a separate legal entity, and he would serve as a consultant to Heartland.56 The parties effectuated the transaction through the execution of three agreements: the Asset Purchase Agreement, the Co-Marketing Agreement, dated September 30, 2011 (the Co-Marketing Agreement ), and the Consulting Agreement, dated September 30, 2011 (the Consulting Agreement ). These agreements contain non-competition, non-solicitation, exclusivity, and cross-marketing and support obligations that form the basis of the alleged breaches here. a. The Asset Purchase Agreement On September 12, 2011, SL-Tech (the Seller ), Heartland (the Buyer ), Goodman (the Major Shareholder ), and other shareholders (the Seller 53 Tr. 65-66 (Goodman). 54 Tr. 614 (Lawler). 55 JX 25 ( Asset Purchase Agreement ) Exs. A-4, M. 56 JX 13, at 3-5. 12 Shareholders ) executed the Asset Purchase Agreement.57 Under the Asset Purchase Agreement, Heartland acquired WebSMARTT and MLM, among other assets, for $17 million.58 i. The non-competition provision The Asset Purchase Agreement‘s covenant not to compete states in relevant part as follows: For a period of five (5) years from and after the Closing Date, neither Seller nor the Major Shareholder will engage directly or indirectly, on Seller‘s or the Major Shareholder‘s own behalf or as a Principal or Representative of any Person, in providing any Competitive Services or Products or any business that School-Link conducts as of the Closing Date in any of the Restricted Territory . . . .59 Thus, this non-competition provision prohibits SL-Tech and Goodman from engaging, directly or indirectly, on their own behalf or on behalf of any Person, in providing (1) any Competitive Services or Products, or (2) any business that School-Link conducts in the United States as of September 30, 2011. The Asset Purchase Agreement defines Competitive Services or Products and School-Link as follows: 57 Asset Purchase Agreement at 1. The deal closed on September 30, 2011. Id. at 4. 58 PTO ¶ III.B.4-5. 59 Asset Purchase Agreement § 5(n), Ex. A. (defining Restricted Territory as the United States). 13 Competitive Services or Products means a business that develops, manufactures, sells and services and maintains computer software and/or POS terminal hardware designed to facilitate (i) accounting and (ii) management and reporting of transactional data functions, of food service operations of K-12 schools (including point-of-sale operations, free and reduced application processing, ordering and inventory, and entry of meal and other payments by parents via the Internet or kiosk); provided, however, that for purposes of clarity, Competitive Services or Products shall not include the inTEAM Business as currently conducted. .... School-Link means the entirety of Seller‘s business, including the business of Seller known as School-Link, but excluding the inTEAM Business.60 Hence, the Asset Purchase Agreement‘s non-competition provision excludes the inTEAM Business from the scope of prohibited activity (the inTEAM CarveOut ). The Asset Purchase Agreement defines inTEAM Business as follows: inTEAM Business means certain Excluded Assets consisting of Seller‘s consulting, e[L]earning and DST segments of the business known as inTEAM and including those products and services described in Exhibit C to the Co-Marketing Agreement.61 Accordingly, the non-competition obligations of SL-Tech and Goodman under the Asset Purchase Agreement are limited by and understood with reference to a 60 Asset Purchase Agreement Ex. A-1, A-8. 61 Asset Purchase Agreement Ex. A-4. 14 carve-out defined therein and further described in Exhibit C of the Co-Marketing Agreement.62 ii. The non-solicitation provision The Asset Purchase Agreement also contains a non-solicitation provision stating: For a period of five (5) years from and after the Closing Date, none of Seller or any Seller Shareholder will directly or indirectly, on Seller‘s or such Seller Shareholder‘s own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer or a Referral Source in any of the Restricted Territory for the purpose of providing Competitive Services or Products.63 The Asset Purchase Agreement goes on further to define Protected Customer as follows: (a) any Person to whom Seller sold, licensed or leased its products or services at any time during the twelve (12) month period ending on the Closing Date and (b) any Person that at any time during the twelve (12) month period ending on the Closing Date, Seller (i) provided a written price quote to or (ii) discussed with in writing other material terms.64 62 See infra Section I.B.2.b.i. 63 Asset Purchase Agreement § 5(o). 64 Id. Ex. A-7. 15 Thus, neither SL-Tech nor any shareholder of SL-Tech may solicit any Protected Customer or Referral Source in the United States in order to provide any Competitive Product or Service on or before September 30, 2016.65 b. The Co-Marketing Agreement The Co-Marketing Agreement grants both Heartland and SL-Tech the right to market one another‘s products.66 inTEAM assumed and was assigned all of SLTech‘s rights under the Co-Marketing Agreement through an Assignment and Assumption Agreement, dated October 31, 2011.67 i. The non-competition and exclusivity obligations Similar to the Asset Purchase Agreement, the Co-Marketing Agreement provides that during the five years following closing, inTEAM shall not engage, directly or indirectly, on its own behalf or as a principal or representative of any person, in providing any services or products competitive with the HPS Business. 68 In the same provision, Heartland grants a reciprocal covenant, which states, 65 See supra Section II.B.1.a.i. for further definitions of Restricted Territory and Competitive Services and Products. 66 JX 23 ( Co-Marketing Agreement ) § 2.1. 67 PTO ¶ III.C.15. 68 Co-Marketing Agreement § 9.1.1(B). 16 [Heartland] shall not engage, directly or indirectly, on its own behalf or as a principal or representative of any person, in providing any services or products competitive with the inTEAM Business, and [Heartland] hereby grants to inTEAM the exclusive right and license under any intellectual property of [Heartland] (other than trademarks) to conduct the inTEAM Business.69 The Co-Marketing Agreement further defines HPS Business and inTEAM Business as follows: HPS Business means the development, manufacture, or sale of computer software and/or POS terminal hardware designed to facilitate (A) accounting and (B) reporting of transactional data functions and management of of [sic] food service operations of K-12 schools (including pointof-sale operations, free and reduced application processing, ordering and inventory, and entry of meal and other payments by parents via the Internet or kiosk). .... inTEAM Business means certain Excluded Assets consisting of inTEAM‘s consulting, eLearning and DST segments of the business known as inTEAM and including those products and services described in Exhibit A and those inTEAM products and services described in Exhibit C and Exhibit D.70 Thus, like the Asset Purchase Agreement, the Co-Marketing Agreement defines the inTEAM Business by reference to, among other things, products and services 69 Id. § 9.1.1. 70 Id. § 1.1.2. 17 described in Exhibit C, which the parties attached to the Co-Marketing Agreement.71 Exhibit C states in its entirety: Functional Specifications Functional specifications for DST Phase 1 and add-ons and DST Phase 2 (future release); including unique state value added functionality (attached) Student Rewards functional specifications (attached) Off Campus (attached)72 Merchants functional specifications Attached to the Co-Marketing Agreement, and incorporated by reference, are the functional specifications for DST Phase 1 and Phase 2 in the form of the Functional Design Documents.73 The two DST Phase 2 Functional Design Documents discussed at trial were Milestone A – Menu Item 74 and Milestone B – Menu Planning. 75 These Functional Design Documents explain how DST utilizes core menu planning 71 Id. Ex. C. 72 Id. 73 See, e.g., JX 3 (DST Phase 2 Functional Design, Milestone A – Menu Item, dated January 10, 2011); JX 4 (DST Phase 2 Functional Design, Milestone B – Menu Planning, dated January 11, 2011); JX 326. 74 JX 3. 75 JX 4. 18 concepts, such as menu items, menu categories, menu templates, and menu cycles. 76 Each represents a building block that a school district or state administrator would use to create and plan a menu.77 Menu items (servings of a specific food) are grouped into menu categories (such as fruits, etc.) and combined to form menu templates (an arrangement of items comprising a single meal). 78 A menu cycle then aggregates menu templates for each day over a specific period of time (week, month, etc.).79 Further, the Functional Design Documents show DST Phase 2 anticipates allowing the user to create, edit, copy, and save in each phase of menu planning.80 ii. The termination provision The Co-Marketing Agreement also contains a termination provision. Section 4.2.2 of the Co-Marketing Agreement states: 76 Tr. 501-03 (Ditch); JX 3, at 7; JX 4, at 6. 77 Tr. 501-02 (Ditch). 78 Id. 79 Id. at 502-03. 80 Id. at 509-36; JX 3, at 8-12 (edit, save, and delete menu category, including create and input description), 20-25 (copy menu items), 29-30 (input and edit portion size and service unit for menu items); JX 4, at 19-22 (create new menu template), 2327 (copy existing menu template), 29-35 (create, copy, and edit menu items to populate menu template), 36-39 (create new menu cycle and input menu cycle data), 40-41 (copy existing menu cycle), 47-48, 52-54 (drag and drop menu templates into menu cycles). 19 In the event that a Provider does not meet a Renewal Threshold applicable to a Product of the Recipient, the Recipient may terminate this Agreement with respect to the provision of such Product upon thirty (30) days‘ prior written notice to the Provider, provided that the Recipient must provide notice of termination within sixty (60) days after the applicable anniversary of the Effective Date. In the event of a termination of a product . . . (A) the corresponding obligations set forth in Section 2 and Section 3 shall cease to apply and (B) if the termination is a termination by HPS of Student Rewards or OffCampus Merchants, the obligations set forth in Section 9.1, including, without limitation, the exclusivity and non-competition obligations therein, shall cease to apply with respect to Student Rewards or Off-Campus Merchants, as applicable.81 In other words, if for instance, inTEAM does not meet its Renewal Thresholds, which are sales targets, for a certain Heartland product, Heartland can terminate the Co-Marketing Agreement with respect to that product with thirty days‘ written notice.82 Upon termination, the obligations in Sections 2 and 3 no longer apply. iii. The cross-marketing and support obligations Section 2 of the Co-Marketing Agreement creates several cross-marketing and support obligations. The relevant portion of Section 2.4 provides: As part of HPS Services, during the Term, HPS shall prominently display the Licensed Content provided by inTEAM on the MLM website and shall work in good faith with inTEAM to determine the commercial viability 81 Co-Marketing Agreement § 4.2.2. 82 Id. 20 of incorporating such Licensed Content into other K-12 payment center websites (with functionality similar to MLM) of HPS that are developed by such parties during the Term.83 Licensed Content is defined as website content, promotional materials or campaign-related communications . . . includ[ing] only content developed or created by or for a Party that such Party delivers to the other Party and specifically designates in writing as Licensed Content. 