Doberstein v. G-P Industries, Inc. ( 2015 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
ANNE L. DOBERSTEIN, )
)
Plaintiff, )
)
v. ) C.A. No. 9995-VCP
)
G-P INDUSTRIES, INC., a Delaware corporation, )
DAVID GREENPLATE, SR., )
)
Defendants. )
MEMORANDUM OPINION
Date Submitted: July 10, 2015
Date Decided: October 30, 2015
Donald L. Logan, Esq., LOGAN & PETRONE, LLC, Wilmington, Delaware; Attorneys
for Plaintiff.
Patrick McGrory, Esq., TIGHE & COTTRELL, P.A., Wilmington, Delaware; Attorneys
for Defendants.
PARSONS, Vice Chancellor.
This is primarily a breach of contract action seeking damages for failure to
perform under a residential renovation agreement. The plaintiff hired the defendants to
substantially remodel her recently purchased residence, but the defendants suffered
significant financial trouble and abandoned the project before completion. The plaintiff
advances a number of theories of recovery, including fraud, intentional and negligent
misrepresentation, breach of contract, and unjust enrichment. The defendants moved to
dismiss three of the complaint‟s counts under Court of Chancery Rule 12(b)(6) for failure
to state a claim and the remaining three counts along with the complaint entirely under
Rule 12(b)(1) for lack of subject matter jurisdiction. For the reasons set forth below, I
conclude that the plaintiff has not stated a claim upon which relief can be granted as to
the first three counts and that this Court lacks subject matter jurisdiction over the
remaining three counts. I therefore grant the defendants‟ motion and dismiss the
complaint.
I. BACKGROUND1
A. Parties
Plaintiff, Anne L. Doberstein, is an individual who primarily works and resides in
Switzerland. Doberstein also owns a residence located at 103 East Pembrey Drive in
Wilmington, Delaware.
1
The facts recited herein are drawn from the allegations of the plaintiff‟s Verified
Complaint (the “Complaint”). Those allegations and facts drawn from documents
integral to the Complaint are presumed true for purposes of Defendants‟ motion to
dismiss.
1
Defendant G-P Industries, Inc. (“G-P”) is a Delaware corporation that provides
general contracting and altering and remodeling services in Wilmington, Delaware.
Defendant David Greenplate, Sr. is the president and registered agent of G-P. G-P and
Greenplate are referred to, collectively, as “Defendants.”
B. Facts
1. Doberstein hires G-P to renovate her house
In October 2012, Doberstein entered into a contract with G-P (the “Agreement”),
under which G-P agreed to serve as the general contractor on a significant home
renovation project at Doberstein‟s Wilmington residence (the “Project”). On October 17,
2012, Greenplate, on behalf of G-P, prepared the Project‟s estimates and the Agreement.
He estimated that the Project would cost Doberstein a total of $494,498.2 Under the
terms of the Agreement, Doberstein was to provide advance deposits for subcontractors
performing work on the basement as well as for the building permit. Otherwise, the
Agreement did not contemplate Doberstein paying for any renovations before they were
completed or paying subcontractors directly. Instead, G-P was to pay all subcontractors
and to seek reimbursement through its invoices to Doberstein. In addition, G-P agreed to
invoice Doberstein on the first of each month—with the exception of major material
purchases, which were to be invoiced immediately—and to provide a three percent
2
Although they agree that the estimated $494,498 was the initial amount of the
Agreement, the parties dispute the final amount covered by the Agreement. Based
on the allegations in the Complaint and taking into account the additional $47,662
in supplemental estimates and change orders, I assume for purposes of this motion
that the total amount of the Agreement was $542,159. See Compl. ¶ 6.
2
discount on labor charges when Doberstein paid in cash. G-P began work on the Project
in November 2012. Defendants repeatedly assured Doberstein that the Project would be
completed by the end of 2013.
