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Gaul, Ashby & Geddes, P.A., of Wilmington, DE; Justin Ehrlich,\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26   Page 2 of 30 PageID #: 224\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                       Page 2\n\n Christian P. Erwin, and Samantha Rifkin, Miller Barondess, LLP, of Los Angeles,\n CA. Attorneys for Plaintiff/Defendant Character Technologies, Inc.\n\n Kelly E. Farnan, Richards, Layton & Finger, PA, of Wilmington, DE; Gavin J\n Rooney and Julie A. Minicozzi, Lowenstein Sandler LLP, of New York, N.Y.\n Attorneys for Defendant/Plaintiff Applied Digital Corporation.\n\n       Choe-Groves, Judge: Before the Court are motions to dismiss in related\n\n cases Character Tech., Inc. v. Applied Digital Corp. (\u201cCharacter Tech.\u201d), Court\n\n No. 25-00739 and Applied Digital Corp. v. Character Tech., Inc. (\u201cApplied\n\n Digital\u201d), Court No. 25-00909.\n\n       Character Technologies, Inc. (\u201cCharacter Tech.\u201d) filed its Complaint in\n\n Court No. 25-00739 on June 13, 2025, alleging the following four counts:\n\n (1) Count I, Declaratory Judgment of No Breach of Contract; (2) Count II, Breach\n\n of the Implied Duty of Good Faith and Fair Dealing; (3) Count III, Promissory\n\n Estoppel; and (4) Count IV, Fraud. Compl., Court No. 25-00739 (\u201cCharacter\n\n Tech. Compl.\u201d) (D.I. 1). Applied Digital Corporation (\u201cApplied Digital\u201d) filed\n\n Defendant\u2019s Partial Motion to Dismiss (\u201cApplied Digital\u2019s Partial Motion to\n\n Dismiss\u201d) seeking dismissal of Counts III and IV of Character Tech.\u2019s Complaint.\n\n See Defendant\u2019s Part. Mot. Dismiss (\u201cApplied Digital Part. Mot. Dismiss\u201d) (D.I.\n\n 9); Opening Br. Supp. Def. Applied Digital Corp.\u2019s Part. Mot. Dismiss (\u201cApplied\n\n Digital Opening Br.\u201d) (D.I. 10).\n\n       Applied Digital filed its Complaint in Court No. 25-00909 on July 18, 2025,\n\n alleging the following three counts: (1) Count I, Breach of Contract; (2) Count II,\n\fCase 1:25-cv-00739-JCG       Document 32    Filed 07/23/26   Page 3 of 30 PageID #: 225\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                        Page 3\n\n Anticipatory Repudiation; and (3) Count III, Breach of the Covenant of Good Faith\n\n and Fair Dealing. Compl., Court No. 25-00909 (\u201cApplied Digital Compl.\u201d) (D.I.\n\n 1). Character Tech. filed Defendant\u2019s Motion to Dismiss, or in the Alternative, for\n\n Consolidation (\u201cCharacter Tech.\u2019s Motion to Dismiss or Consolidate\u201d) seeking\n\n dismissal of Applied Digital\u2019s Complaint under Federal Rules of Civil Procedure\n\n 12(b)(6) and 13(a) or, in the alternative, consolidation of the two actions under\n\n Federal Rule of Civil Procedure 42(a). Def.\u2019s Mot. Dismiss Alt. Consol.\n\n (\u201cCharacter Tech. Mot. Dismiss Alt. Consol.\u201d) (D.I. 11); Def.\u2019s Opening Br. Supp.\n\n Mot. Dismiss Alt. Consol. (\u201cCharacter Tech. Opening Br.\u201d) (D.I. 12).\n\n       For the reasons that follow, the Court denies in part and grants in part both\n\n Applied Digital\u2019s Partial Motion to Dismiss and Character Tech.\u2019s Motion to\n\n Dismiss or Consolidate, and the Court consolidates Character Tech., Court No. 25-\n\n 00739 into Applied Digital, Court No. 25-00909. Applied Digital, Court No. 25-\n\n 00909 shall be designated as the lead case and Applied Digital shall be designated\n\n as the Plaintiff, with Character Tech. designated as the Defendant. This case shall\n\n proceed under Consol. Court No. 25-00909 and Character Tech.\u2019s claims in\n\n Character Tech., Consol. Court No. 25-00739 shall be deemed filed as\n\n counterclaims and defenses in Applied Digital, Consol. Court No 25-00909 (except\n\n for Count I of Character Tech.\u2019s Complaint, which the Court dismisses for the\n\n reasons explained below).\n\fCase 1:25-cv-00739-JCG        Document 32     Filed 07/23/26   Page 4 of 30 PageID #: 226\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                           Page 4\n\n                                     BACKGROUND\n\n           Character Tech. is a Delaware corporation with its principal place of\n\n business in Menlo Park, California. Character Tech. Compl. at \u00b6 3; Applied\n\n Digital Compl. at \u00b6 3. Applied Digital is a Nevada corporation with its principal\n\n place of business in Dallas, Texas. Character Tech. Compl. at \u00b6 4; Applied Digital\n\n Compl. at \u00b6 4. Character Tech. was founded in 2021 and developed an artificial\n\n intelligence (\u201cAI\u201d) platform on which users can create and engage with\n\n personalized \u201cCharacters\u201d for educational or entertainment purposes. Character\n\n Tech. Compl. at \u00b6 9; Applied Digital Compl. at \u00b6 8. Applied Digital is a\n\n technology company that develops digital infrastructure and sells access to general\n\n processing units (\u201cGPUs\u201d) where, through a series of data centers, Applied Digital\n\n offers AI-development solutions designed to meet the needs of high-performance\n\n computing applications. Character Tech. Compl. at \u00b6 10; Applied Digital Compl.\n\n at \u00b6 7.\n\n           The Parties\u2019 Complaints allege that on June 28, 2023, Character Tech. and\n\n Applied Digital entered into the Service Level Agreement (SLA) Supportive to\n\n Customer Terms of Service Contract (the \u201cAgreement\u201d), in which Character Tech.\n\n agreed to pay Applied Digital an hourly fee assessed on a 24-hour per-day, 7-day\n\n per-week basis for access to a defined number of GPUs. Character Tech. Compl.\n\n at \u00b6 11; Character Tech. Compl., Ex. A (D.I. 1-1); Applied Digital Compl. at\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26   Page 5 of 30 PageID #: 227\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                       Page 5\n\n \u00b6\u00b6 10\u201312; Applied Digital Compl., Ex. A (D.I. 1-1). Applied Digital alleges that\n\n the Agreement required Applied Digital to make available 1,024 GPUs by June\n\n 2023 (\u201cthe Phase I Tranche\u201d), and a second group of 1,024 GPUs by August 2023\n\n (\u201cthe Phase II Tranche\u201d). Applied Digital Compl. at \u00b6 11. Character Tech. alleges\n\n that it provided Applied Digital with a prepayment of $22,491,979.78 toward the\n\n total value of the Agreement, to be drawn down until it ran out, at which point\n\n Character Tech. would pay any remaining amounts on a per-month basis.\n\n Character Tech. Compl. at \u00b6 11. Applied Digital alleges that Character Tech.\n\n agreed to pay usage fees of $1.99 per GPU per hour, with a total contract value for\n\n Phase I Tranche of $35,701,555.20. Applied Digital Compl. at \u00b6 13. Thereafter,\n\n Applied Digital sent quarterly invoices to Character Tech. detailing the charges\n\n accrued and corresponding reduction in Character Tech.\u2019s prepayment amount.