84 Thus, Heartland agrees to display inTEAM‘s Licensed Content on its MLM website, and Heartland also agrees to perhaps incorporate the content into other K-12 payment center websites.85 Section 2.5.2 incorporates by reference Section 4.2.2, the termination provision, and states: HPS shall provide inTEAM the customer lists and reseller lists pertaining solely to MLM and the Developed Websites (including updates to such lists that are made during the Term) of HPS and HPS Affiliates for the purposes of marketing and selling Student Rewards and Off-Campus Merchants to such customers and resellers.86 83 Id. § 2.4. 84 Id. § 5.2.1. 85 Id. §§ 2.4, 5.2.1. 86 Id. § 2.5.2. 21 Under this provision, Heartland is obligated to provide inTEAM with lists of parents and schools from MLM and any other Heartland K-12 payment center websites with functionality similar to MLM in order to allow inTEAM to market Student Rewards and Off-Campus Merchants.87 The parties also agreed to provisions governing the support of technology. The relevant language from Section 2.6 states: To the extent that performance or receipt of Services hereunder requires a Party to have access to the other Party‘s intranet or other computer software, networks, hardware, technology or computer-based resources ( Required Technology ), such other Party shall provide (or cause to be provided) limited access to such Required Technology . . . In no event shall a Party be obligated to provide such access beyond the limited access necessary to permit the other Party to perform or receive the Services as required under this Agreement.88 Services are defined as inTEAM Services and [Heartland] Services. inTEAM Services are subject to Section 4.2.2, and give inTEAM Parties the right to market, advertise, and promote sales of the HPS Products. 89 Heartland Services are subject to Section 4.2.2 and give Heartland Parties the right to 87 Id. §§ 2.4, 2.5 (incorporating the definition of Developed Websites from Section 2.4.). 88 Id. § 2.6. 89 Id. § 2.1. 22 market, advertise, and promote sales and licenses of the inTEAM Products. 90 In other words, each party must allow the other party the minimum access to whatever necessary technology is required for them to perform their marketing and sales obligations under the agreement, but no more. These obligations are expressly subject to the termination provision. Section 2.8 adds: [p]arties shall use commercially reasonable best efforts to develop and maintain all applicable Products, related websites and related technology assets and ensure that the Products and related websites and technology assets are all integrated and interfaced . . . such that the products may be crosspromoted. 91 c. The Consulting Agreement Under the Consulting Agreement, Goodman is to act as a strategic advisor to Heartland and as a liaison with key industry stakeholders advancing Heartland‘s objectives. 92 In return, Goodman is to receive a monthly salary of $16,666.67.93 90 Id. § 2.1. 91 Id. § 2.8. 92 JX 22 ( Consulting Agreement ) ¶ 1. 93 Id. ¶ 3. 23 i. The non-competition provision The relevant non-competition language binds Goodman ( Consultant ) as follows: During the Term of this Agreement and for two (2) years thereafter, the Consultant shall not directly or indirectly, on behalf of himself or on behalf of any other person, firm or business entity: (i) become an owner of any outstanding capital stock, or a member or partner, of any company, partnership, or entity that engages in, Competitive Business within the Restricted Territory; or (ii) perform or provide any services, whether as an employee, owner, consultant or otherwise, to, for or on behalf of any company, partnership, or entity that engages in Competitive Business within the Restricted Territory, if such services are the same or similar in character to the services performed or provided by the Consultant to Heartland pursuant to this Agreement. . . . For purposes of this Agreement, Competitive Business shall be defined as follows: developing, manufacturing, selling, servicing or maintaining computer software and/or POS terminal hardware designed to facilitate (i) accounting or (ii) management and reporting of transactional data functions of food service operations of K-12 schools (including point-of-sale operations, free and reduced application processing, ordering and inventory, entry of meal or other payments by parents via the Internet or kiosk); provided, however, for purposes of clarity, Competitive Business shall not include the inTEAM Business (as defined in the Asset Purchase Agreement) as conducted as of the effective date of the Asset Purchase Agreement. For purposes of this Section 11, Restricted Territory shall be defined as the entire United States of America.94 94 Id. ¶ 11(a). 24 In other words, for five years95 after the agreement‘s Effective Date on September 30, 2011, Goodman cannot directly or indirectly become an owner of any entity that does Competitive Business with Heartland, or perform or provide any services to an entity that engages in Competitive Business, in the entire United States of America. Competitive Business essentially refers to the same definition as Competitive Services or Products under the Asset Purchase Agreement, and it specifically carves out the inTEAM Business.96 If Goodman provides services to a Competitive Business, he will only be in breach if such services are similar to those he is providing to Heartland. ii. The non-solicitation provision The Consulting Agreement contains a non-solicitation provision that also binds Goodman. It states: During the Term of this Agreement and for two (2) years thereafter, the Consultant shall not directly or indirectly, on behalf of himself or on behalf of any other person, firm or business entity: (i) contact, solicit or do business with, or attempt to contact, solicit, or do business with, any Customer of Heartland for purposes of conducting any Competitive Business; or (ii) encourage or attempt to encourage any Customer of Heartland to terminate, or 95 The agreement‘s Term is three years following the effective date, Consulting Agreement ¶ 5, and the provision at issue adds two (2) years thereafter, totaling five years. Consulting Agreement ¶ 11(b). 96 See supra Sections I.B.2.b.i, I.B.2.a.i. 25 materially and adversely modify, its relationship with Heartland or to cease or refrain from doing business with Heartland. Customers means all customers, clients, vendors, and suppliers, as well as any prospective customers, clients, vendors, and suppliers, of Heartland (or any of its subsidiaries or affiliated entities), and all customers, clients, vendors, and suppliers, as well as any prospective customers, clients, vendors, and suppliers, of Seller prior to the Effective Date. The non-solicitation provision in this Section 11 shall only apply to those Customers with whom the Consultant worked, or about whose business or needs the Consultant gained information, either in his capacity as an officer with Seller, or in his capacity as Consultant under this agreement.97 Goodman essentially cannot contact or attempt to contact any customer or prospective customer of Heartland for purposes of conducting Competitive Business, as defined in the corresponding non-competition provision, or encourage any customer of Heartland to terminate or modify its relationship with Heartland. The customer must be someone with whom Goodman worked or on whose business he gained information through his capacity at SL-Tech or his capacity as consultant for Heartland. 3. Post-transaction occurrences After the closing of the transaction, the parties began working together under the new arrangement. But this co-existence was short lived and unsuccessful. 97 Consulting Agreement ¶ 11(b). 26 a. The parties execute memoranda of understanding and launch KidsChoose Shortly after executing the Asset Purchase Agreement and Co-Marketing Agreement, Heartland and inTEAM executed a Memorandum of Understanding dated November 29, 2011 (the 2011 MOU ) and a supplemental Memorandum of Understanding dated February 10, 2012 (the 2012 MOU ).98 The 2011 MOU clarified inTEAM‘s ability to develop a state-level Meal Benefits Management System within DST to fulfill pre-existing contracts with customers without becoming competitive with Heartland.99 The 2012 MOU memorialized the agreement between Heartland and inTEAM regarding the new program KidsChoose, but it did not alter the CoMarketing Agreement.100 Under the 2012 MOU, inTEAM would develop KidsChoose to allow parents to set up spending accounts for students to buy thirdparty products, and inTEAM would have exclusive marketing rights.101 Heartland would share student payment information, allow promotion by a banner ad in Heartland‘s existing MLM program, provide the payment processing functionality 98 JX 29; JX 44. 99 JX 29, at 1; JX 34, at 1. 100 JX 44, at 1. 101 JX 42; JX 44, at 2-3. 27 for the KidsChoose website, and, in return, retain a portion of the revenue.102 Over the course of the next year, Roberts and Goodman had multiple discussions regarding the pilot launch of KidsChoose.103 Heartland selected the KidsChoose pilot schools in January 2014 and sent out the initial marketing e-mail campaign in March 2014.104 The KidsChoose launch failed to meet expectations.105 Thereafter, Heartland decided not to devote additional resources to KidsChoose.106 In August 2014, Heartland and inTEAM agreed that inTEAM would develop a version of KidsChoose that was independent of any Heartland product.107 Heartland agreed to promote KidsChoose every six months through e-mails to parents in twenty MLM districts and to provide meal history for students who used KidsChoose.108 102 JX 44, at 2-3. 103 JX 105; JX 112; JX 131; JX 142; JX 143. 104 Tr. 1117-18 (Roberts). 105 JX 212 (stating that the first marketing campaign did not yield a single sign up for KidsChoose). 106 Tr. 1129-30 (Roberts). 107 JX 240. 108 Id. 28 As compensation, Heartland would receive two percent of revenue from KidsChoose transactions.109 b. The USDA approves DST as a Menu Planning Tool After the HHFKA‘s new regulations were finalized in 2012,110 inTEAM incorporated the Simplified Nutrient Assessment components into the existing DST functions and created the Menu Compliance Tool+ module, which became the first USDA-approved Menu Planning Tool for six cent certification.111 inTEAM also added administrative review software to its arsenal in 2014.112 inTEAM‘s Menu Compliance Tool+ currently is not approved as Nutrient Analysis Software.113 c. Heartland partially terminates the Co-Marketing Agreement In November of 2013, Heartland notified inTEAM that it was terminating the Co-Marketing Agreement as to WebSMARTT, State Compliance Software, MLM, Student Rewards, and Off-Campus Merchants because inTEAM had not 109 Id. 110 See supra Section II.B. 111 Tr. 387 (Griffin); Tr. 542 (Ditch). 112 Tr. 142 (Goodman). 113 JX 359; JX 360. 29 met sales targets for those products.114 Michael Lawler sent an e-mail to Chip Goodman stating as follows: The purpose of this letter is to inform pursuant to the inTEAM/Heartland Agreement, we would like to terminate to in relation to the following products identified in Exhibit B: that you [sic] Co-Marketing [sic] the CMA and services WebSMARTT State Compliance Software MLM Student Rewards Off Campus Merchants Pursuant to section 4.2.2 of the CMA, the sales thresholds for these products were not met as of the 2year anniversary of the CMA‘s effective date.115 Goodman accepted this termination, but clarified that the MOU was still in place regarding KidsChoose and DST by stating as follows: [W]e accept [Heartland]‘s notice to terminate Exhibit B of the CMA. That said, let‘s clarify a couple of points in areas where we have made very substantial investments: As you and I discussed at our meeting last week, the February 10, 2012 MOU (including the exclusivity rights described in the MOU) continues to govern our relationship with respect to Off-Campus Merchants/KidsChoose, and DST Phase II 114 JX 184; Co-Marketing Agreement § 4.2.2. 115 JX 184. 30 notwithstanding the termination of Exhibit B of the CMA.116 d. inTEAM employees e-mail potential customers On July 24, 2014, Goodman sent an e-mail to Geri Hughes, an employee of inTEAM, with the subject line, St Paul Window of Opportunity. 