Doberstein, who lives and works in Switzerland, began making monthly payments
while abroad. On March 14, 2013, G-P sent Doberstein a $1,520 invoice for cabinet
grade plywood. G-P had not yet begun construction on the portions of the Project that
required the plywood, but purchased the plywood early because it was concerned that the
cost would increase. Doberstein paid G-P to purchase the plywood in advance and store
it until needed. Further, in that March 14 invoice and in an April 10, 2013 invoice, G-P
offered Doberstein a three percent reduction on labor if she paid in cash directly to
Greenplate. Doberstein paid a total amount of $33,950 in cash directly to Greenplate
based on those two invoices.
2. Doberstein discovers issues with the Project’s progress
In May 2013, Doberstein traveled from Switzerland to visit the Project site. Upon
arrival, she discovered that little work had been completed, despite the fact that she had
paid Defendants $127,820.10. After Doberstein returned to Switzerland, her interior
designer, Matthew Pearson, spoke with Greenplate about the lack of progress.
Greenplate explained that the Project had been delayed due to a lack of manpower, delays
on other projects, and shuffling employees. He assured Pearson, however, that the
Project still would be completed by the end of 2013.
On or about July 25 and 27, 2013, a neighbor, who also served as the president of
the neighborhood homeowners‟ association, contacted Doberstein regarding the unkempt
3
state of her property. The neighbor informed Doberstein that little progress had been
made on the Project in the past several months, even after the meetings Doberstein and
Pearson had with Greenplate. Doberstein contacted Greenplate, demanding action. On
August 9, 2013, Greenplate sent a letter to Doberstein‟s neighbors, explaining that the
Project had been delayed due to weather and manpower issues and stating that “we did
stop working there in early May . . . .”3 Despite halting work on the Project, G-P had sent
Doberstein invoices from May through August for a total amount of $49,500.
Later in August 2013, Pearson began meeting weekly at the Project site with
Greenplate and insisted that G-P prepare a schedule of the work to be done. During those
weekly meetings, Pearson observed three to six workers on the Project at any given time.
Doberstein and Pearson later discovered that the Project was unmanned most of the week
and that the number of workers was increased on days when Greenplate would meet with
one of them.
3. The Project’s completion date gets delayed
In September 2013, Doberstein learned that, contrary to her explicit instructions,
Pearson had not been copied on the invoices sent to her by G-P and Greenplate.
Doberstein reiterated her request for Pearson to be copied on all invoices. Later that
month, during one of their weekly meetings, Greenplate revealed to Pearson that the
Project would not be completed until the end of January 2014. Doberstein did not
respond well to this news. To ameliorate her displeasure, Greenplate told Doberstein that
3
Compl. ¶ 12.
4
the Project would be substantially complete by the end of 2013, such that Doberstein
could move in her things. Throughout the rest of 2013, G-P‟s invoicing accelerated in
amount and frequency. By the end of December 2013, Doberstein had paid a total of
$314,434.68 to G-P and Greenplate since the Project‟s inception, representing fifty-eight
percent of the total $542,159 due under the Agreement, though the Project was nowhere
near complete.
In January 2014, Pearson informed Greenplate that the Project had to be
completed by March 1, because Doberstein‟s builders‟ risk insurance policy would expire
on that date. After multiple requests from Pearson, Greenplate finally submitted a
completion schedule, which contemplated a March 1 completion date. Greenplate then
told Doberstein that G-P would need to bill every two weeks rather than monthly. As a
result, Doberstein set up direct wire transfers from her bank account to G-P‟s account.
Between January 1 and February 21, 2014, Doberstein paid an additional $146,930.34 via
wire transfers to G-P. The Project‟s final invoice was issued to Doberstein on February
17, 2014 and was followed by G-P‟s urgent requests for payment over the following few
days.