\n\n Character Tech. Compl. at \u00b6 11; Applied Digital Compl. at \u00b6 15. The Parties\n\n contend that after Character Tech. issued the prepayment of $22,491,979.78\n\n against the Phase I Tranche of 1,024 GPUs, Applied Digital proceeded to make\n\n 1,024 GPUs in the Phase II Tranche available to Character Tech. and received a\n\n further payment of $8,073,216.00 for the Phase II Tranche GPUs. Character Tech.\n\n Compl. at \u00b6 12; Applied Digital Compl. at \u00b6\u00b6 14, 16.\n\n       Applied Digital avers that the Agreement provided that once the\n\n prepayments were exhausted, Character Tech. would be responsible for the hourly\n\fCase 1:25-cv-00739-JCG     Document 32       Filed 07/23/26   Page 6 of 30 PageID #: 228\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                        Page 6\n\n usage fees for the Phase I Tranche and the Phase II Tranche GPUs until the end of\n\n the Agreement\u2019s term. Applied Digital Compl. at \u00b6 17. Applied Digital contends\n\n that during negotiations of the Phase II Tranche pricing addendum, Character\n\n Tech. confirmed that after the prepayment was exhausted, Character Tech. would\n\n pay in full for the remaining months. Id.\n\n       On or around April 29, 2024, Character Tech. and Applied Digital entered\n\n into a second addendum to the Agreement (\u201cthe Second Addendum\u201d), which\n\n updated the pricing and payment terms of the Phase II Tranche. Character Tech.\n\n Compl. at \u00b6 13; Applied Digital Compl. at \u00b6 18; see Character Tech. Compl., Ex.\n\n B. Applied Digital alleges that the Second Addendum provided a price of $2.25\n\n per GPU, per hour, assessed on a 24-hour per-day, 7-day per-week basis for the\n\n 1,024 GPUs over the remaining 16 months of the Agreement, with a total Phase II\n\n Tranche value of $26,910,720.00. Applied Digital Compl. at \u00b6 18; see Applied\n\n Digital Compl., Ex. B. Applied Digital asserts that pursuant to the Second\n\n Addendum, Character Tech. would continue to lease both the Phase I Tranche and\n\n the Phase II Tranche GPUs from March 2024 to August 2025. Applied Digital\n\n Compl. at \u00b6 19. The Second Addendum provides that any dispute related to the\n\n Agreement or addenda would be \u201cgoverned and construed in accordance with the\n\n laws of the State of Delaware[.]\u201d Character Tech. Compl., Ex. B at 2; Applied\n\n Digital Compl., Ex. B at 2.\n\fCase 1:25-cv-00739-JCG      Document 32     Filed 07/23/26   Page 7 of 30 PageID #: 229\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                         Page 7\n\n       On or around June 3, 2024, Applied Digital reached out to Character Tech.\n\n about returning access to the clusters and ending the Agreement early. Character\n\n Tech. Compl. at \u00b6 14; Applied Digital Compl. at \u00b6 23. Applied Digital avers that if\n\n Applied Digital was able to re-lease the clusters to another customer, Applied\n\n Digital would release Character Tech. from its payment obligations for those re-\n\n leased GPUs otherwise due under the Agreement. Applied Digital Compl. at \u00b6 23.\n\n Character Tech. alleges that the first time it learned of the precondition of finding\n\n new customers to assume the GPUs assigned to Character Tech. was through a\n\n letter sent on March 12, 2025. Character Tech. Compl. at \u00b6 34. On July 29, 2024,\n\n Character Tech. sent a third addendum (\u201cThird Addendum\u201d) allegedly\n\n memorializing the terms for ending the Agreement early. Character Tech. Compl.\n\n at \u00b6 24; Applied Digital Compl. at \u00b6 28; Character Tech. Compl., Ex. E; Applied\n\n Digital Compl., Ex. C.\n\n       The Third Addendum as drafted by Character Tech. states in relevant part:\n\n       [Character Tech.] made a Phase I prepayment of $22,491,979.78 in July\n       2023. [Character Tech.] made a Phase II prepayment of $8,073,216.00\n       in December 2023.\n\n       Under this Third Addendum, [Applied Digital] and [Character Tech.]\n       agree that:\n\n       1. The two prepayments described above shall constitute the full\n       payment by [Character Tech.] under this Addendum and Terms of\n       Service.\n\n       2. In consideration of those payments, [Character Tech.] shall have the\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26   Page 8 of 30 PageID #: 230\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                       Page 8\n\n       right to use the Phase I and Phase II GPUs described on page 1 of this\n       addendum through September 4, 2024.\n\n       3. At midnight on September 4, 2024: (a) [Character Tech.\u2019s] right to\n       use the Phase I and Phase II GPUs shall cease; and (b) this Addendum\n       and the Terms of Service shall be terminated (except to the extent the\n       parties agreed that particular terms survive termination).\n\n       4. Both parties will be whole, and neither party shall have the right to\n       recover payments or other monies from the other (except to the extent\n       damages later become apparent under provisions of the Terms of\n       Service, if any, that survive termination).\n\n Character Tech. Compl., Ex. E at 1\u20132; Applied Digital Compl., Ex. C at 2.\n\n Applied Digital avers that it neither accepted nor executed the Third Addendum\n\n because Applied Digital did not agree with the terms, arguing that the Parties failed\n\n to accurately memorialize the offer. Applied Digital Compl. at \u00b6 30. Character\n\n Tech. alleges that Applied Digital gave no indication at the time that the Third\n\n Addendum mischaracterized the terms of the Agreement or that the Third\n\n Addendum was wrong. Character Tech. Compl. at \u00b6 26.\n\n       On September 3, 2024, Character Tech. relinquished exclusive control of the\n\n GPUs. Character Tech. Compl. at \u00b6 29; Applied Digital Compl. at \u00b6 31. Applied\n\n Digital alleges that Character Tech. continued to have access to and utilized the\n\n GPUs whenever it wished to do so. Applied Digital Compl. at \u00b6 31. Character\n\n Tech. contends that Applied Digital deleted Character Tech.\u2019s data from the\n\n system, rendering those clusters \u201cessentially useless\u201d to Character Tech. Character\n\n Tech. Compl. at \u00b6 29. On November 15, 2024, Applied Digital issued an invoice\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26   Page 9 of 30 PageID #: 231\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                          Page 9\n\n to Character Tech. representing the amount due for the remainder of the\n\n Agreement. Character Tech. Compl. at \u00b6 31; Applied Digital Compl. at \u00b6 34.\n\n Character Tech. replied that it had completed its service with Applied Digital on\n\n September 3, 2024, and stated that there would be no further payments made.\n\n Character Tech. Compl. at \u00b6 32; Applied Digital Compl. at \u00b6 35. Applied Digital\n\n alleges that Character Tech. failed to pay the remaining balance of $31,957,929.40\n\n and Applied Digital sent a demand for payment to Character Tech. Applied\n\n Digital Compl. at \u00b6\u00b6 43\u201344.