117 Goodman writes in the e-mail Did Mary Jo recap the opportunity to you? to which Hughes replies, Yes. I will discuss with you when we meet this afternoon. As you know, Jean‘s replacement (Jim) as [sic] not been as interested in help and this is her new approach. 118 Below Hughes‘ reply is the tagline: Note to Jim Hemmen regarding our menu planning tool/production record alternative to WebSMARTT. 119 On December 15, 2014, Tuckwell e-mailed Jean Ronnei, the COO for St. Paul Public Schools, stating: Based on interactions I had with Jim at ANC in July I believe the department was still struggling with automating production records. In August there was discussion of me providing a demo to key central office staff of the inTEAM menu planning and production record modules as an alternative to the WebSMARTT system. That offer remains open if your team is interested . . . whether you stay with WebSMARTT or 116 JX 187. 117 JX 234. 118 Id. 119 Id. 31 are interested in an alternative, I would urge the team to prioritize this activity to achieve financial success.120 Tuckwell then forwarded this e-mail to Hughes, who sent it to Goodman and Michael Sawicky, a senior software engineer at inTEAM, saying that the inTEAM employees had confirmed that Jim is leaving St Paul and he has been stopping our efforts so that is good. . . . I give MJ full credit for continuing to nurture this key relationship with Jean and for continuing to push for them to use our tools. 121 e. Heartland collaborates with Colyar on a joint proposal and inTEAM submits a competing proposal On May 12, 2015, the Texas Department of Agriculture issued a REQUEST FOR OFFERS TO PROVIDE Menu Analysis & Planning System (MAPS) Software Solutions (the Texas Request ).122 On May 27, 2015, inTEAM contacted Heartland regarding a potential joint proposal to the Texas Request.123 Heartland declined.124 On June 19, 2015, Heartland, teamed with Colyar Technology Solutions, Inc. ( Colyar ), an inTEAM competitor since 2014, and submitted a bid to provide 120 JX 248. 121 Id. 122 PTO ¶ III.F.31. 123 JX 261, at 2. 124 Id. at 1. 32 a MAPS solution.125 Colyar‘s software assists state agencies in performing audits and administrative reviews for USDA compliance.126 Texas did not select the Heartland/Colyar joint proposal.127 After losing the bid, Heartland promised to ramp up efforts with Colyar[] to bid in other states.128 After the Heartland rejection, inTEAM submitted its competing bid to the Texas Request.129 In its proposal, inTEAM represents that its new software, will have the capability to meet all of the requirements of the Texas Request, including point-of-sale, nutrient analysis, and menu planning.130 inTEAM‘s proposal also was not selected by Texas.131 On July 20, 2015, inTEAM notified Heartland of its wrongful competition and breach of the Co-Marketing Agreement.132 125 PTO ¶ III.F.32-34; Tr. 142 (Goodman). 126 Tr. 141-42 (Goodman); Tr. 1161, 1165 (Roberts). 127 PTO ¶ III.F.32-34; Tr. 1166 (Roberts). 128 JX 295. 129 PTO ¶ III.F.32. 130 JX 275; Tr. 472-79 (Griffin). 131 PTO ¶ III.F.32-34. 132 JX 433. 33 f. inTEAM launches CN Central In July 2015, inTEAM presented its Big Reveal of the new, rebranded successor to DST, CN Central, to the public.133 CN Central combined all of inTEAM‘s modules, including the Menu Compliance Tool+, under one system.134 This brought together the ability to analyze certain nutrients, menu plan, menu search, menu share, generate production records, and assist administrative reviews.135 g. An inTEAM employee gathers information regarding point of sale software On March 22, 2016, inTEAM Senior Consultant Kim Coleman e-mailed Lisa Sims at the Kentucky School District stating: We are looking at adding a POS feature to our inTEAM software package to go with the Menu Planning, Production Records, Pre-cost, etc. My boss has asked me to reach out to several KY schools and see if I could get a copy of your current POS maintenance invoice for competitive research purposes. I was told that this should be public record and could help us offer the best deal possible in moving forward with this decision.136 133 JX 265; Tr. 29 (Goodman). 134 Tr. 283-84 (Goodman); Tr. 445, 448-51 (Griffin). 135 Id. 136 JX 418, at 2. 34 C. Parties’ Contentions inTEAM alleges that Heartland has materially breached the noncompetition, exclusivity rights, and cross marketing and support provisions of the Co-Marketing Agreement. Specifically, inTEAM avers that Heartland‘s partnership with Colyar breached the first two provisions, and its repeated failure to support inTEAM in various capacities or to display inTEAM‘s content breached the final provision. inTEAM seeks damages, costs and attorney‘s fees, specific performance requiring Heartland to provide certain customer and reseller lists, and injunctive relief preventing Heartland from continuing to compete with inTEAM. Heartland denies any breach and argues that the inTEAM Business as defined at the execution of the Co-Marketing Agreement controls, which at that time did not contain anything competitive with Colyar. Furthermore, Heartland contends that it did not actually provide any service to Colyar, and inTEAM provided no evidence of Heartland‘s breach of cross-marketing or support obligations. Heartland also asserts the defenses of laches, prior material breach, unclean hands, and prior termination. Against inTEAM, Heartland alleges breach of the Co-Marketing Agreement‘s non-competition provision because inTEAM developed a product, CN Central, which is competitive with WebSMARTT. 35 Heartland requests injunctive relief enforcing the Co-Marketing Agreement, as well as costs and attorney‘s fees. Against Goodman, Heartland asserts breach of both the non-competition and non-solicitation provisions under both the Asset Purchase Agreement and the Consulting Agreement. Heartland alleges Goodman violated his non-solicitation obligations by serving as majority owner and CEO of a company that has developed a product that competes with WebSMARTT. Heartland further claims that Goodman breached his non-solicitation obligations through his involvement with inTEAM employees‘ efforts to solicit business from St. Paul Public Schools. Heartland seeks injunctive relief preventing Goodman from engaging in any further competitive activities or further participation at inTEAM, and preventing inTEAM from using any of the knowledge or services provided by Goodman. Heartland also seeks disgorgement by Goodman of any profits realized from his competitive activities. inTEAM and Goodman contend that they are not in breach of the noncompetition provisions because the three agreements create the inTEAM CarveOut, which includes the business currently run by inTEAM. Goodman argues he is not in breach of his non-solicitation obligations under the Asset Purchase Agreement or the Consulting Agreement because there is no evidence that he made any type of contact in violation of either agreement. Goodman contends he also is 36 not in breach of the non-solicitation provision under the Asset Purchase Agreement because he is not a Seller Shareholder as defined under that agreement. inTEAM and Goodman also assert the defenses of laches, acquiescence, waiver/estoppel, unclean hands, prior material breach, failure to mitigate damages, and ask for reduction/set off of damages against inTEAM‘s own damages. II. ANALYSIS Plaintiffs, as well as Counterclaim-Plaintiffs, have the burden of proving each element, including damages, of each of their causes of action against each Defendant or Counterclaim-Defendant, as the case may be, by a preponderance of the evidence. 137 Proof by a preponderance of the evidence means proof that something is more likely than not.138 By implication, the preponderance of the evidence standard also means that if the evidence is in equipoise, Plaintiffs lose. 139 Thus, to prevail on their respective breach of contract claims, both inTEAM as plaintiff and Heartland as counterclaim plaintiff must prove by a preponderance of the evidence (1) the existence of a contract, (2) the breach of an 137 Revolution Retail Sys., LLC v. Sentinel Techs., Inc., 2015 WL 6611601, at *9 (Del. Ch. Oct. 30, 2015). 138 Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *13 (Del. Ch. Feb. 18, 2010). 139 Revolution Retail, 2015 WL 6611601, at *9; 2009 Caiola Family Tr. v. PWA, LLC, 2015 WL 6007596, at *12 (Del. Ch. Oct. 14, 2015). 37 obligation imposed by that contract, and (3) damages suffered as a result of that breach.140 A contract‘s express terms provide the starting point in approaching a contract dispute. 141 Delaware follows an objective theory of contracts, which requires a court to interpret a particular contractual term to mean what a reasonable person in the position of the parties would have thought it meant.‘ 142 When a contract is clear and unambiguous, the court‘s role is to effectuate the parties‘ intent based on the parties‘ words and the plain meaning of those words. 143 In upholding the intention of the parties, a court must construe the agreement as a whole, giving effect to all provisions therein.‘ The meaning inferred from a particular provision cannot control the meaning of the entire 140 Revolution Retail, 2015 WL 6611601, at *9. 141 Ostroff v. Quality Servs. Labs., Inc., 2007 WL 121404, at *11 (Del. Ch. Jan. 5, 2007). 142 Charney v. Am. Apparel, Inc., 2015 WL 5313769, at *10 (Del. Ch. Sept. 11, 2015) (citing Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992)). 143 Zimmerman v. Crothall, 62 A.3d 676, 690 (Del. Ch. 2013) (citing Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006)). 38 agreement if such an inference conflicts with the agreement‘s overall scheme or plan. 144 The parties‘ steadfast disagreement over interpretation will not, alone, render the contract ambiguous. 145 Neither will extrinsic, parol evidence . . . be used to manufacture an ambiguity in a contract that facially has only one reasonable meaning. 146 A term in a contract is ambiguous when it is reasonably or fairly susceptible to different interpretations or may have two or more different meanings. 147 If a contract is ambiguous, a court may consider extrinsic evidence to interpret the intent of the parties.148 144 GMG Capital Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012) (quoting E.I. du Pont de Nemours and Co., Inc. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985)). 145 Osborn v. Kemp, 991 A.2d 1153, 1160 (Del. 2010) (citing Twin City Fire Ins. Co. v. Del. Racing Ass’n, 840 A.2d 624, 628 (Del. 2003); Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992)). 146 United Rentals, Inc. v. RAM Hldgs., Inc., 937 A.2d 810, 830 (Del. Ch. 2007) (citing Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) ( If a contract is unambiguous, extrinsic evidence may not be used to interpret the intent of the parties, to vary the terms of the contract or to create an ambiguity. )). 147 Id. (citing Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992)). 148 iBio, Inc. v. Fraunhofer USA, Inc., 2016 WL 4059257, at *5 (Del. Ch. July 29, 2016) (citing Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997)). 39 None of the parties challenges the validity or enforceability of any of the provisions; as such, I do not analyze those issues. The claims, instead, hinge on this Court‘s interpretation of inTEAM Business as defined in the relevant agreements. Thus, I begin by analyzing the definition of inTEAM Business and determining whether the inTEAM business as currently conducted violates any of the non-competition provisions. Then, I analyze whether Heartland or Goodman breached any contractual obligations. Finally, I determine the appropriate remedy for any breaches. A. inTEAM’s Business as Currently Conducted Does Not Breach its Non-Competition Obligations Under the Asset Purchase Agreement or the Co-Marketing Agreement Heartland contends that inTEAM breached its non-competition obligations under the Co-Marketing Agreement because the inTEAM Carve-Out only extended to functionality that existed as of the closing date.149 Heartland argues that, because inTEAM‘s CN Central product now can plan menus,150 generate production records,151 facilitate USDA compliance,152 and analyze nutrients,153 149 Def.