4. G-P goes out of business
On February 22, 2014, Doberstein, Pearson, Greenplate, and the flooring
subcontractor met to discuss the Project. During the meeting, Greenplate admitted he
would not have the Project complete by March 1, but promised Doberstein it would be
complete by the end of April. Three days later, however, Greenplate fired G-P‟s
employees and sent a letter to Doberstein and at least one other customer informing them
5
that G-P would be abandoning their renovations, because financially, it was unable to
continue in business. The letter stated that G-P‟s financial troubles were due, in part, to
its underbidding of the Project, late payments by customers, and increased costs. In
March, Greenplate and G-P abandoned the Project altogether. In April, Todd Breck,
A.I.A., P.E., of Breckstone Architecture, inspected the Project and estimated that, at the
time, the value of the work in place was approximately $298,272.98. To date, Doberstein
has paid Defendants a total of $461,365.02.
C. Procedural History
On August 2, 2014, Doberstein filed the Complaint against Greenplate and G-P.
On October 2, 2014, Defendants moved to dismiss the Complaint and filed an opening
brief on December 8. On July 10, 2015, after completion of the briefing, I heard oral
argument on that motion. During argument, Doberstein voluntarily dismissed Counts
VII, VIII, and IX of the Complaint.4 This Memorandum Opinion constitutes my rulings
on Defendants‟ motion to dismiss with respect to the Complaint‟s remaining six counts.
D. Parties’ Contentions
Doberstein asserts six remaining counts against Defendants. In Count I, she seeks
to pierce G-P‟s corporate veil and hold Greenplate personally liable for his fraudulent
statements and misrepresentations to her. In Count II, Doberstein avers that Greenplate
and G-P fraudulently concealed their plan to abandon the Project after she had paid in full
4
July 10 Arg. Tr. 7. Count VII was a claim for breach of the implied covenant of
good faith and fair dealing, Count VIII a claim for conversion, and Count IX a
claim for replevin. See Compl. ¶¶ 71-86.
6
under the Agreement. In Count III, Doberstein alleges Greenplate and G-P intentionally
misrepresented the amount due under various invoices in order to extract unwarranted
payments from her. In Count IV, Doberstein avers that Greenplate and G-P negligently
misrepresented information regarding the status, completion, and billing of the Project.
Count V asserts a claim against G-P for breach of an express contract, which Defendants
do not contest in their motion. Finally, in Count VI, Doberstein alleges that Greenplate
and G-P have been unjustly enriched by the amount they received from her for work they
did not perform on the Project.
Defendants counter, pursuant to Rule 12(b)(6), that Counts I, IV, and VI should be
dismissed for failure to state a claim that would entitle Doberstein to relief. Further,
Defendants argue that if the equitable claims in Counts I, IV, and VI are dismissed under
Rule 12(b)(6), the remaining claims, which are legal in nature, should be dismissed for
lack of subject matter jurisdiction under Rule 12(b)(1). Alternatively, if I do not dismiss
the remainder of the action for lack of subject matter jurisdiction, Defendants assert that
Counts II and III should be dismissed for failure to state a claim upon which relief can be
granted.
II. ANALYSIS
A. Counts I, IV, and VI Must Be Dismissed Under Rule 12(b)(6) for Failure to
State a Claim
1. Legal standard
Pursuant to Rule 12(b)(6), this Court may grant a motion to dismiss for failure to
state a claim if a complaint does not assert sufficient facts that, if proven, would entitle
7
the plaintiff to relief. As reaffirmed by the Delaware Supreme Court, “the governing
pleading standard in Delaware to survive a motion to dismiss is reasonable
„conceivability.‟”5 That is, when considering such a motion, a court must “accept all
well-pleaded factual allegations in the Complaint as true, . . . draw all reasonable
inferences in favor of the plaintiff, and deny the motion unless the plaintiff could not
recover under any reasonably conceivable set of circumstances susceptible of proof.”6
This reasonable “conceivability” standard asks whether there is a “possibility” of
recovery.7 If the well-pled factual allegations of the complaint would entitle the plaintiff
to relief under a reasonably conceivable set of circumstances, the court must deny the
motion to dismiss.8 The court, however, need not “accept conclusory allegations
unsupported by specific facts or . . . draw unreasonable inferences in favor of the non-
moving party.”9 Moreover, failure to plead an element of a claim precludes entitlement
to relief and, therefore, is grounds to dismiss that claim.10
Generally, the Court will consider only the pleadings on a motion to dismiss under
5
Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 537
(Del. 2011) (footnote omitted).