\n\n       Applied Digital contends that after Character Tech. failed to make the\n\n payments required under the Agreement and Second Addendum, Applied Digital\n\n declared that Character Tech. had breached the Agreement and thus, Applied\n\n Digital was relieved of its own performance obligations and entitled to pursue\n\n damages. Applied Digital Compl. at \u00b6 45. Character Tech. avers that Applied\n\n Digital\u2019s failure to raise the condition precedent of finding new customers to\n\n assume Character Tech.\u2019s clusters under the Agreement induced Character Tech. to\n\n relinquish its exclusive control of the leased clusters and to cease payments that\n\n were otherwise owed under the Agreement. Character Tech. Compl. at \u00b6 37.\n\n Character Tech. avers that Applied Digital deprived Character Tech. of its\n\n bargained-for benefit under the Agreement. -\n                                            Id.\n                                              -\n\n       On June 5, 2025, Applied Digital provided Character Tech. with a draft\n\fCase 1:25-cv-00739-JCG      Document 32      Filed 07/23/26   Page 10 of 30 PageID #: 232\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                          Page 10\n\n complaint that Applied Digital intended to file within 10 days if Character Tech.\n\n refused to remit payment. Id. at \u00b6 36. Character Tech. contends that Applied\n\n Digital\u2019s threat to sue left Character Tech. \u201cwith no choice but to bring [its] action\n\n to vindicate its rights under the Agreement.\u201d Id. at \u00b6 40. On June 13, 2025,\n\n Character Tech. filed its Complaint, and on July 18, 2025, Applied Digital filed its\n\n Complaint. See Character Tech. Compl.; Applied Digital Compl.\n\n                                 LEGAL STANDARD\n\n       The Court has subject matter jurisdiction pursuant to 28 U.S.C. \u00a7\u00a7 2201(a)\n\n and 1332(a), which grants the Court subject matter jurisdiction over actions in\n\n which there is complete diversity among the parties and the amount in controversy\n\n exceeds $75,000, exclusive of interests and costs. 28 U.S.C. \u00a7 1332(a).\n\n       Federal Rule of Civil Procedure 8(a) requires that pleadings contain a short\n\n and plain statement of the claim showing that the pleader is entitled to relief. Fed.\n\n R. Civ. P. 8(a)(2). If pleadings fail to state a claim, in whole or in part, on which a\n\n court may grant relief, a defendant may seek to dismiss a complaint under Federal\n\n Rule of Civil Procedure 12(b)(6). Fed. R. Civ. P. 12(b)(6). \u201cTo survive a motion\n\n to dismiss, a complaint must contain sufficient factual matter, accepted as true, to\n\n \u2018state a claim to relief that is plausible on its face.\u2019\u201d Ashcroft v. Iqbal (\u201cIqbal\u201d),\n\n 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v Twombly (\u201cTwombly\u201d), 550\n\n U.S. 544, 570 (2007)). \u201cA claim has facial plausibility when the plaintiff pleads\n\fCase 1:25-cv-00739-JCG      Document 32     Filed 07/23/26    Page 11 of 30 PageID #: 233\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                         Page 11\n\n factual content that allows the court to draw the reasonable inference that the\n\n defendant is liable for the misconduct alleged.\u201d Id. Plausibility requires \u201cmore\n\n than a sheer possibility that a defendant has acted unlawfully.\u201d Id. In considering\n\n a motion to dismiss, the Court must assume the factual allegations contained in the\n\n complaint to be true and draw all reasonable inferences in favor of the non-moving\n\n party. Twombly, 550 U.S. at 555\u201356. However, \u201c[t]hreadbare recitals of the\n\n elements of a cause of action, supported by mere conclusory statements, do not\n\n suffice\u201d to state a claim. Iqbal, 556 U.S. at 678; see Donald J. Kochan, While\n\n Effusive, \u201cConclusory\u201d is Still Quite Elusive: The Story of a Word, Iqbal, and a\n\n Perplexing Lexical Inquiry of Supreme Importance, 73 U. Pitt. L. Rev. 215, 307\n\n (2011) (\u201c\u2018[C]onclusory\u2019 sets a standard that requires a certain degree of case-by-\n\n case, contextual analysis.\u201d).\n\n       The Declaratory Judgment Act states that \u201c. . . any court in the United\n\n States . . . may declare the rights and other legal relations of any interested party\n\n seeking such declaration, whether or not further relief is or could be sought.\u201d 28\n\n U.S.C. \u00a7 2201(a). When only declaratory relief is sought, federal courts are\n\n granted more flexibility in exercising their discretion to hear the case. See\n\n Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 494\u201395 (1942); Wilton v.\n\n Seven Falls Co., 515 U.S. 277, 282 (1995). When determining whether to exercise\n\n jurisdiction under the Declaratory Judgment Act, the Court is guided by the\n\fCase 1:25-cv-00739-JCG      Document 32     Filed 07/23/26   Page 12 of 30 PageID #: 234\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                        Page 12\n\n following factors in addition to the Brillhart factors:1\n\n       (1) the likelihood that a federal court declaration will resolve the\n       uncertainty of obligation which gave rise to the controversy; (2) the\n       convenience of the parties; (3) the public interest in settlement of the\n       uncertainty of obligation; (4) the availability of the relative\n       convenience of other remedies; (5) a general policy of restraint when\n       the same issues are pending in a state court; (6) avoidance of\n       duplicative litigation; (7) prevention of the use of the declaratory action\n       as a method of procedural fencing or as a means to provide another\n       forum in a race for res judicata; and (8) (in the insurance context), an\n       inherent conflict of interest between an insurer\u2019s duty to defend in a\n       state court and its attempt to characterize that suit in federal court as\n       falling within the scope of a policy exclusion.\n\n Reifer v. Westport Ins. Corp., 751 F.3d 129, 146 (3d Cir. 2014).\n\n       In a case involving both declaratory relief and legal claims, the Court applies\n\n the independent claim test to determine the level of discretion it may exercise in\n\n declining jurisdiction. Rarick v. Federated Serv. Ins. Co., 852 F.3d 223, 229 (3d\n\n Cir. 2017). Under the independent claim test, \u201ca district court must determine\n\n whether the legal claims are independent of the declaratory claims.\u201d Id. \u201cNon-\n\n declaratory claims are \u2018independent\u2019 of a declaratory claim when they are alone\n\n\n 1\n   Courts should consider \u201cwhether the questions in controversy between the parties\n to the federal suit, and which are not foreclosed under the applicable substantive\n law, can better be settled in the proceeding pending in the state court.