‘s Opening Br. 37-38. 150 Tr. 344 (Griffin). 151 Id. 152 Id. 153 Id. at 445. 40 which are capabilities developed after closing, inTEAM is in breach of the noncompetition provision.154 For all the reasons stated below, inTEAM did not breach its non-competition obligations. The Asset Purchase Agreement and the Co-Marketing Agreement contain materially similar non-competition obligations.155 The Asset Purchase Agreement‘s non-competition provision states that SL-Tech and Goodman will not provide Competitive Services or Products (or any business that SL-Tech conducts) in the United States for five years.156 The definition of SL-Tech and the definition of Competitive Services and Products exclude the inTEAM Business.157 Similarly, the Co-Marketing Agreement prohibits inTEAM from directly or indirectly providing any services or products competitive with [Heartland]. 158 Both the Asset Purchase Agreement and the Co-Marketing Agreement define the inTEAM Business as the consulting, eLearning, and DST portions of the business.159 And, 154 Def.‘s Opening Br. 43. 155 Although Heartland only asserts claims under the Co-Marketing Agreement against inTEAM, I also discuss the Asset Purchase Agreement for the sake of completeness. 156 Asset Purchase Agreement § 5(n), Ex. A-8 (definition of Restricted Territory). 157 Id. Exs. A-1, A-8. 158 Co-Marketing Agreement § 9.1.1. 159 Asset Purchase Agreement Ex. A-4; Co-Marketing Agreement § 1.1.2. 41 both definitions of the inTEAM Business reference those products and services described in Exhibit C to the Co-Marketing Agreement.160 Exhibit C incorporates by reference the Functional Design Documents for DST Phase 2 (future release) (emphasis added).161 Thus, the inTEAM Business as defined in the Asset Purchase Agreement, Co-Marketing Agreement, Exhibit C, and the Functional Design Documents, does not breach the non-competition provisions. 1. The inTEAM Business definition expressly includes the ability to plan menus, generate production records, and assist administrative reviews Throughout 2010, SL-Tech closely followed the developments of the Committee on Nutritional Standards for National School Lunch and Breakfast Programs.162 When the committee published the IOM Report in 2010, SL-Tech foresaw the sea change the new recommendations would bring under the HHFKA.163 Thus, SL-Tech incorporated the IOM Report‘s proposed changes to de-emphasize nutrient analysis and emphasize food-based menu planning into their 2011 Business Plan, which was published at the end of 2010.164 This plan 160 Id. 161 Co-Marketing Agreement Ex. C. 162 JX 58, at 4-5. 163 Tr. 54-55 (Goodman). 164 JX 58, at 4-5. 42 discusses a product that will focus on new menu planning requirements and may only be feasible in large districts or when offered by the state agencies. 165 SL-Tech also began to overhaul DST Phase 2 in 2010 in response to the IOM Report by incorporating the recommendations into the Functional Design Documents for DST Phase 2, which were finalized in early January 2011.166 The Functional Design Documents, including those titled Milestone A — Menu Item and Milestone B — Menu Planning, envisioned a product that would have the new, post-HHFKA menu planning as its core concept. The menu planning functionality would allow the user to create, edit, copy, and save menu items, menu categories, and menus to be placed in menu cycles.167 The user could manage the entire menu planning process from inputting a single serving of a specific food, to assigning it to a larger category, to arranging a collection of foods into a meal, to finally, creating a cycle of meals to rotate over weeks or months.168 The Functional Design Documents also described a product that would allow schools or districts to project the menus‘ impact on other areas of food programs, 165 Id. at 8. 166 JX 3; JX 4. 167 See JX 3, at 8-12; JX 4, at 19-22; Tr. 509-36 (Ditch). 168 Tr. 501-503 (Ditch). 43 such as staffing, equipment, and food/labor costs.169 Both Heartland and inTEAM point to extrinsic evidence to support their competing interpretations of the inTEAM Business and whether menu planning is included. I need not consider any extrinsic evidence because I find that the contract unambiguously includes menu planning in the inTEAM Carve-Out. The Functional Design Documents also envisioned that DST Phase 2 would generate production records.170 The Functional Design Documents do not explicitly reference production records in the same way they mention menu planning. Both parties, however, agree on the definition of a production record.171 Notably, Heartland‘s own witness, Prescott, testified that a production record is a comparison of what the school planned to serve, what the school actually prepared, and what the school actually sold.172 He stated these components include: the menu plan to which the school is referring, the menu cycle‘s week, how many of each item the school planned to serve, how many the school actually produced, and how many items they actually served.173 The DST Phase 2 Functional Design 169 JX 3; JX 4; JX 326; Tr. 33, 54-57 (Goodman). 170 JX 4. 171 See Tr. 794 (Prescott); Tr. 451-52 (Griffin). 172 Tr. 794. 173 Id. at 810. 44 Documents have inputs for all of these components.174 Although Heartland points to extrinsic evidence to argue the agreement unambiguously supports its contention that production records are not included in the definition of inTEAM Business, I need not consider this evidence because the functionality is included, unambiguously, in the Functional Design Documents.175 To prove that the inTEAM Carve-Out includes administrative review software, inTEAM relies on Exhibit C, which states that DST Phase 2 will include unique state value added functionality. 176 Goodman testified that he understood the phrase in Exhibit C to mean the ability to allow[] [state reviewers or auditors] immediate access to records that they needed to review electronically that were created and generated generally at the school district level, 177 causing a breakthrough in the way audits were conducted and the value that was added for state agencies. 178 Additionally, Ditch testified that the cloud-based integration 174 See JX 4, at 31 (showing an input for Name, Served as Meal %, A La Carte %, and a Week and Day label); JX 326, at 259 (showing editable columns for Served as Meal %, A La Carte %). 175 See Def.‘s Opening Br. 37, 43 (citing Sawicky Dep. Tr. 78, 79, 87); JX 104; Sawicky Dep. Tr. 14. 176 Pl.‘s Opening Br. 52. 177 Tr. 91. 178 Id. 45 would allow both state agencies and school districts to use common functions and access records in real time. 179 Goodman also testified that the phrase meant during an administrative review related to menu plans, in particular, the ability to have school districts within that state either to utilize the third-party systems that they already had, or allow them to utilize our menu compliance tool directly so that the data feed was always available at the state level. 180 Griffin then testified that the additional state value of inTEAM‘s Menu Compliance Tool+ was that the state agencies are able to access the districts‘ menu information directly and, as a result, are able to modify the menus within the system to assure the district is in compliance before the agency comes on-site to do a review.181 Heartland does not rebut this testimony and instead argues that because this functionality did not exist until 2014, three years after the parties signed the CoMarketing Agreement, it could not be part of the state value added functionality described in the agreement.182 This argument fails because the definition of inTEAM Business, which references Exhibit C and discusses a future release of 179 Tr. 500-01 (Ditch); JX 23, at 33. 180 Tr. 153-54. 181 Tr. 414-15. 182 Def.‘s Answering Br. 26-27. 46 DST Phase 2 as defined in the Functional Design Documents, anticipated the development of a product with functionality that did not exist at closing. Heartland also argues no inTEAM witness made any effort to show that the functionality of inTEAM‘s administrative review software module was identified in the functional design documents. 183 This argument ignores the first part of Goodman‘s testimony, which specifically discusses Exhibit C (and, by reference, the Functional Design Documents).184 This argument also fails to address the language of the Functional Design Documents, which state District Administrators [] will configure their districts within DST . . . State Agency Administrators (SAs) will . . . be able to access the new district and building setup screens. 185 Heartland offers no testimony or evidence to rebut these descriptions of the unique state value added functionality of the inTEAM Carve-Out, and inTEAM meets its burden to show it bargained for this functionality at the time of the transaction. By January 2011, inTEAM was contemplating a future release of DST Phase 2 that would have greater functionalities than existed at the time of the agreement. Exhibit C and the Functional Design Documents expressly reference those 183 Id. at 27. 184 Tr. 91 (Goodman). 185 JX 3-4, at 5. 47 functionalities, which included the ability to plan menus, generate production records, and assist administrative reviews. Heartland agreed to incorporate Exhibit C and the Functional Design Documents into the inTEAM Business definition described in the Asset Purchase Agreement and the Co-Marketing Agreement, and it cannot now simply ignore what those documents state. 2. The ability to analyze certain nutrients does not violate the non-competition obligations Heartland also points to the Menu Compliance Tool+‘s ability to analyze limited nutrients to show that inTEAM attempted to engage in providing 186 products and services competitive with WebSMARTT. 187 The parties seem to agree that Heartland had the exclusive ability to conduct nutrient analysis as the USDA regulations define that term.188 The parties, however, dispute whether the ability to analyze a more limited subset of nutrients would violate the noncompetition clause.189 Neither the Asset Purchase Agreement nor the Co- Marketing Agreement addresses this issue or expressly defines nutrient analysis. Therefore, I look to the USDA regulations, because the very purpose of this 186 Co-Marketing Agreement § 9.1.1. 187 Def.‘s Opening Br. 31. 188 See Tr. 21-22, 122, 154-56 (Goodman); Def.‘s Opening Br. 33. 189 Pl.‘s Answering Br. 18; Def.‘s Opening Br. 33 n.10. 48 software is to aid districts in reporting for USDA compliance. Even if Heartland can point to some overlap in the functionalities of WebSMARTT and inTEAM‘s Menu Compliance Tool+ in terms of analyzing nutrients, Heartland fails to prove that inTEAM‘s product improperly competes with WebSMARTT. Nutrient Analysis Software and Menu Planning Tools perform different functions under the HHFKA.190 Nutrient Analysis Software, such as WebSMARTT, can run a full nutrient analysis, while Menu Planning Tools, such as inTEAM‘s Menu Compliance Tool+, can run a Simplified Nutrient Assessment of calories, saturated fat, and sodium.191 Heartland‘s own expert witness admitted that this is only a subset of the nutrients WebSMARTT can analyze, and inTEAM‘s Menu Compliance Tool+ cannot analyze the full range of components necessary for a full nutrient analysis.192 Heartland tries to argue that the classification of the products is not the issue, but rather the overlapping functionality. 193 The USDA, however, classifies these various software programs according to their functionality in carrying out the 190 See supra Section I.B. 191 See id. 192 Tr. 921-22 (Fox). 193 Def.