6
Id. at 536 (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002)).
7
Id. at 537 & n.13.
8
Id. at 536.
9
Price v. E.I. duPont de Nemours & Co., Inc., 26 A.3d 162, 166 (Del. 2011) (citing
Clinton v. Enterprise Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)).
10
Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d 963, 972 (Del. Ch. 2000) (Steele,
V.C., by designation).
8
Rule 12(b)(6). “A judge may consider documents outside of the pleadings only when: (1)
the document is integral to a plaintiff‟s claim and incorporated in the complaint or (2) the
document is not being relied upon to prove the truth of its contents.”11
2. Count I: piercing the corporate veil
Doberstein claims that, despite Greenplate‟s otherwise limited liability, I should
pierce G-P‟s corporate veil and hold him individually liable for his allegedly fraudulent
conduct. “To state a „veil-piercing claim,‟ the plaintiff must plead facts supporting an
inference that the corporation, through its alter-ego, has created a sham entity designed to
defraud investors and creditors.”12 Specific facts a court may consider when being asked
to disregard the corporate form include: “(1) whether the company was adequately
capitalized for the undertaking; (2) whether the company was solvent; (3) whether
corporate formalities were observed; (4) whether the dominant shareholder siphoned
company funds; and (5) whether, in general, the company simply functioned as a facade
for the dominant shareholder.”13 The decision to disregard the corporate entity
“generally results not from a single factor, but rather some combination of them, and „an
overall element of injustice or unfairness must always be present, as well.‟”14 Most
11
Allen v. Encore Energy P’rs, 72 A.3d 93, 96 n.2 (Del. 2013).
12
Crosse v. BCBSD, Inc., 836 A.2d 492, 497 (Del. 2003)
13
MicroStrategy Inc. v. Acacia Research Corp., 2010 WL 5550455, at *11 (Del. Ch.
Dec. 30, 2010) (internal quotation marks and citation omitted).
14
Id. (citing EBG Hldgs. LLC v. Vredezicht's Gravenhage 109 B.V., 2008 WL
4057745, at *12 (Del. Ch. Sept. 2, 2008)).
9
importantly, “because Delaware public policy does not lightly disregard the separate legal
existence of corporations, a plaintiff must do more than plead that one corporation is the
alter ego of another in conclusory fashion in order for the Court to disregard their
separate legal existence.”15
Doberstein contends that her claim for veil-piercing is supported by her allegations
that Greenplate repeatedly communicated false statements to her concerning the work
being done at her property and that she relied on those statements to her detriment. She
alleges that Greenplate and G-P increased the frequency and the amount of their billing
during the last six weeks of the Project, despite the fact that they knew they shortly were
going to abandon it and cease doing business.16 According to Doberstein, because all the
requisite elements of fraud are present, she has alleged a sufficient basis for disregarding
the corporate identity of G-P and holding Greenplate personally liable. I disagree.
The case law governing veil-piercing requires me to consider whether the
individual defendant—i.e., Greenplate—abused the corporate form and, through that
abuse, perpetrated fraud on an innocent third party—i.e., Doberstein. It is not enough to
allege, as Doberstein does, that Greenplate made fraudulent statements about his progress
toward completing his contractual obligations. Those types of allegations may or may
not support a claim for fraud, but Greenplate‟s wrongful acts must be tied to the
15
Id.
16
Compl. ¶¶ 41-42.
10
manipulation of the corporate form in order to make veil-piercing justifiable on grounds
of equity. No such nexus is alleged here.
The Complaint alleges that Greenplate knew that G-P was going out of business
and, therefore, induced Doberstein to make accelerated payments from January 1 to
February 21, 2014, to extract as much money from her as possible. Doberstein has not
pled, however, that Greenplate siphoned funds from G-P to himself during those last six
weeks and thereby used the corporate form to shield those funds and himself from
liability once G-P went out of business.17 Absent such allegations, the Complaint states,
at most, a claim for fraud against G-P due to actions taken by Greenplate on its behalf.18
Because Doberstein failed to allege that Greenplate utlized G-P as a sham entity to
defraud her, Count I must be dismissed for failure to state a claim.