\u201d Brillhart,\n 316 U.S. at 495. Answering this question may require inquiring: (1) \u201cinto the\n scope of the pending state court proceeding[;]\u201d (2) \u201cthe nature of the defenses open\n there[;]\u201d (3) \u201cwhether the claims of all parties in interest can satisfactorily be\n adjudicated in that proceeding[;]\u201d (4) whether necessary parties have joined[;]\u201d and\n (5) \u201cwhether such parties are amenable to process in that proceeding[.]\u201d Reifer v.\n Westport Ins. Corp., 751 F.3d 129, 146 n.21 (3d Cir. 2014) (quoting Brillhart, 316\n U.S. at 495).\n\fCase 1:25-cv-00739-JCG      Document 32      Filed 07/23/26   Page 13 of 30 PageID #: 235\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                         Page 13\n\n sufficient to invoke the court\u2019s subject matter jurisdiction and can be adjudicated\n\n without the requested declaratory relief.\u201d Id. at 228 (quoting R.R. St. & Co. v.\n\n Vulcan Materials Co., 569 F.3d 711, 715 (7th Cir. 2009)).\n\n       If the legal claims are not independent of the claims for declaratory relief,\n\n \u201cthe court retains discretion to decline jurisdiction of the entire action[.]\u201d Id. at\n\n 229. If the legal claims are independent of the claims for declaratory relief, \u201cthe\n\n court has a \u2018virtually unflagging obligation\u2019 to hear those claims, subject\n\n to . . . exceptional circumstances.\u201d Id. (citing Colorado River Water Conservation\n\n Dist. v. U.S. (\u201cColorado River\u201d), 424 U.S. 800, 817\u201319 (1976)). District courts\n\n consider the following in determining whether \u201cexceptional circumstances\u201d apply:\n\n       (1) which court first assumed jurisdiction over property; (2) the\n       inconvenience of the federal forum; (3) the desirability of avoiding\n       piecemeal litigation; (4) the order in which jurisdiction was obtained;\n       (5) whether federal or state law controls; and (6) whether the state court\n       will adequately protect the interests of the parties.\n\n Spring City Corp. v. American Bldgs. Co., 193 F.3d 165, 171, 173 (3d Cir. 1999);\n\n see Colorado River, 424 U.S. at 818. \u201cOnly the clearest of justifications will\n\n warrant dismissal.\u201d Colorado River, 424 U.S. at 819.\n\n                                     DISCUSSION\n\nI.     Motions to Consolidate\n\n       The Court may consolidate actions that \u201cinvolve a common question of law\n\n or fact.\u201d Fed. R. Civ. P. 42(a)(2). \u201cThe purpose of consolidation is to streamline\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26   Page 14 of 30 PageID #: 236\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                          Page 14\n\n and economize pretrial proceedings so as to avoid duplication of effort, and to\n\n prevent conflicting outcomes in cases involving similar legal and factual issues.\u201d\n\n In re TMI Litigation, 193 F.3d 613, 724 (3d Cir. 1999) (quotation and citation\n\n omitted).\n\n       In its Complaint, Character Tech. seeks a declaratory judgment that Applied\n\n Digital\u2019s failure to provide \u201cdedicated GPU hardware resources\u201d to Character\n\n Tech. after September 4, 2024, constituted a breach of contract, \u201cwhich served to\n\n excuse [Character Tech.] from its contractual obligations to make ongoing\n\n payments for access to those clusters.\u201d Character Tech. Compl. at \u00b6 57. Character\n\n Tech. also alleges three additional claims: (1) Breach of the Implied Duty of Good\n\n Faith and Fair Dealing (Count II); (2) Promissory Estoppel (Count III); and (3)\n\n Fraud (Count IV). Id. at \u00b6\u00b6 58\u201387.\n\n       In its motion to dismiss or, in the alternative, motion to consolidate,\n\n Character Tech. avers that there is \u201cno basis for the Court to decline to hear\n\n [Character Tech.\u2019s] case because the [Character Tech.] Action includes claims for\n\n breach of the implied duty of good faith and fair dealing and fraud that are\n\n independent of [Character Tech.\u2019s] declaratory judgment claims.\u201d Character Tech.\n\n Opening Br. at 9. Applied Digital contends that Character Tech.\u2019s argument\n\n regarding independent claims is \u201cbelied by the fact that its ancillary claims rest\n\n solely on whether the contract was breached and stem from the very same set of\n\fCase 1:25-cv-00739-JCG     Document 32      Filed 07/23/26   Page 15 of 30 PageID #: 237\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                        Page 15\n\n facts as the declaratory judgment claim,\u201d and Applied Digital argues that the Court\n\n \u201cretains discretion under the Declaratory Judgment Act to consider [Character\n\n Tech.\u2019s] procedural fencing\u201d because the \u201ccrux of the matter is declaratory[.]\u201d\n\n Pl.\u2019s Answering Br. Opp\u2019n. Def.\u2019s Mot. Dismiss Alt. Consol. (\u201cApplied Digital\n\n Resp. Br.\u201d) at 10 (D.I. 17).\n\n       The Court agrees with Applied Digital that the claims brought by Character\n\n Tech. arise out of the same set of facts that underlie the breach of contract claims.\n\n Applied Digital argues that Character Tech. engaged in \u201cprocedural fencing\u201d by\n\n filing Character Tech.\u2019s Complaint consisting of the declaratory claim and legal\n\n claims. Applied Digital Resp. Br. at 5, 11. Applied Digital contends that it is\n\n \u201cimproper for a litigant to so misuse the declaratory judgment device to achieve a\n\n first-filing procedural advantage.\u201d Id. at 6. Applied Digital asserts that the \u201cfirst-\n\n to-file rule \u2018is not a mandate directing wooden application of the rule without\n\n regard to rare or extraordinary circumstances, inequitable conduct, bad faith,\n\n [anticipatory filing] or forum shopping.\u2019\u201d Id. at 7 (quoting FMC Corp. v. AMVAC\n\n Chem. Corp., 379 F. Supp. 2d 733, 738 (Ed. Pa. 2005) (alteration in original)).\n\n       Applied Digital alleges Breach of Contract (Count I), Anticipatory\n\n Repudiation (Count II), and Breach of the Covenant of Good Faith and Fair\n\n Dealing (Count III). Applied Digital Compl. at \u00b6\u00b6 46\u201362. Character Tech. argues\n\n that the Court should dismiss Applied Digital\u2019s Complaint under Federal Rules of\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26   Page 16 of 30 PageID #: 238\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                      Page 16\n\n Civil Procedure 12(b)(6) and 13(a) or, in the alternative, consolidate Applied\n\n Digital Corp., Court No. 25-00909 into Character Tech., Court No. 25-00739. See\n\n Character Tech. Opening Br. at 4\u201312. Applied Digital contends that dismissal\n\n under Rule 13 is inappropriate and avers that Applied Digital should be designated\n\n as plaintiff if the Court consolidates the two cases. Applied Digital Resp. Br. at\n\n 11\u201312.\n\n       The Court notes that Applied Digital\u2019s Complaint arises out of the same\n\n transaction or occurrence that is the subject matter of Character Tech.\u2019s Complaint.\n\n Character Tech.\u2019s fraud claim (Count IV) includes allegations that Applied Digital\n\n fraudulently concealed, or withheld, information regarding Character Tech.