‘s Opening Br. 35, n.10. 49 purpose of the regulations.194 The USDA approves certain programs as one and not the other, and some as both.195 Heartland should be familiar with this concept, as WebSMARTT unsuccessfully attempted to obtain USDA approval as a Menu Planning Tool,196 and another Heartland program, Mosaic Menu Planning, is an approved Menu Planning Tool and Nutrient Analysis Software.197 Thus, Heartland has not met its burden to prove that inTEAM‘s Menu Compliance Tool+‘s ability to analyze limited nutrients violates the Co-Marketing Agreement‘s noncompetition provision. B. Heartland Breached its Non-Competition and Exclusivity Obligations Under the Co-Marketing Agreement inTEAM argues that Heartland breached its obligation not to compete with inTEAM (directly or indirectly) when Heartland collaborated with Colyar, a direct competitor of inTEAM, to create an interface between Heartland‘s Mosaic Menu Planning product and Colyar‘s administrative review software for the express 194 JX 400 (stating that Menu Planning Tools provide an assessment of meal pattern contributions and a Simplified Nutrient Assessment that does not require data entry, while Nutrient Analysis tools provide nutrient analysis from a data source and weighted nutrient analysis). 195 See JX 359; JX 360 (listing different programs on each list, with only some programs on both lists); JX 400 (stating that if certain software programs consist of both assessment of meal pattern contributions and nutrient analysis functions, they need both approvals). 196 Tr. 875 (Prescott). 197 See JX 359; JX 360 (Mosaic appears on both lists). 50 purposes of provid[ing] state auditors a consistent view of school district menu data so that they can perform audits in a more efficient manner and offering access to school district menu data as needed in performing an audit and providing recommendations. 198 inTEAM alleges that by enhancing the state value added functionality of Colyar‘s products through a data exchange between Mosaic Menu Planning and Colyar‘s administrative review software, Heartland improperly assisted a direct competitor.199 inTEAM concedes that Heartland lost the bid and had no opportunity to provide the services, but inTEAM argues that Heartland‘s failure to secure the Texas bid does not excuse Heartland‘s indirect[] competition with inTEAM.200 Under the Co-Marketing Agreement, Heartland cannot engage, directly or indirectly . . . in providing services or products competitive with the inTEAM Business. 201 This non-competition obligation excludes products and services defined as [Heartland] Business. Thus, I must determine whether the products 198 JX 227, at 3-4; JX 255, at 5 (Heartland will [p]rovide Mosaic menu planning in a hosted environment for access by Colyar‘s Customers (i.e., States) and Users (i.e., School Districts). ). 199 Pl.‘s Opening Br. 55. 200 Pl.‘s Opening Br. 55; see Kan-Di-Ki, LLC v. Suer, 2015 WL 4503210, at *21 n.242 (Del. Ch. July 22, 2015) ( Directly engaging in the proscribed Business would entail the actual provision of mobile diagnostic services to nursing facilities by [defendant] himself. ). 201 Co-Marketing Agreement § 9.1.1. 51 and services at issue are reserved for inTEAM, Heartland, or both. Under the CoMarketing Agreement, both Heartland and inTEAM can build and maintain products with menu planning functions.202 Additionally, Heartland may own products that conduct a full nutrient analysis, as understood under the relevant regulations at the time of the transaction.203 inTEAM‘s Business includes the ability to build products that assist state agencies in conducting their administrative review process as part of unique state value added functionality. 204 Heartland does not rebut inTEAM‘s purported definition of unique state value added functionality under the Asset Purchase Agreement and Co-Marketing Agreement.205 Heartland also does not argue that its own business as defined in the relevant agreements contains a similar state value added functionality or administrative review software of any kind. Thus, the non-competition provisions allow inTEAM, but not Heartland, to provide administrative review software. Heartland cannot now obtain through this Court what it did not reserve for itself in contract negotiations. 202 See supra Section II.A.1. 203 See id. 204 See id. 205 Def.‘s Answering Br. 25-27. 52 Heartland teamed with Colyar to provide the same functionality that the Asset Purchase Agreement and the Co-Marketing Agreement reserve for inTEAM. Although offering Heartland‘s Mosaic Menu Planning product on its own would not have been a breach,206 Heartland assisting a direct competitor of inTEAM‘s administrative review software, Colyar, indirectly breached the non-competition obligations under the Co-Marketing Agreement.207 Based on the same facts, Heartland also breached its exclusivity obligations under the same provision.208 C. Heartland Did Not Breach its Cross-Marketing and Support Obligations Under the Co-Marketing Agreement inTEAM argues that Heartland breached its cross-marketing and support obligations under various provisions of Section 2 of the Co-Marketing Agreement. Specifically, inTEAM asserts that Heartland breached its obligations with respect to its lack of support for KidsChoose and its refusal to integrate DST and 206 Both Heartland and inTEAM have the ability to own and develop products with menu planning functionality. 207 See, e.g., Kan-Di-Ki, LLC v. Suer, 2015 WL 4503210, at *21 n.242 (Del. Ch. July 22, 2015) (holding former CEO‘s involvement in assisting a direct competitor‘s efforts to replace [plaintiff] as the service provider was a breach.); Pl‘s Opening Br. 55. 208 Cf. Def.‘s Answering Br. 27 (arguing any exclusivity requirement found in Section 9.1 of the CMA does not apply because inTEAM was not conducting the inTEAM Business‘ by marketing menu planning and administrative review software to Texas. ). 53 Nutrikids/WebSMARTT.209 inTEAM‘s conclusory allegations of breaches of Section 2 of the Co-Marketing Agreement fail. Under Section 2 of the Co-Marketing Agreement, Heartland is obligated to (1) prominently display Licensed Content provided by inTEAM on the MLM website; 210 (2) work in good faith with inTEAM to consider incorporating the Licensed Content into other [Heartland] K-12 payment center websites; 211 (3) provide inTEAM with customer and reseller lists of MLM and Developed Websites of Heartland in order to market and sell Student Rewards and OffCampus Merchants;212 (4) provide limited access (as necessary to perform obligations under the Co-Marketing Agreement) to intranet, software, networks, hardware, technology, or computer-based resources; 213 and (5) use commercially reasonable best efforts to develop and maintain all related described products, websites, and technology assets to ensure the integration and cross-promotion of the products.214 209 Pl.‘s Opening Br. 56-57. 210 Co-Marketing Agreement § 9.1.1. 211 Id. 212 Id. § 2.5.2. 213 Id. § 2.6. 214 Id. § 2.8. 54 1. Heartland did not breach its obligations with respect to KidsChoose under Section 2 of the Co-Marketing Agreement In order to decide whether Heartland breached its obligations, I must first determine the true ownership of KidsChoose. The Co-Marketing Agreement designates Off-Campus Merchants and Student Rewards as Heartland products.215 Goodman testified that KidsChoose was the embodiment of Off-Campus Merchants and rewards program that was described in the [Co-Marketing Agreement], which Goodman admitted were Heartland products at the time of the execution of the Co-Marketing Agreement.216 In his deposition, Roberts testified that Off-Campus Merchants and Student Rewards were inTEAM products. 217 At trial, Roberts clarified that each side was to focus on developing the capabilities it knew best—Heartland on MLM and inTEAM on KidsChoose—but that Heartland did not transfer ownership of Student Rewards or Off-Campus Merchants.218 Further, the 2012 MOU explicitly states that it does not modify the Co-Marketing Agreement.219 Thus, the Co-Marketing Agreement‘s language remains in full 215 Co-Marketing Agreement Ex. B. 216 Tr. 103, 284-85 (Goodman). 217 Roberts. Dep. 39-40. 218 Tr. 1048-53. 219 JX 44, at 1. 55 effect, and Heartland continues to own Off-Campus Merchants and Student Rewards, which KidsChoose embodies. a. Heartland validly terminated the Co-Marketing Agreement as to Off-Campus Merchants and Student Rewards Heartland partially terminated the Co-Marketing Agreement in a November 26, 2013 e-mail from Lawler to Goodman.220 Under Section 4.2.2 of the CoMarketing Agreement, the Recipient (in this case, Heartland) of the crossmarketing services has the ability to terminate with respect to a specific product if the Provider (in this case, inTEAM) does not meet its particular goals related to that product.221 Heartland specifically terminated the agreement as to WebSMARTT, State Compliance Software, MLM, Student Rewards, and OffCampus Merchants.222 inTEAM does not challenge Heartland‘s ability to terminate or the enforceability of the termination as to Heartland‘s products.223 Instead, inTEAM argues that the 2012 MOU continued to govern the relationship with respect to Off-Campus Merchants/KidsChoose, and DST Phase II. 224 220 JX 184. 221 Co-Marketing Agreement § 4.2.2. 222 JX 184. 223 Pl.‘s Opening Br. 57-58. 224 JX 187. 56 As discussed more thoroughly above, Goodman testified that KidsChoose was a brand of Off-Campus Merchants and Student Rewards, which were Heartland products at the time of the execution of the Co-Marketing Agreement.225 Thus, Heartland had the right to terminate its obligations as they related to KidsChoose. Section 4.2.2 provides that any termination of a product causes the corresponding obligations set forth in Section 2 to cease to apply, as long as the Recipient gives the Provider 30 days‘ prior written notice and the termination is within 60 days after the applicable anniversary of the Effective Date. 226 This means Heartland‘s obligations under the agreement ended as of December 26, 2013.227 b. Heartland’s conduct prior to the termination did not breach its obligations under Section 2 of the CoMarketing Agreement inTEAM argues that even if the agreement was terminated at the end of 2013, Heartland is still liable for any breach prior to the termination.228 The 2012 MOU gave inTEAM the exclusive right to market and sell products and services 225 Tr. 103, 284-85 (Goodman); see supra Section 2.C.1. 226 Co-Marketing Agreement § 4.2.2. 227 Heartland was validly within sixty days of the execution of the agreement (before November 26, 2013) and the beginning of the term of the agreement (before December 1, 2013). inTEAM does not argue Heartland‘s termination was invalid on timeliness grounds. 228 Pl.‘s Opening Br. 57-58 n.24. 57 on the KidsChoose . . . website[] and stated that inTEAM shall develop the functionality described in the FDD relating to the . . . KidsChoose website[]. 229 Meanwhile, Heartland was to develop the functionality contained within MLM and . . . web service functionality consistent with the FDD to exchange identified information with the inTEAM-developed websites. 230 inTEAM asserts that Heartland did not display any Licensed Content to promote KidsChoose and did not work in good faith with inTEAM to promote KidsChoose on its other K-12 payment center websites that replaced MLM in 2015.231 inTEAM, however, does not point to any materials it designate[d] in writing as Licensed Content‘ under the Co-Marketing Agreement and provided to Heartland that Heartland then refused to display as required under Section 2.4.232 Therefore, inTEAM has not met its burden to prove breach under this section of the Co-Marketing Agreement. Similarly, with regard to Heartland‘s obligation to provide customer and reseller lists under Section 2.5.2 of the Co-Marketing Agreement, inTEAM asserts that Heartland never furnished the required lists of parents to inTEAM in support 229 JX 44, at 2. 