17
Although not discussed in the briefs, Doberstein alleges in the Complaint that
Greenplate had her make direct payments to him in cash on two separate occasions
in March and April 2013, Compl. ¶ 17, well before Greenplate allegedly knew of
G-P‟s eventual demise. Although this allegation raises questions about Greenplate
possibly siphoning off company funds, the Complaint does not plead facts
satisfying the other four elements under MicroStrategy or demonstrating that an
element of injustice or unfairness related to the corporate form of G-P was present
during the March-April 2013 time period. The decision to disregard the corporate
entity “generally results not from a single factor, but rather some combination of
them, and „an overall element of injustice or unfairness must always be present, as
well.‟” MicroStrategy Inc., 2010 WL 5550455, at *11. Although Doberstein‟s
allegations as to her two payments to Greenplate may establish a direct claim
against him for fraud, they are insufficient, standing alone, to state a claim for
piercing the corporate veil.
18
I express no opinion as to whether Doberstein might have a claim directly against
Greenplate for fraud.
11
3. Count IV: negligent misrepresentation
Negligent misrepresentation—also known as “equitable fraud”—“is separate
from, and broader, than common law fraud,”19 such that “generally whatever amounts to
common law fraud also amounts to equitable fraud.”20 “[T]o claim equitable fraud, „the
plaintiff need not show that a statement was made with knowledge that it was false or in
reckless disregard of the truth,‟”21 as this Court generally “has not required a showing of
scienter, „reflecting its willingness to provide a remedy for negligent or innocent
misrepresentation.‟”22 Yet, “[e]quitable fraud is not available in every case or to every
plaintiff. It requires special equities, typically the existence of some form of fiduciary
relationship, such as that between a director and stockholder or a trustee and cestui que
trust, although other circumstances might be cited.”23
Doberstein contends that because she contracted with G-P to complete renovation
work at her property while she was living abroad, she was “relying” on Defendants in a
special way and, therefore, can bring this claim for equitable fraud. I do not find this
19
Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 143 (Del. Ch. 2009).
20
Narrowstep Inc. v. Onstream Media Corp., 2010 WL 5422405, at *13 (Del. Ch.
Dec. 22, 2010).
21
Airborne Health, Inc., 984 A.2d at 144 (citing DONALD J. WOLFE, JR. & MICHAEL
A. PITTENGER, CORPORATE AND COMMERCIAL PRACTICE IN THE DELAWARE
COURT OF CHANCERY § 2.03[b][1], at 2-33 (2009)).
22
Narrowstep Inc., 2010 WL 5422405, at *13 (quoting Airborne Health, Inc., 984
A.2d at 144).
23
Id. (citing U.S. West, Inc. v. Time Warner, Inc., 1996 WL 307445, at *24 (Del. Ch.
June 6, 1996) (Allen, C.)).
12
argument persuasive. Sophisticated24 contractual parties who bargain at arm‟s length
generally do not qualify for the kind of equitable protection that the negligent
misrepresentation doctrine envisions in this regard.25 The “special equities” that can
provide a basis for equitable fraud are relationships more akin to fiduciary duties or
trustee relationships. In this case, Doberstein entered into a contract for a major home
renovation. Even though she was living abroad, Doberstein still periodically checked in
on the progress of that Project. Moreover, Doberstein alleges that her designer, Pearson,
was located in the vicinity of the property, monitored the progress of Defendants‟ work
more closely, and reported back to her.26 Nothing in the Complaint suggests that the
relationship between Doberstein and Defendants was anything but a typical contractual
relationship. The obligations owed to Doberstein, therefore, were contractual in nature,
and her remedy for breaches of those obligations can be obtained through an action
sounding in contract. As a result, the Complaint fails to state a claim for negligent
misrepresentation.