\u2019s\n\n obligations under the Agreement. Character Tech. Compl. at \u00b6 75 (\u201cDuring the\n\n parties\u2019 negotiation of the Agreement, [Applied Digital] withheld its belief that the\n\n Agreement was subject to a condition precedent requiring that [Applied Digital]\n\n locate a replacement customer to take over [Character Tech.\u2019s] leased computing\n\n clusters before [Character Tech.] would be released from its obligations under the\n\n [Agreement].\u201d). Similarly, Applied Digital\u2019s Complaint alleges that Applied\n\n Digital did in fact inform Character Tech. that the Agreement was contingent on a\n\n condition precedent. Applied Digital Compl. at \u00b6 23 (\u201cMr. Cummins suggested\n\n that if [Applied Digital] were able to find and contract with new, replacement\n\n customers willing to take the GPUs, thereby making [Applied Digital] whole on\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26   Page 17 of 30 PageID #: 239\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                      Page 17\n\n the revenue attributable to those GPUs under the Agreement, [Applied Digital]\n\n would release [Character Tech.] from payment obligations for those re-leased\n\n GPUs otherwise due under the Agreement.\u201d).\n\n       Both Character Tech.\u2019s Complaint and Applied Digital\u2019s Complaint involve\n\n the Parties\u2019 rights and obligations under the Agreement and whether those rights\n\n and obligations were modified under the Agreement. See Character Tech. Compl.\n\n at \u00b6\u00b6 45, 53; Applied Digital Compl. at \u00b6\u00b6 49\u201350, 54, 60. The Court observes that\n\n Applied Digital\u2019s suit did not name any parties who were not already named in\n\n Character Tech.\u2019s action, therefore affirming that Applied Digital\u2019s claims do not\n\n require the addition of any party beyond the Court\u2019s jurisdiction.\n\n       The Court finds that the two actions arise from the same \u201ctransaction or\n\n occurrence\u201d and \u201cdoes not require adding another party over whom the court\n\n cannot acquire jurisdiction.\u201d Fed. R. Civ. P. 13(a)(1). Additionally, there are no\n\n applicable exceptions under Rule 13(a)(2) that would preclude any claims being\n\n considered as counterclaims. The two actions \u201cinvolve a common question of law\n\n or fact,\u201d and in order to \u201cstreamline and economize pretrial proceedings so as to\n\n avoid duplication of effort,\u201d the Court orders that the two cases shall be\n\n consolidated. Fed. R. Civ. P. 42(a)(2); In re TMI Litigation, 193 F.3d at 724\n\n (internal quotation omitted). Both Character Tech. and Applied Digital requested\n\n consolidation of the two actions with the only opposition being which Party would\n\fCase 1:25-cv-00739-JCG       Document 32    Filed 07/23/26   Page 18 of 30 PageID #: 240\n\n  Court Nos. 1:25-cv-00739, 1:25-cv-00909                                       Page 18\n\n  retain their status as plaintiff. See Character Tech. Opening Br. at 11; Applied\n\n  Digital Resp. Br. at 11.\n\n        Accordingly, the Court holds that Character Tech., Court No. 25-00739 shall\n\n  be consolidated into Applied Digital Corp., Court No. 25-00909, with Applied\n\n  Digital maintaining its status as Plaintiff, and Character Tech. shall be designated\n\n  as Defendant. Character Tech.\u2019s claims are to be considered as counterclaims in\n\n  the consolidated action. Because Character Tech.\u2019s Count I for Declaratory\n\n  Judgment of No Breach of Contract is substantively duplicative, arises out of the\n\n  same transaction and occurrence, and involves a common question of law and fact\n\n  with Applied Digital\u2019s Count I for Breach of Contract, the Court dismisses Count I\n\n  of Character Tech.\u2019s Complaint for No Breach of Contract.\n\nII.     Applied Digital\u2019s Partial Motion to Dismiss\n\n        Applied Digital moves to partially dismiss Character Tech.\u2019s Complaint as\n\n  to Count III for Promissory Estoppel and Count IV for Fraud. Applied Digital\n\n  Opening Br. at 7\u201313. Applied Digital argues that Character Tech.\u2019s Promissory\n\n  Estoppel claim should be dismissed because Character Tech.\u2019s Complaint does not\n\n  allege the required elements of promissory estoppel as detrimental reliance was not\n\n  alleged and cannot be established as a matter of law. Id. at 11\u201313. With respect to\n\n  Count IV of Character Tech.\u2019s Complaint, Applied Digital contends that under\n\n  Delaware\u2019s \u201canti-bootstrapping rule,\u201d Character Tech. is not permitted to append a\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26   Page 19 of 30 PageID #: 241\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                       Page 19\n\n fraud claim to a factually indistinct contract claim. Id. at 7\u20138. Applied Digital\n\n avers that Count IV of Character Tech.\u2019s Complaint does not set forth\n\n particularized or plausible allegations concerning fraudulent inducement. Id. at 8\u2013\n\n 11.\n\n       A.     Promissory Estoppel (Count III)\n\n       In Count III of Character Tech.\u2019s Complaint, Character Tech. alleges that the\n\n doctrine of promissory estoppel bars Applied Digital\u2019s claim that Character Tech.\n\n breached the Parties\u2019 Agreement by failing to make ongoing payments after\n\n Character Tech. relinquished its exclusive access to its leased computing clusters.\n\n Character Tech. Compl. at \u00b6 66.\n\n       \u201cPromissory estoppel is applied to enforce a promise not supported by\n\n consideration, where there is no binding contract.\u201d MDNet, Inc. v. Pharmacia\n\n Corp., 147 F. App\u2019x. 239, 244 (3d Cir. 2005). To state a claim for promissory\n\n estoppel, Character Tech. must allege facts sufficient to show that:\n\n       (i) a promise was made; (ii) it was the reasonable expectation of the\n       promisor to induce action or forbearance on the part of the promise; (iii)\n       the promisee reasonably relied on the promise and took action to his\n       detriment; and (iv) such promise is binding because injustice can be\n       avoided only by enforcement of the promise.\n\n Harmon v. State, Delaware Harness Racing Comm\u2019n, 62 A.3d 1198, 1200\u201301\n\n (Del. 2013) (citation omitted). \u201cThe requirement of a written contract does not\n\n necessarily prevent an oral waiver or modification,\u201d so long as the plaintiff alleges\n\fCase 1:25-cv-00739-JCG     Document 32      Filed 07/23/26   Page 20 of 30 PageID #: 242\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                        Page 20\n\n \u201cfacts showing an intention to waive or modify the requirement of a writing.\u201d\n\n MDNet, Inc., 147 F. App\u2019x. at 244. In Delaware, \u201ccontract provisions deeming\n\n oral modifications unenforceable can be waived orally\u201d and may be demonstrated\n\n by course of conduct if there is a \u201cclear intention to alter the express terms.