230 Id. 231 Pl.‘s Opening Br. 56. 232 Co-Marketing Agreement §§ 5.2.1, 2.4. 58 of KidsChoose before the termination.233 Heartland offers evidence that it did produce these lists prior to November 2013 for the purposes of allowing inTEAM to conduct marketing under the Co-Marketing Agreement.234 inTEAM does nothing to rebut either the list produced by Heartland or Roberts‘s testimony that the list was produced for marketing purposes. At the very least, inTEAM has not met its burden of proving that it is more likely than not that Heartland did not produce these lists. inTEAM also argues that Heartland failed to timely respond to scheduling Steering Committee meetings, did not agree to a reasonable timeline for development, and never agreed to a final version of the functional design document for KidsChoose.235 All of these claims refer to obligations under the 2012 MOU and under Section 12.2.3 of the Co-Marketing Agreement, neither of which 233 Pl.‘s Opening Br. 57. 234 JX 97 (showing an e-mail from Erik Ramp, Vice President of Operations at inTEAM, dated Oct. 30, 2012, to Roberts at Heartland, with an attached document titled HPS Customer List 2012 ); Tr. 1080-81 (Roberts) (stating that this list was sent for the purposes of allowing inTEAM to do marketing under the CoMarketing Agreement). 235 Pl.‘s Opening Br. 37. 59 inTEAM argues that Heartland breached.236 Therefore, I need not consider inTEAM‘s arguments as to these issues. inTEAM generally argues that Heartland engaged in various delay tactics that caused KidsChoose to launch much later than expected. Specifically, inTEAM argues that in 2012, Heartland assured inTEAM it would be ready to meet its June 15 deadline, but in May, Heartland told inTEAM it was stopping development. 237 Heartland offered no justification, provided no information about what Heartland had already developed, refused to establish a new timeline for the product, and ignored inTEAM‘s inquiries.238 inTEAM also asserts that Heartland delayed in (1) selecting the pilot schools, which occurred in January 2014, and (2) sending e-mails to promote KidsChoose, which occurred in March 2014.239 236 See JX 44, at 2 ( The Steering Committee will mutually agree on a functional design document ( FDD‘) to detail the functionality described in this MOU. Based on that FDD, the Steering Committee will agree to a timeline. ); CoMarketing Agreement § 12.2.3 ( The Steering Committee shall meet at such frequency as mutually agreed by the Parties, but in any event no less frequently than once per month. Steering Committee meetings shall be at a mutually acceptable location or telephonically. ). 237 Pl.‘s Opening Br. 37; JX 380; JX 384; JX 385. 238 Id. 239 Pl.‘s Opening Br. 38. 60 With respect to the June 2012 deadline, Heartland contends that it completed its development work,240 but that inTEAM caused the delay of the pilot launch because of its own inability to secure regulatory approval until the end of January 2014.241 Heartland also argues that the departure of Scott Fennel, an inTEAM employee responsible for securing deals for KidsChoose, caused severe internal disruption at inTEAM and further delays.242 Moreover, Heartland alleges that as soon as inTEAM notified Heartland of the necessary approvals, Heartland immediately complied with its obligations to launch the pilot.243 inTEAM concedes that the pilot schools were selected in January 2014, presumably the same time as inTEAM secured its regulatory approval.244 Importantly, inTEAM 240 JX 388; see also JX 137, at 2; JX 142. 241 Def.‘s Answering Br. 16; JX 193 (showing a Jan. 24, 2014 e-mail from Goodman stating it has been a tedious, expensive, and time consuming task to craft a model for state bank regulators where rules differ. . . . We believe that we have finally resolved the custodial and other mulit[sic] state issues with the ability to write and manage differential agreements. ). 242 Def.‘s Answering Br. 13 (quoting JX 387, an e-mail from Ditch on Jan. 29, 2013) ( [D]ue to the issues we were having with Scott that it wouldn‘t be wise to hunt [Heartland] down for this because we wouldn‘t have any Deals to pilot with anyways, and it was better to restart the conversation when we have our act together. ); id. at 15-16 (quoting JX 148, an e-mail from Sawicky on May 7, 2013) ( [T]he project is already three weeks behind with regard to staffing and provisioning and I‘m trying to fudge an update to the Project Plan that we can share with [Heartland] and that doesn‘t air too much of our dirty laundry. ). 243 Def.‘s Answering Br. 16. 244 Pl.‘s Opening Br. 38. 61 does not suggest that it received the regulatory approval before January 2014, or that Fennel‘s departure did not cause severe issues. Therefore, inTEAM has not proven that it is more likely than not any delay in the KidsChoose launch or the integration problems were due to Heartland‘s behavior. With respect to Heartland‘s obligation to send e-mails promoting KidsChoose, inTEAM suggests that Heartland sent the emails in March 2014, two months after the launch, which was too late. But, inTEAM does not argue what specific provision of the Co-Marketing Agreement this action breaches, if any. inTEAM simply asserts the fact that this occurred, which is not enough to prove a breach by Heartland. inTEAM also points to the integration problems between KidsChoose and MLM as causing a negative impact on the pilot launch.245 inTEAM states that it repeatedly tried to engage Heartland to address the issues, but Heartland ignored these requests.246 inTEAM‘s evidence of its attempts to engage Heartland are dated June 2014, months after the pilot launch failure and the termination of the Co-Marketing Agreement.247 As Heartland did not have any continuing obligations under the Co-Marketing Agreement to support the prior version of 245 Id. 246 Id. 247 JX 225. 62 KidsChoose in 2014, inTEAM has not met its burden of proving Heartland breached its obligations. After the failure of the KidsChoose launch, Heartland further agreed to allow inTEAM to develop a stand-alone version of KidsChoose, independent of any Heartland products, and to send promotional e-mails to MLM users every six months and provide user data to inTEAM.248 Concerning the e-mail obligation, Heartland agreed to send jointly designed emails to parents in certain districts using their payment platforms promoting KidsChoose and to provide meal information for students who performed transactions using KidsChoose.249 inTEAM alleges that Heartland failed to comply with its new obligations. But, inTEAM produces no evidence of any jointly designed e-mails or even inTEAM‘s drafts of such e-mails. Regarding the user data, Heartland produces evidence that it provided the required user data in December 2014, including an email from Goodman to Roberts thanking him for the data.250 Although inTEAM points to certain testimony that the information Heartland produced was not in a final usable KidsChoose launchable form, 251 it provides no explanation for why 248 Pl.‘s Opening Br. 40; JX 240; JX 242. 249 JX 242. 250 JX 414; JX 415; JX 416. 251 Tr. 139 (Goodman). 63 the data was not usable or how being in a final, usable form was required per the parties‘ 2014 agreement.252 Hence, inTEAM has not met its burden of proving Heartland did not comply with its obligations. 2. Heartland did not breach its obligations with respect to DST inTEAM argues that Heartland did not cooperate with inTEAM‘s attempts to create an interface between Heartland‘s Nutrikids and WebSMARTT and inTEAM‘s DST, which would have allowed DST to extract data from Nutrikids and WebSMARTT.253 inTEAM argues Heartland violated Section 2.8 of the CoMarketing Agreement by not using commercially reasonable best efforts to maintain its products for the purpose of cross-promoting inTEAM‘s products, as well as Section 2.6 of the Co-Marketing Agreement, by not providing limited access to Heartland‘s technology for the purpose of allowing inTEAM to market, advertise and promote sales and licenses of Heartland.254 As an initial matter, Nutrikids is not subject to the Co-Marketing Agreement, and any claim regarding obligations towards that product fail. The HPS 252 Pl.‘s Opening Br. 40; JX 242 ( [Heartland] will return the meal history for breakfast and lunch or invalid ID or no meal history . [sic] We will not need other information or addresses. This query will include some students eligible for free meals and possibly on other [Heartland] platforms as well. ). 253 Pl.‘s Opening Br. 46. 254 Id. at 46, 57. 64 Products that are subject to the Co-Marketing Agreement are WebSMARTT, MLM, Student Rewards, and Off-Campus Merchants.255 There is no mention of Nutrikids, a product Heartland acquired well after the SL-Tech transaction, in the Co-Marketing Agreement.256 Therefore, the Co-Marketing Agreement imposes no obligations as to this product. With regard to WebSMARTT, inTEAM fails to demonstrate adequately the basis for this alleged breach. inTEAM‘s sole evidence of this breach is Goodman‘s testimony that inTEAM looked forward to [Heartland‘s] continuing support connections to WebSMARTT for our Portland contract. 257 To the extent this claim relates to Section 2.8, inTEAM does not explain how Heartland failed to use commercially reasonable best efforts to develop and maintain WebSMARTT with the specifications under Section 2.8 for the purpose of crosspromotion.258 inTEAM merely states that Heartland failed to continue supporting an interface that inTEAM relied on for an existing contract. 259 As to Section 2.6, inTEAM does not allege attempts to cross-promote WebSMARTT or that 255 Co-Marketing Agreement at 1. 256 Pl.‘s Opening Br. 41. 257 Tr. 89 (Goodman). 258 Co-Marketing Agreement § 2.8. 259 Pl.‘s Opening Br. 46. 65 inTEAM was not able to access to Heartland‘s technology in order to do so. Thus, inTEAM fails to prove that Heartland breached Section 2 of the Co-Marketing Agreement. D. No Affirmative Defenses Bar inTEAM’s Claims Heartland asserts the following affirmative defenses as a bar to inTEAM‘s claims: (1) laches, (2) prior material breach, (3) unclean hands, and (4) failure to mitigate damages. First, Heartland argues that the doctrine of laches bars inTEAM‘s claims. The standard for a traditional laches analysis requires a defendant to prove three elements: (1) the plaintiff had knowledge of the claim; (2) the plaintiff unreasonably delayed in bringing suit on that claim; and, (3) the delay resulted in injury or prejudice to the defendant.260 Heartland asserts that inTEAM knew of the breach by December 6, 2014,261 but inTEAM waited nine months to file this suit on September 21, 2015.262 Heartland ignores inTEAM‘s July 20, 2015 letter to 260 Homestore, Inc. v. Tafeen, 888 A.2d 204, 210 (Del. 2005). 261 JX 381 (containing an e-mail attachment to Goodman from Craig Cheslog, Prinicipal Advisor to California State Superintendent of Public Instruction, which showed the California Department of Education was using Colyar‘s product for administrative review, and was working with Heartland to create a menu planning interface that could be used by state administrators in Colyar‘s system); Tr. 147-49 (Goodman). 262 Def.‘s Answering Br. 45-46. 66 Heartland notifying Heartland of its breach.263 Thus, the delay at issue here is seven months. Heartland fails to convince me that this was an unreasonable delay under the facts and circumstances of this case. Additionally, Heartland has not argued adequately that it suffered any injury from this seven-month delay. If the alleged injury is Heartland‘s investment in the Colyar relationship, Heartland engaged in that behavior before inTEAM knew about the breach. To the extent that Heartland has incurred some cost by investing further in its relationship with Colyar after finding out about inTEAM‘s objections, it did so at its own risk, as it was on notice of its possible violation. Second, Heartland asserts that inTEAM‘s development of a product that improperly competes with WebSMARTT was a prior material breach by inTEAM that bars its recovery. As discussed above, however, inTEAM is not in breach of its non-competition obligations, and this defense fails.264 Third, Heartland asserts the unclean hands defense. Heartland argues that inTEAM violated conscience or good faith or other equitable principles in [its] conduct 265 by concealing its prohibited development of the Menu Compliance 263 JX 433. 