4. Count VI: unjust enrichment
Unjust enrichment is the “„unjust retention of a benefit to the loss of another, or
the retention of money or property of another against the fundamental principles of
24
Although there is no indication in the Complaint that Doberstein herself was a
sophisticated party as to the subject matter of the Agreement, the assistance she
received throughout the relevant period from Pearson likely qualifies her as such.
25
Id.; see also Osram Sylvania Inc. v. Townsend Ventures, LLC, 2013 WL 6199554,
at *15 (Del. Ch. Nov. 19, 2013).
26
See, e.g., Compl. ¶¶ 6-11; Pl.‟s Answer Br. 3.
13
justice or equity and good conscience.‟”27 Unjust enrichment, or “quasi-contract,”
developed “as a theory of recovery to remedy the absence of a formal contract.”28 When
a complaint alleges an express, enforceable contract that controls the parties‟ relationship,
a claim for unjust enrichment will be dismissed because the “contract is the measure of
plaintiffs‟ right.”29
Defendants contend that because Doberstein pleads a breach of the Agreement in
Count V, that contract is the measure of her rights. That is, because there is no
independent basis upon which the unjust enrichment claim could proceed, it should be
dismissed. Doberstein responds that her unjust enrichment claim is pled in the alternative
to the breach of contract claim and that all the elements of unjust enrichment have been
pled.
“A claim for unjust enrichment is not available if there is a contract that governs
the relationship between parties that gives rise to the unjust enrichment claim.”30
Doberstein has not identified any factual basis for her unjust enrichment claim
independent of the allegations relating to her breach of contract claim. Indeed, in her
brief, Doberstein states that she “has lost on the deal given that she paid the full amount
due under the [Agreement], $494,498.00, only to be left with an [un]inhabitable home
27
Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 891-92 (Del. Ch. 2009).
28
Choupak v. Rivkin, 2015 WL 1589610, at *20 (Del. Ch. Apr. 6, 2015).
29
Wood v. Coastal States Gas Corp., 401 A.2d 932, 942 (Del. 1979).
30
Kuroda, 971 A.2d at 891.
14
. . . .”31 Thus, by her own assertions, the unjust enrichment claim relies on the same
damages as the breach of contract claim. In those circumstances, I conclude that Count V
cannot be maintained, because the Agreement provides the measure of Doberstein‟s
rights here. Thus, Doberstein‟s unjust enrichment claim also must be dismissed under
Rule 12(b)(6).
B. The Remaining Counts Must be Dismissed Under Rule 12(b)(1) for Lack of
Subject Matter Jurisdiction
1. Legal standard
The Court of Chancery will dismiss an action under Rule 12(b)(1) “if it appears
from the record that the Court does not have subject matter jurisdiction over the claim.”32
The plaintiff “bears the burden of establishing this Court‟s jurisdiction, and where the
plaintiff‟s jurisdictional allegations are challenged through the introduction of material
extrinsic to the pleadings, he must support those allegations with competent proof.”33
31
Pl.‟s Answer Br. 23.
32
AFSCME Locals 1102 & 320 v. City of Wilm., 858 A.2d 962, 965 (Del. Ch. 2004)
(internal citation omitted).
33
Yancey v. Nat’l Trust Co., 1993 WL 155492, at *6 (Del. Ch. May 7, 1993)
(internal citation omitted).
15
This Court is one of limited jurisdiction.34 It can acquire subject matter
jurisdiction over a case in three ways: (1) an invocation of an equitable right;35 (2) a
request for an equitable remedy when there is no adequate remedy at law; 36 or (3) a
statutory delegation of subject matter jurisdiction.37 This Court “will not exercise subject
matter jurisdiction where a complete remedy otherwise exists but where plaintiff has
prayed for some type of traditional equitable relief as a kind of formulaic „open sesame‟
to the Court of Chancery.”38
34
The issue of subject matter jurisdiction is so crucial that it may be raised at any
time before final judgment. See Appoquinimink Educ. Ass’n v. Appoquinimink
Sch. Dist., 2003 WL 1794963, at *3 n.24 (Del. Ch. Mar. 31, 2003).