\u201d\n\n Simon Prop. Grp., L.P. v. Brighton Collectibles, LLC, C.A. No. N21-C-01-258\n\n MMJ CCLD, 2021 WL 6058522, at *3 (Del. Super. Ct. Dec. 21, 2021) (internal\n\n quotation omitted). \u201cAn oral modification \u2018must be of such specificity and\n\n directness as to leave no doubt of the intention of the parties to change what they\n\n previously solemnized by formal document.\u2019\u201d Id. (quoting Durig v. Woodbridge\n\n Bd. of Educ., No. 90C-NO-22, 1992 WL 423926, at *1 (Del. Super. Ct. Dec. 8,\n\n 1992)).\n\n       Section 10 of the Agreement provides that \u201c[a]ny amendments to this\n\n Agreement must be made in writing and signed by authorized representatives of\n\n both Parties.\u201d Character Tech. Compl., Ex. A at 3. Accordingly, Character Tech.\n\n must allege facts sufficient to show an intention by Applied Digital to waive or\n\n modify the requirement that any amendment be made in writing and signed as set\n\n forth in Section 10 of the Agreement. MDNet, Inc., 147 F. App\u2019x. at 244.\n\n Character Tech. alleges in its Complaint that both Applied Digital\u2019s CEO, Mr.\n\n Cummins, and Applied Digital\u2019s Executive Vice President of Strategic Finance,\n\n Mr. Raza, confirmed in writing Applied Digital\u2019s oral promises releasing Character\n\fCase 1:25-cv-00739-JCG    Document 32     Filed 07/23/26   Page 21 of 30 PageID #: 243\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                     Page 21\n\n Tech. from its obligations under the Agreement in exchange for an early return of\n\n the leased computing clusters. See Character Tech. Compl. at \u00b6\u00b6 19, 21\u201323, 28\u2013\n\n 29. Character Tech.\u2019s Complaint cites to the attached Exhibits C and D, showing\n\n the email and text message exchanges between Character Tech. and Applied\n\n Digital regarding Character Tech.\u2019s release from the Agreement. -----\n                                                                 See id., Exs.\n\n C, D. Character Tech. alleges that the first time it was alerted about Applied\n\n Digital\u2019s precondition of finding new customers to assume the GPUs assigned to\n\n Character Tech. was through a letter sent on March 12, 2025, after the alleged\n\n writings and oral promises released Character Tech. from its obligations to pay.\n\n Character Tech. Compl. at \u00b6 34.\n\n       Applied Digital argues that Character Tech. has failed to plead that the\n\n Parties intended to waive the no oral modification clause in Section 10 of the\n\n Agreement. Applied Digital Opening Br. at 11\u201312. The Court observes that\n\n Character Tech. drafted a Third Addendum in an attempt to memorialize the\n\n Parties\u2019 conversations regarding Character Tech. returning access to the clusters\n\n and ending the Agreement early. Character Tech. Compl. at \u00b6\u00b6 24\u201326. Character\n\n Tech. alleges that the proposed Third Addendum was binding on the Parties based\n\n on Applied Digital\u2019s representations and actions throughout the negotiation of the\n\n Agreement and because Applied Digital never objected to the proposed Third\n\n Addendum and did not raise the condition precedent during negotiations. Id. at\n\fCase 1:25-cv-00739-JCG     Document 32      Filed 07/23/26   Page 22 of 30 PageID #: 244\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                       Page 22\n\n \u00b6\u00b6 26, 35.\n\n       At this stage of the case, assuming all factual allegations contained in\n\n Character Tech.\u2019s Complaint to be true, and drawing all reasonable inferences in\n\n favor of Character Tech., the Court holds that Character Tech. has alleged facts\n\n sufficient to show an intention by Applied Digital to waive or modify the\n\n requirement that any amendment be made in writing and signed as contained in\n\n Section 10 of the Agreement, at least to a sufficient level to proceed to discovery\n\n on this factual issue. See MDNet, Inc., 147 F. App\u2019x. at 244. Further, Character\n\n Tech. has alleged facts sufficient to show that Applied Digital promised to release\n\n Character Tech. from its obligations under the Agreement in exchange for an early\n\n return of the leased computing clusters, and that it was reasonable for Character\n\n Tech. to rely on that promise. Character Compl. at \u00b6\u00b6 19, 21\u201323, 28\u201329. Character\n\n Tech. alleged facts showing that Character Tech. reasonably relied on Applied\n\n Digital\u2019s promise to its detriment, given the loss of exclusive access to the clusters\n\n and subsequent deletion of Character Tech.\u2019s data from those clusters. Id. at \u00b6 29.\n\n Lastly, Character Tech. has sufficiently alleged that Applied Digital\u2019s promise was\n\n binding because \u201c[r]equiring [Character Tech.] to pay full price for computing\n\n power that it has not used, and indeed, given [Applied Digital] deleted Character\u2019s\n\n data from the leased clusters, could not use, would be unfair, particularly in light of\n\n [Applied Digital\u2019s] promises[.]\u201d Id. at \u00b6 72.\n\fCase 1:25-cv-00739-JCG     Document 32      Filed 07/23/26   Page 23 of 30 PageID #: 245\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                         Page 23\n\n       Assuming all factual allegations contained in the complaint to be true and\n\n drawing all reasonable inferences in favor of Character Tech., the Court holds that\n\n Character Tech. has alleged facts sufficient to establish a claim of promissory\n\n estoppel. Twombly, 550 U.S. at 555\u201356. Accordingly, the Court denies Applied\n\n Digital\u2019s Partial Motion to Dismiss Count III of Character Tech.\u2019s Complaint.\n\n       B.     Fraud (Count IV)\n\n       In Count IV of Character Tech.\u2019s Complaint, Character Tech. alleges that\n\n Applied Digital \u201cfraudulently concealed, or withheld, material information from\n\n [Character Tech.] that, based on the [P]arties\u2019 contractual relationship it was under\n\n a duty to disclose, to induce [Character Tech.] to relinquish its exclusive access to\n\n the leased computing clusters.\u201d Character Tech. Compl. at \u00b6 74. Applied Digital\n\n argues that Character Tech. has not pled \u201cany separate, particularized, and/or\n\n plausible fraud allegation,\u201d and avers that Delaware courts do not permit a plaintiff\n\n to use the words \u201cfraudulently induced\u201d to bootstrap an unsupported fraud claim to\n\n a contract claim. Applied Digital Opening Br. at 7\u20138. Applied Digital contends\n\n further that Character Tech. failed to set forth particularized and plausible\n\n allegations concerning fraudulent conduct. Id. at 8\u201311.\n\n       When \u201calleging fraud or mistake, a party must state with particularity the\n\n circumstances constituting fraud or mistake. Malice, intent, knowledge, and other\n\n conditions of a person\u2019s mind may be alleged generally.\u201d Fed. R. Civ. P. 9(b).