264 See infra Section II.A. 265 Sutter Opportunity Fund 2 LLC v. Cede & Co., 838 A.2d 1123, 1131 (Del. Ch. 2003). 67 Tool+, and as a result, the doors of equity should shut against [inTEAM]. 266 The Co-Marketing Agreement, however, allowed inTEAM to develop its Menu Compliance Tool+. Further, the evidence on which Heartland relies actually undercuts Heartland‘s argument.267 On June 8, 2012, the same year the Menu Compliance Tool+ was approved as a Menu Planning Tool, Erik Ramp, Vice President of Operations at inTEAM, e-mailed Roberts at Heartland to make sure [he] was clear about what [inTEAM was] doing with menu compliance. 268 Ramp informed Roberts that inTEAM was building a menu compliance tool for use under Option #2 to certify menus submitted under the new regulations, 269 which expressly included menu planning and analysis of certain nutrients, namely calories, saturated fat, and sodium.270 Ramp went on to assure Roberts that inTEAM was not building full nutrient analysis software like what you have in the POS. 271 He added that the product may be sold to both states and districts.272 266 Id. 267 Tr. 1185-87 (Roberts). 268 JX 425. 269 Id. 270 See supra Section I.B. 271 JX 425. 272 Id. 68 And he ended by stating that the new software is an add-on to DST.273 This is exactly what inTEAM proceeded to do. Thus, Heartland fails to prove that inTEAM was not being transparent. Moreover, as explained below, Heartland has also not met its burden of proving that inTEAM is surreptitiously developing point of sale software.274 Thus, the claim of unclean hands fails.275 Fourth, and finally, Heartland asserts the defense that inTEAM has made no effort to mitigate damages. Because I do not award damages for Heartland‘s breach of the Co-Marketing Agreement, I need not analyze this defense. E. Goodman Did Not Breach His Non-Competition Obligations Under the Asset Purchase Agreement or the Consulting Agreement Heartland argues that Goodman‘s ownership of CN Central and his related work at inTEAM violates the non-competition provisions in both the Asset Purchase Agreement and the Consulting Agreement because CN Central can generate the same types of data that WebSMARTT could prior to closing, namely analyzing nutrients, planning menus, and generating production records, and 273 Id. 274 See infra Section II.E.2. 275 Def.‘s Answering Br. 53. 69 because inTEAM is developing point of sale software.276 Heartland, however, fails to prove these allegations. 1. Work at inTEAM The Asset Purchase Agreement provides that Goodman improperly competes with Heartland if he engages, directly or indirectly, in providing any Competitive Services or Products or any business that [SL-Tech] conducts as of the Closing Date in the United States.277 Under the Consulting Agreement, Goodman may not directly or indirectly . . . become an owner of any outstanding capital stock, or a member or partner of any . . . entity that engages in Competitive Business within the Restricted Territory; or perform or provide any services . . . for any . . . entity that engages in Competitive Business within the Restricted Territory. 278 The definitions of SL-Tech and Competitive Services or Products (in the Asset Purchase Agreement) and Competitive Business (in the Consulting Agreement) exclude the inTEAM Business.279 The inTEAM Business expressly 276 Def.‘s Opening Br. 30, 33-34. 277 Asset Purchase Agreement § 5(n). 278 Consulting Agreement ¶ 11.a. 279 The Consulting Agreement directly states Competitive Business shall not include the inTEAM Business (as defined in the Asset Purchase Agreement). Consulting Agreement § 11(a); see also supra Section I.B.2.a.i. 70 includes the ability to create menus and generate production records, and analyzing certain nutrients does not per se make a product competitive with WebSMARTT.280 Therefore, Heartland has not proven Goodman violated his noncompetition obligations by owning a competitive business under either the Asset Purchase Agreement or the Consulting Agreement. 2. Point-of-sale software Heartland also fails to prove that inTEAM is surreptitiously developing point of sale ( POS ) software and, as such, has failed to prove that Goodman breached certain non-competition obligations under the Asset Purchase Agreement or the Consulting Agreement. Heartland cites to Revolution Retail Sys., LLC v. Sentinel Techs., Inc., as support for the proposition that broad non-compete language regarding development 281 would prevent an entity from beginning to develop, design, or market a competitive product, i.e. a running start. 282 Even if the provisions in the Asset Purchase Agreement or the Consulting Agreement at issue here prohibit a running start, Heartland fails to prove that inTEAM began such a process. 280 See supra Section II.A. 281 Def.‘s Opening Br. 38. 282 Revolution Retail Sys., LLC v. Sentinel Techs., Inc., 2015 WL 6611601, at *11 (Del. Ch. Oct. 30, 2015). 71 Heartland relies on one e-mail to prove the running start allegations. That email, sent by inTEAM employee Kim Coleman to the Kentucky School District, states that inTEAM is looking at adding a POS feature to the inTEAM software package and requests a copy of Kentucky‘s POS maintenance invoice for competitive research purposes. 283 Griffin testified that inTEAM knew this type of software improperly would compete with Heartland until September 30, 2016; thus, inTEAM simply was gathering information and conducting research.284 Comparatively, in Revolution Retail, the defendant claimed that the noncompetition provision at issue only prohibited an actual sale of a competitively priced product.285 The defendant argued it was not in breach because it was conducting market research, and it never formally agreed to sell a competitive product.286 This Court held that the defendant was in fact engaging in actual negotiations intended to sell the competitive product, and the non-competition 283 JX 418, at 2. 284 Tr. 471-72 (Griffin). 285 Revolution Retail, 2015 WL 6611601, at *11-12. 286 Id. 72 agreement prohibited such behavior, as well as other behavior occurring much earlier than the point of sale.287 The plaintiff in that case proved the breach through an exchange of e-mails that showed multiple employees‘ desire to move towards, or beyond, the [competitive] price line, 288 as well as a document specifying the technical plans to develop the competitive product, and various sell-side documents prepared during the non-competition period that explicitly discussed the competitive product.289 Here, one e-mail stating that inTEAM is looking at adding a POS feature hardly rises to the level of proving by a preponderance of evidence that inTEAM has begun development of POS software, or is otherwise actively engaging in selling POS software while claiming to gather information and conduct research.290 As such, Heartland has failed to show a breach of Goodman‘s non-competition obligations. 287 Id. (stating defendant undertook, directly and indirectly, to assist and advise others, and to both engage in, and propose to engage in, the development, marketing, and manufacturing of the . . . R50 at per unit selling prices above the Inflation Adjusted Price Line. I find unpersuasive [defendant]‘s argument that the R50 cannot be proven to have a selling price‘ above the price line because [defendant] never actually sold an R50 at any price during the Non-Competition Period. ). 288 Id. at *12. 289 Id. at *12-13. 290 Def.‘s Opening Br. 26. 73 F. Goodman Did Not Breach His Non-Solicitation Obligations Under the Asset Purchase Agreement Heartland argues that Goodman breached his non-solicitation obligations under the Asset Purchase Agreement by working on behalf of inTEAM to solicit business from an undisputed Protected Customer, St. Paul Public Schools.291 Section 5(o) of the Asset Purchase Agreement prohibits solicitations made for the purpose of providing Competitive Services or Products. 292 The definition of Competitive Services or Products explicitly excludes the inTEAM Business. Therefore, any solicitation of a customer of Heartland simply for the purposes of providing the inTEAM products included in the inTEAM Carve-Out is not a violation of this provision. As such, Goodman is not in breach, and the Court need not address Goodman‘s argument that the Asset Purchase Agreement‘s nonsolicitation provision does not bind him. G. Goodman Breached His Non-Solicitation Obligations Under the Consulting Agreement Heartland also argues that Goodman breached his non-solicitation obligations in the Consulting Agreement by encouraging St. Paul Public Schools to 291 Id. at 39-40; JX 25, at 291 (showing list of customers of inTEAM for twelve months ended on June 30, 2011); Tr. 242 (Goodman) (stating that St. Paul was a WebSMARTT customer prior to the transaction between SL-Tech and Heartland and was a customer of Heartland after the transaction). 292 Asset Purchase Agreement § 5(o). 74 modify adversely its relationship with Heartland. Heartland points to two e-mail chains discussing St. Paul Public Schools as a possible opportunity for inTEAM as evidence that Goodman breached his non-solicitation obligations under the Consulting Agreement. In the first e-mail chain, dated July 24, 2014, Goodman emails Hughes about the St. Paul Window of Opportunity asking whether Tuckwell relayed the news to her about the opportunity.293 Included in Hughes‘ reply is a note to Jim Hemmen, the point of contact at St. Paul, regarding inTEAM‘s menu WebSMARTT. 294 planning tool/production record alternative to Hughes also plans to have a future conversation with Goodman about Tuckwell‘s new approach to get Hemmen interested in inTEAM.295 In the second e-mail chain, Tuckwell e-mails Ronnei, the COO at St. Paul, on December 15, 2014, reiterating her July conversation with Hemmen about St. Paul‘s struggles with automating production records.296 Tuckwell goes on to say that in August she offered to provide a demonstration of inTEAM‘s product, once 293 JX 234. 294 Id. 295 Id. 296 JX 248. 75 again, as an alternative to the WebSMARTT system.297 Tuckwell then forwards this e-mail to Hughes, who forwards it to Goodman, stating that Hemmen is leaving St. Paul, and this is a positive development since Hemmen was blocking inTEAM‘s efforts in this regard. Further, she applauds Tuckwell to Goodman for her efforts of continuing to push [St. Paul] to use [inTEAM‘s] tools. 298 The Consulting Agreement prohibits Goodman from directly or indirectly, on behalf of himself or any other entity, encourag[ing] or attempt[ing] to encourage any Customer of Heartland to terminate, or materially and adversely modify, its relationship with Heartland or to cease or refrain from doing business with Heartland. 299 Customer is defined as any current or prospective customers, clients, vendors, and suppliers of either SL-Tech prior to closing or Heartland.300 The Customer must be someone with whom the Consultant worked, or about whose business or needs the Consultant gained information, either in his capacity as an officer with [SL-Tech], or in his capacity as a Consultant [for Heartland]. 301 Thus, any direct or indirect solicitation by Goodman that attempted to affect 297 Id. 298 Id. 299 Consulting Agreement ¶ 11(b). 