Partial Summary Judgment on Liability Granted Where Defendant Fails to Controvert Breach or Raise Viable Affirmative Defenses
Read the Court's Opinion (PDF)
Judge Andrea K. Bouressa
In Cobalt Falcon v. AXS Investments, the Business Court granted partial summary judgment on breach of contract liability under Delaware law, holding that the defendant's undisputed cessation of required monthly payments established breach and damages as a matter of law, while the court left the amount of damages for trial and declined to resolve whether the absence of an acceleration clause limited recovery to pre-filing installments. The court also rejected the defendant's unconscionability defense, finding no evidence that a perpetual payment obligation expressly bargained for in exchange for perpetual rights was substantively or procedurally unconscionable.
Court Staff Summary
Under Delaware law, the Court grants summary judgment on the plaintiff's claim that the defendant is liable for breach of contract, with the amount of damages remaining to be tried. The Court also grants the plaintiff's no-evidence motion for summary judgment against the defendant's affirmative defenses of substantive unconscionability, liquidated damages disguised as a penalty (because plaintiff does not seek liquidated damages), failure to mitigate damages, and performance by payment and duplicative recovery (because that is not an affirmative defense).
Background and Procedural Posture
Cobalt Falcon, LLC moved for traditional and no-evidence summary judgment against AXS Investments, LLC on claims arising from a Transaction Agreement as modified by a First Amendment. The contract imposed a continuing obligation on AXS to make monthly payments to Cobalt Falcon in perpetuity—a term the court had previously construed under Texas Rule of Civil Procedure 166(g) in an earlier ruling in this same case. AXS ceased making the required minimum monthly payments in December 2024, and Cobalt Falcon sought partial summary judgment on liability only, leaving damages for trial.
The Court's Analysis on Breach of Contract Liability
Applying Delaware law, the court held that Cobalt Falcon conclusively established all three elements of breach of contract: a contractual obligation, breach of that obligation, and resulting damages. The court noted that it had already construed the Transaction Agreement as imposing the perpetual payment obligation, satisfying the first element. As to breach and damages, the court found that AXS "does not dispute that it ceased making the minimum monthly payments required under Section 2.4 and Schedule 2.4 of the First Amendment in December 2024." AXS's sole argument—that the absence of an acceleration clause limited liability to "Minimum Monthly Payments arising prior to June 11, 2025"—went "solely to the amount of damages, not their existence." Because Cobalt Falcon sought only partial judgment on liability, the court granted summary judgment with the amount of damages remaining to be tried.
Rejection of the Unconscionability Defense
The court granted Cobalt Falcon's no-evidence motion for summary judgment on AXS's unconscionability defense. AXS argued that the perpetual payment obligation created a "gross imbalance" or "gross disparity." The court rejected this argument, emphasizing that unconscionability factors "must be considered at the time of contracting" and that the contract conveyed "perpetual rights in exchange for perpetual monthly payments." Citing its earlier ruling, the court observed:
The idea that a party, holding an asset that may generate revenue in perpetuity, would trade that asset for a perpetual [payment] obligation, is not inherently absurd.
The court further noted that "AXS neglects to factor in that closure of the Fund was entirely within its own hands," and that the perpetual payment obligation "was not veiled or obscured in the contract—it [was] expressly stated, in plain terms." Finding no evidence to support the unconscionability defense, the court granted summary judgment for Cobalt Falcon on this issue.