\n\fCase 1:25-cv-00739-JCG     Document 32      Filed 07/23/26    Page 24 of 30 PageID #: 246\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                          Page 24\n\n \u201c[A] heightened pleading standard applies to fraud claims, requiring that \u2018in all\n\n averments of fraud . . . the circumstances constituting fraud . . . shall be stated with\n\n particularity.\u2019\u201d Am. Gen. Life. Ins. v. Goldstein, 741 F. Supp. 2d 604, 612 (D.\n\n Del. 2010) (quoting Trenwick Am. Litig. Trust v. Ernst & Young, LLP, 906 A.2d\n\n 168, 207 (Del. Ch. 2006) (alterations in original), aff\u2019d sub nom., Trenwick Am.\n\n Litig. Trust v. Billett, 931 A.2d 438 (Del. 2007)). Under Delaware law, the\n\n elements of fraud are:\n\n       (1) a false representation, usually one of fact, made by the defendant;\n       (2) the defendant\u2019s knowledge or belief that the representation was\n       false, or was made with reckless indifference to the truth; (3) an intent\n       to induce the plaintiff to act or to refrain from acting; (4) the plaintiff\u2019s\n       action or inaction taken in justifiable reliance upon the representation;\n       and (5) damage to the plaintiff as a result of such reliance.\n\n Snowstorm Acquisition Corp. v. Tecumseh Prods. Co., 739 F. Supp. 2d 686, 708\n\n (D. Del. 2010) (quoting Norman v. Elkin, 617 F. Supp. 2d 303, 315 n.6 (D. Del.\n\n 2009)). In Delaware, there are three recognized categories of fraud:\n\n \u201c(1) affirmative falsehoods; (2) active concealment; and (3) silence in the face of a\n\n duty to speak.\u201d Id. (quoting Airborne Health, Inc. v. Squid Soap, LP, Civ. No.\n\n 4410, 2010 WL 2836391, at *7 (Del. July 20, 2010)). \u201c[O]ne is equally culpable\n\n of fraud who by omission fails to reveal that which it is his duty to disclose in\n\n order to prevent statements actually made from being misleading.\u201d Stephenson v.\n\n Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983) (citations omitted).\n\n       Character Tech. alleges that Applied Digital was under a duty to disclose\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26   Page 25 of 30 PageID #: 247\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                      Page 25\n\n Applied Digital\u2019s belief that the Agreement was subject to a condition precedent\n\n requiring Applied Digital to locate a replacement customer to take over Character\n\n Tech.\u2019s leased computing clusters before Character Tech. would be released from\n\n its obligations. Character Tech. Compl. at \u00b6\u00b6 74\u201376. Applied Digital argues that it\n\n was under no obligation to disclose information to Character Tech. and contends\n\n that Character Tech.\u2019s Complaint fails to allege the factual basis from which the\n\n purported duty derives, what it entails, and how and why Applied Digital would be\n\n under an affirmative duty. Applied Digital Opening Br. at 10.\n\n       Character Tech.\u2019s Complaint alleges that Applied Digital had multiple\n\n opportunities to disclose its belief that the Agreement was subject to a condition\n\n precedent. Character Tech. Compl. at \u00b6 76. Character Tech. contends that Applied\n\n Digital did not disclose the condition precedent when Applied Digital first offered\n\n to end the Agreement early, nor did Applied Digital disclose the condition\n\n precedent in subsequent communications between the Parties. Id. at \u00b6\u00b6 77\u201379.\n\n The Complaint alleges that after Character Tech. sent the proposed Third\n\n Addendum, Applied Digital had a duty to disclose its belief that the Third\n\n Addendum did not accurately reflect the terms of the Agreement. Id. at \u00b6 80.\n\n       The Court observes that Applied Digital received the proposed Third\n\n Addendum after the Parties communicated the terms that Character Tech.\n\n attempted to memorialize in the Third Addendum. -----\n                                                 See id., Ex. D. Applied Digital\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26   Page 26 of 30 PageID #: 248\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                       Page 26\n\n did not respond that the proposed Third Addendum failed to accurately reflect the\n\n terms discussed by the Parties. See id. After Applied Digital was in receipt of the\n\n proposed Third Addendum, Applied Digital had the opportunity to disclose the\n\n condition precedent, yet failed to do so. Accordingly, at this stage of the case,\n\n assuming all factual allegations contained in the complaint to be true and drawing\n\n all reasonable inferences in favor of Character Tech., the Court holds that\n\n Character Tech. has alleged facts sufficient to show that Applied Digital had a duty\n\n to disclose the condition precedent of finding replacement customers before\n\n releasing Character Tech. from its obligations. See Stephenson, 462 A.2d at 1074.\n\n       With respect to the third element of fraud, Applied Digital\u2019s intent to induce\n\n Character Tech. to act or refrain from acting, Character Tech. alleges that Applied\n\n Digital intended to induce Character Tech. to relinquish its exclusive access to the\n\n leased computing clusters. Character Tech. Compl. at \u00b6 74. As to the fourth and\n\n fifth elements of justifiable reliance and damage because of said reliance,\n\n Character Tech. relinquished its exclusive access to the leased computing clusters\n\n to Applied Digital under the belief that Applied Digital would release Character\n\n Tech. from its obligations under the Agreement. Id. at \u00b6 87; see Stephenson, 462\n\n A.2d at 1074. Character Tech. alleges that Applied Digital deleted all of Character\n\n Tech.\u2019s data from the clusters and that Character Tech. proceeded to seek\n\n additional computing power from third-party providers. Character Tech. Compl. at\n\fCase 1:25-cv-00739-JCG      Document 32     Filed 07/23/26   Page 27 of 30 PageID #: 249\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                        Page 27\n\n \u00b6 87.\n\n         Applied Digital argues that Character Tech. failed to allege damages related\n\n to the fraud allegation. Applied Digital Opening Br. at 10\u201311. Under Delaware\n\n law, however, Character Tech. has sufficiently alleged facts showing that it was\n\n damaged as a result of its reliance on Applied Digital\u2019s statements. See Latsco,\n\n L.P. v. Wayport, Inc., No. 4167-VCL, 2009 WL 2246793, at *9 (Del. Ch. July 24,\n\n 2009) (\u201cLastly, with regard to damages, although how damages would be\n\n measured should the plaintiffs prevail is unclear, all that the plaintiffs need to plead\n\n at this stage is that they were harmed by the fraudulent conduct.\u201d). Accordingly,\n\n assuming all factual allegations contained in the complaint to be true and drawing\n\n all reasonable inferences in favor of Character Tech., the Court holds that\n\n Character Tech. has sufficiently pled facts establishing its fraud claim against\n\n Applied Digital.