300 Id. 301 Id. 76 adversely an existing customer‘s relationship with Heartland would breach the Consulting Agreement, regardless of whether Goodman sought to provide Competitive Products and Services or a Competitive Business. Importantly, Goodman does not attempt to rebut the facts that St. Paul is a customer of Heartland, that St. Paul was a customer of SL-Tech while he was CEO, that Tuckwell or Hughes work for him, that Tuckwell was marketing inTEAM‘s products as an alternative to WebSMARTT, that Goodman was aware of an opportunity at St. Paul, or that he was proactively discussing with his employees attempts to offer inTEAM as an alternative to WebSMARTT.302 Instead, Goodman argues that inTEAM was merely help[ing] out a consulting client and that inTEAM had every right to market that product to the St. Paul [P]ublic [S]chools. 303 What Goodman‘s argument fails to consider is that by allowing his employees to market this product as an alternative to WebSMARTT, he indirectly is involved in attempting to encourage St. Paul to modify or alter its relationship with Heartland by replacing WebSMARTT with inTEAM‘s products. The language in the non-solicitation provision prohibits any attempts to get customers to materially or adversely modify their relationship with Heartland. Goodman encouraged, or at the very least implicitly condoned, 302 Tr. 240-44. 303 Id. at 244. 77 inTEAM employees‘ efforts to persuade a Heartland customer to use inTEAM products as an alternative to WebSMARTT. Goodman attempts to assert multiple defenses against Heartland‘s ability to bring these claims—namely, laches, acquiescence, waiver/estoppel, unclean hands, While I agree that there is evidence and prior material breach of contract. establishing that [Heartland] has long been aware that inTEAM developed and sold software with the functions [Heartland] now alleges are wrongfully competitive, 304 I need not analyze individually the affirmative defenses because each focuses on whether inTEAM‘s business as currently conducted violates the various non-competition provisions. Here, Goodman has breached the second clause of the non-solicitation provision, which is not dependant on and does not relate to the definition of the inTEAM Business. Instead, it precludes Goodman from encouraging any customer of Heartland to change adversely its relationship with Heartland. Thus, Goodman has not argued that any of the affirmative defenses specifically apply to this clause of the non-solicitation provision. Additionally, no facts in the record support the application of any of the affirmative defenses to the non-solicitation clause of the Consulting Agreement. 304 Pl.‘s Answering Br. 45; see JX 425; Tr. 1177 (Roberts). 78 H. Remedies In awarding relief, this Court has broad flexibility and discretion. 305 The Court also must put in place a balanced remedy that is equitable and reasonably tailored to address the precise nature of the misconduct at issue. 306 In the context of violations of restrictive covenants, this Court has awarded both injunctive and monetary relief.307 To obtain an injunction, the plaintiff must show (1) actual success on the merits, (2) irreparable harm, and (3) that the balance of the equities weighs in favor of issuing the injunction. 308 With respect to damages, [t]he law does not require certainty in the award of damages where a wrong has been proven and injury established. 309 [W]hen a contract is breached, expectation damages 305 DONALD J. WOLFE, JR. & MICHAEL A. PITTENGER, CORPORATE AND COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY § 12.01(a) (2014). 306 Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *24 (Del. Ch. Feb. 18, 2010). 307 See, e.g., Concord Steel, Inc. v. Wilmington Steel Processing Co., 2009 WL 3161643, at *14-17 (Del. Ch. Sept. 30, 2009) (awarding money damages, injunctive relief, and attorney‘s fees for breach of a non-competition covenant). 308 Concord Steel, 2009 WL 3161643, at *18. 309 Red Sail Easter Ltd. P’rs, L.P. v. Radio City Music Hall Prods., Inc., 1992 WL 251380, at *7 (Del. Ch. Sept. 29, 1992). 79 can be established as long as the plaintiff can prove the fact of damages with reasonable certainty. The amount of damages can be an estimate. 310 1. inTEAM is entitled to an injunction inTEAM seeks an injunction ordering Heartland and its agents, representatives and any persons in active concert or participation with them (including Colyar) from competing directly or indirectly with the inTEAM Business,‘ which includes DST‘s unique state value added functionality‘ as defined in Exhibit C to the CMA. 311 As discussed above, inTEAM has proven actual success on the merits by showing that Heartland breached the noncompetition agreement in Section 9.1.1 of the Co-Marketing Agreement. Delaware law recognizes the uncertainty of what could have been had the non-competition agreement been honored and, thus, has consistently found a threat of irreparable injury in circumstances where a covenant not to compete is breached. Measuring the effects of breaches like this involves a costly process of educated guesswork with no real pretense of accuracy. This court has been candid 310 SIGA Techs., Inc. v. PharmAthene, Inc., 132 A.3d 1108, 1111 (Del. 2015). 311 Pl.‘s Opening Br. 63. 80 to admit this reality and to use injunctive relief as the principal tool of enforcing covenants not to compete.312 Here, it is unknowable whether inTEAM would have gained more business, such as that from the Texas Department of Agriculture, had Heartland not improperly competed with inTEAM. Thus, the irreparable harm prong is met. Finally, the equities favor injunctive relief as Heartland agreed not to pursue certain types of actions in the Co-Marketing Agreement, specifically, providing integrated administrative review and menu planning services to state agencies. And, inTEAM will continue to suffer the specific type of harm it sought to protect against in signing reciprocal non-competition clauses if Heartland is allowed to continue engaging in this behavior. Heartland‘s breach began on March 17, 2014, when the relationship with Colyar first began, and ran until September 8, 2015, when Heartland announced Texas had not selected its proposal with Colyar.313 This totals almost eighteen months of breach. Thus, I find the appropriate remedy is to extend the noncompetition agreement from September 30, 2016 to March 21, 2018 in order to give inTEAM the full benefit of its bargain. 312 Hough Assocs. Inc. v. Hill, 2007 WL 148751, at *18 (Del. Ch. Jan. 17, 2007) (footnotes omitted). 313 JX 295; JX 203; Tr. 1162 (Roberts). 81 2. inTEAM is not entitled to costs and fees The Co-Marketing Agreement states that if a court of competent jurisdiction . . . determines that either Party has breached this Agreement, then the breaching Party shall be liable and pay to the non-breaching Party the reasonable and verifiable legal fees and costs incurred in connection with such litigation or proceeding. 314 The Co-Marketing Agreement, however, limits the amount of any monetary payments by a breaching party to not exceed the Fees previously paid by the other Party. 315 The provisions state further that these limitations shall not apply with respect to (A) damages caused by the willful misconduct of the other Party; (B) damages resulting from a Party‘s breach of its confidentiality obligations . . . or (C) Losses that are the subject of indemnification . . . 316 inTEAM does not rebut the fact that inTEAM has not paid Heartland any fees under the CoMarketing Agreement, and inTEAM does not argue that any of the exceptions to the limitation under Section 11.3 apply. Therefore, inTEAM is not entitled to any costs and fees pursuant to the limitation in Section 11.2 of the Co-Marketing Agreement. 314 Co-Marketing Agreement § 6.5. 315 Id. § 11.2. 316 Id. §11.3. 82 3. Heartland is entitled to an injunction Section 11(e) of the Consulting Agreement states that any violation or threatened violation of the provisions of Section 11 by the Consultant would cause Heartland irreparable harm, and the Consultant agrees that Heartland shall be entitled, in addition to any other right or remedy it may have at law or in equity, to an injunction. 317 Heartland contends that in order to receive the full benefit if its bargain, the Court should tack on the amount of time from the beginning of Goodman‘s breach in July 2014, to the end date of the agreement in September 2016, equaling two years and two months.318 Heartland has proven that Goodman breached Section 11(b) of the Consulting Agreement from July 24, 2014 until December 15, 2014, totaling almost five months. Essentially, Heartland only received four-and-a-half years of non-solicitation, rather than the five it bargained for. The parties concede that under the Consulting Agreement, any violation or threatened violation of the provisions of Section 11 by the Consultant would cause Heartland irreparable 317 Consulting Agreement ¶ 11(e). 318 Def.‘s Opening Br. 51; see also Consulting Agreement ¶ 11(f) ( Consultant agrees that the time periods referenced [in the operative provisions] shall not include any period(s) of violation or period(s) of time required for litigation to enforce the covenants set forth herein. ). 83 harm. 319 In balancing the equities in this case, I find Heartland is entitled to an injunction against Goodman continuing the second clause of the non-solicitation provision for six months beginning September 30, 2016, and ending March 22, 2017. 4. Heartland is entitled to damages Section 3 of the Consulting Agreement states that [i]n the event the Consultant breaches Sections 7, 8, 9, 10, or 11 of this Agreement, Heartland shall have no obligation to pay the Consultant any compensation set forth herein. 320 Heartland argues Goodman should disgorge all compensation he received, totaling $600,000, along with pre- and post-judgment interest.321 Heartland continued paying Goodman fees in July, August, and September 2014, all while Goodman was breaching the non-solicitation provision. Pursuant to the Consulting Agreement, Goodman lost his entitlement to those fees as soon as he began 319 Consulting Agreement ¶ 11(e); see Hough Assocs. Inc. v. Hill, 2007 WL 148751, at *18 (Del. Ch. Jan. 17, 2007) ( [T]he Non-Competition Agreement should be enforced according to its plain terms, which in this case, specify that Hill‘s breach would, by definition, cause irreparable harm to Hough and justify the entry of an injunction against him. No one has to sign a contract with such a provision, but when one does, he should not complain if the terms are given effect. ). 320 Consulting Agreement ¶ 3. 321 Def.‘s Opening Br. 51-52. 84 breaching.322 The agreement, however, does not state that Goodman must return the fees he was entitled to before the breach occurred. Hence, I find that Goodman must disgorge any consulting fees paid in July, August, and September 2014, totaling $50,003.01. III. CONCLUSION For the foregoing reasons, I find in favor of inTEAM on its non-competition claims against Heartland and against Heartland on all its claims against inTEAM. Heartland shall be enjoined for a period of approximately eighteen months from engag[ing], directly or indirectly, on its own behalf or as a principal or representative of any person, in providing any services or products competitive with the inTEAM Business. 323 I also find in favor of Heartland and against Goodman for breach of the second clause of the non-solicitation provision in the Consulting Agreement. Goodman shall be enjoined for a period of approximately five months from directly or indirectly, on behalf of himself or on behalf of any other person, firm or business entity . . . encourag[ing] or attempt[ing] to encourage any Customer of Heartland to terminate, or materially and adversely modify, its relationship with 322 Consulting Agreement ¶ 3 (stating in the event of breach, Heartland has no obligation to pay the Consultant any compensation ). 323 Co-Marketing Agreement § 9.1.1. 85 Heartland or to cease or refrain from doing business with Heartland. 324 Goodman also shall disgorge $50,003.01 in consulting fees. The parties shall submit a joint conforming final judgment within ten days. IT IS SO ORDERED. 324 Consulting Agreement ¶ 11(b). 86