\n\n         Delaware\u2019s \u201canti-bootstrapping rule\u201d bars a fraud claim when the plaintiff\n\n merely \u201cadds the term \u2018fraudulently induced\u2019 to a complaint or alleges that the\n\n defendant never intended to comply with the agreement at issue at the time the\n\n parties entered into it,\u201d but does not prevent \u201ca fraud claim against defendants who\n\n \u2018knew [contractual representations] were false, and yet made them anyway.\u2019\u201d\n\n Levy Fam. Invs., LLC v. Oars + Alps LLC, No. CV 2021-0129-JRS, 2022 WL\n\n 245543, at *8 (Del. Ch. Jan. 27, 2022) (alteration in original) (quoting Anschutz\n\fCase 1:25-cv-00739-JCG     Document 32      Filed 07/23/26   Page 28 of 30 PageID #: 250\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                        Page 28\n\n Corp. v. Brown Robin Cap., LLC, No. CV 2019-0710-JRS, 2020 WL 3096744, at\n\n *15 (Del. Ch. June 11, 2020)). \u201cA rule that would limit a plaintiff\u2019s recovery for\n\n so-called \u2018contractual fraud\u2019 solely on the ground that the same conduct also\n\n constitutes a breach of contract would offend Delaware public policy and the now-\n\n settled Delaware law regarding \u2018contractual fraud\u2019 that is animated, in part, by\n\n those policy concerns.\u201d Id. Delaware\u2019s \u201canti-bootstrapping rule\u201d does not prevent\n\n parties from bringing a fraud claim if: \u201c(1) the plaintiff alleges the seller knowingly\n\n made false contractual representations[;]\u201d \u201c(2) damages for plaintiff\u2019s fraud claim\n\n may be different from plaintiff\u2019s own breach of contract claim[;]\u201d \u201c(3) the conduct\n\n occurs prior to the execution of the contract and thus with the goal of inducing the\n\n plaintiff\u2019s signature and willingness to close on the transaction[;]\u201d or \u201c(4) the\n\n breach of contract claim is not well-pled such that there is no breach claim on\n\n which to \u2018bootstrap\u2019 the fraud claim.\u201d Levy Fam. Invs., LLC, 2022 WL 245543, at\n\n *8 (internal citations omitted).\n\n       Character Tech. alleges that Applied Digital withheld its belief that the\n\n Agreement was subject to a condition precedent requiring that Applied Digital\n\n locate a replacement customer to take over Character Tech.\u2019s leased computing\n\n clusters before Character Tech. would be released from its obligations to pay.\n\n Character Tech. Compl. at \u00b6 75. Character Tech. avers that Applied Digital had\n\n several opportunities to disclose its belief that the Agreement was subject to this\n\fCase 1:25-cv-00739-JCG    Document 32     Filed 07/23/26   Page 29 of 30 PageID #: 251\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                     Page 29\n\n condition. Id. at \u00b6 76. Character Tech.\u2019s Complaint refers to email and text\n\n message communications alleging that Applied Digital should have disclosed its\n\n belief regarding the condition precedent in this correspondence. Id. at \u00b6\u00b6 77\u201379.\n\n Lastly, Character Tech. contends that Applied Digital should have disclosed the\n\n condition precedent when Applied Digital received the proposed Third Addendum\n\n from Character Tech. Id. at \u00b6 80. Although Character Tech.\u2019s fraud claim and\n\n declaratory judgment claim overlap in some degree, the fraud claim is distinct from\n\n the declaratory judgment claim, because Character Tech. sufficiently pled that\n\n Applied Digital engaged in fraudulent inducement by withholding its belief that the\n\n Agreement was subject to a condition precedent that required Applied Digital to\n\n locate a replacement customer to take over Character Tech.\u2019s leased computing\n\n clusters before Character Tech. would be released from its obligations. See Levy\n\n Fam. Invs., LLC, 2022 WL 245543, at *8. Because Character Tech. has\n\n sufficiently pled that Applied Digital made pre-agreement misrepresentations and\n\n omissions intended to induce Character Tech. to relinquish its exclusive control of\n\n the leased computing clusters, Character Tech.\u2019s fraud claim will not be dismissed\n\n on the ground that the fraud claim is duplicative and will survive as a counterclaim\n\n after consolidation. Accordingly, the Court denies Applied Digital\u2019s Partial\n\n Motion to Dismiss Count IV of Character Tech.\u2019s Complaint.\n\fCase 1:25-cv-00739-JCG     Document 32     Filed 07/23/26    Page 30 of 30 PageID #: 252\n\n Court Nos. 1:25-cv-00739, 1:25-cv-00909                                       Page 30\n\n                                   CONCLUSION\n\n        Upon consideration of Applied Digital\u2019s Partial Motion to Dismiss in\n\n Character Tech., Court No. 25-00739 (D.I. 9) and Character Tech.\u2019s Motion to\n\n Dismiss or Consolidate in Applied Digital, Court No. 25-00909 (D.I. 11), and all\n\n other papers and proceedings in this action, it is hereby\n\n        ORDERED that Applied Digital\u2019s Partial Motion to Dismiss in Character\n\n Tech., Court No. 25-00739 (D.I. 9) is granted in part and denied in part; and it is\n\n further\n\n        ORDERED that Count I of Character Tech.\u2019s Complaint, Declaratory\n\n Judgment of No Breach of Contract, is dismissed; and it is further\n\n        ORDERED that Character Tech.\u2019s Motion to Dismiss or Consolidate in\n\n Applied Digital, Court No. 25-00909 (D.I. 11) is granted in part and denied in part;\n\n and it is further\n\n        ORDERED that Court No. 25-00739 shall be consolidated into Court No.\n\n 25-00909; and it is further\n\n        ORDERED that this case shall proceed under Consol. Court No. 25-00909.\n\n IT IS SO ORDERED this 23rd day of July, 2026.\n\n                                                        /s/ Jennifer Choe-Groves\n                                                           Jennifer Choe-Groves\n                                                         U.S. District Court Judge\uf02a\n\n \uf02a\n  Judge Jennifer Choe-Groves, of the United States Court of International Trade,\n sitting by designation.\n\f","ocr_status":1,"date_upload":"2026-07-23T08:26:37.268841-07:00","document_number":"32","attachment_number":null,"pacer_doc_id":"04307302663","is_available":true,"is_free_on_pacer":true,"is_sealed":null,"document_type":1,"description":"Order - Memorandum and Order","acms_document_guid":""}],"date_created":"2026-07-23T08:07:03.572162-07:00","date_modified":"2026-08-23T04:15:45.097827-07:00","date_filed":"2026-07-23","time_filed":"10:24:49","entry_number":32,"recap_sequence_number":"2026-07-23.001","pacer_sequence_number":113,"description":" OPINION AND ORDER: Applied Digital's Partial Motion to Dismiss in Character Tech., Court No. 25-00739 (D.I. 9) is granted in part and denied in part. Character Tech.'s Motion to Dismiss or Consolidate in Applied Digital, Court No. 25-00909  (D.I. 11) is granted in part and denied in part. Court No. 25-00739 shall be consolidated into Court No. 25-00909; and it is further ORDERED that this case shall proceed under Consol. Court No. 25-00909. (See Order for further details). Signed by Judge Jennifer Choe-Groves on 7/23/2026. 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