35
See 10 Del. C. § 341 (“The Court of Chancery shall have jurisdiction to hear and
determine all matters and causes in equity.”); Christiana Town Ctr. LLC v. New
Castle Cty., 2003 WL 21314499, at *3 (Del. Ch. June 6, 2003) (“Equitable rights
are rights that have traditionally not been recognized at common law. The most
common example of equitable rights in this court are fiduciary rights and duties
that arise in the context of trusts, corporations, other forms of business
organizations, guardianships, and the administration of estates.”); Azurix Corp. v.
Synagro Techs., Inc., 2000 WL 193117, at *2 (Del. Ch. Feb. 3, 2000).
36
10 Del. C. § 342 (“The Court of Chancery shall not have jurisdiction to determine
any matter wherein sufficient remedy may be had by common law, or statute,
before any other court or jurisdiction of this State.”); Christiana Town Ctr., 2003
WL 21314499, at *3 (“Equitable remedies . . . may be applied even where the
right sued on is essentially legal in nature, but with respect to which the available
remedy at law is not fully sufficient to protect or redress the resulting injury under
the circumstances.”) (internal quotation marks omitted).
37
See Candlewood Timber Gp., LLC v. Pan Am. Energy, LLC, 859 A.2d 989, 997
(Del. 2004).
38
Christiana Town Ctr., 2003 WL 21314499, at *3 (quoting IBM Corp. v.
Comdisco, Inc., 602 A.2d 74, 78 (Del. Ch. 1991)).
16
The party seeking a court‟s intervention bears the burden of establishing the
court‟s subject matter jurisdiction,39 and the court may consider evidence outside the
pleadings in resolving that issue.40 Further, “[i]n deciding whether or not equitable
jurisdiction exists, the Court must look beyond the remedies nominally being sought, and
focus upon the allegations of the complaint in light of what the plaintiff really seeks to
gain by bringing his or her claim.”41 In other words, “the court must address the nature
of the wrong alleged and the available remedy to determine whether a legal, as opposed
to an equitable remedy, is available and sufficiently adequate.”42
Further, “[t]he Court of Chancery . . . routinely decides controversies that
encompass both equitable and legal claims.”43 “[I]f a controversy is vested with equitable
features which would support Chancery jurisdiction of at least part of the controversy,
39
Maloney-Refaie v. Bridge at Sch., Inc., 2008 WL 2679792, at *7 (Del. Ch. July 9,
2008) (quoting Ropp v. King, 2007 WL 2198771, at *2 (Del. Ch. July 25, 2007)).
40
Ct. Ch. R. 12(b)(1); Sloan v. Segal, 2008 WL 81513, at *6 (Del. Ch. Jan. 3, 2008)
(citing Simon v. Navellier Series Fund, 2000 WL 1597890, at *5 (Del. Ch. Oct.
19, 2000)); see also Maloney-Refaie, 2008 WL 2679792, at *7 (citing NAMA
Hldgs., LLC v. Related World Mkt. Ctr., LLC, 922 A.2d 417, 429 n.15 (Del. Ch.
2007)).
41
Candlewood Timber Gp., 859 A.2d at 997; see also Diebold Computer Leasing,
Inc. v. Commercial Credit Corp., 267 A.2d 586, 588 (Del. 1970).
42
IMO Indus., Inc. v. Sierra Int’l, Inc., 2001 WL 1192201, at *2 (Del. Ch. Oct. 1,
2001).
43
Nicastro v. Rudegeair, 2007 WL 4054757, at *2 (Del. Ch. Nov. 13, 2007) (citing
WOLFE & PITTENGER, supra note 19, § 2-4 (supp. 2006) (“It is not at all unusual
for cases properly within the subject matter jurisdiction of the Court of Chancery
to involve both legal and equitable claims.”)).
17
then the Chancellor has discretion to resolve the remaining portions of the controversy as
well.”44 “Once the Court determines that equitable relief is warranted, even if subsequent
events moot all equitable causes of action or if the court ultimately determines that
equitable relief is not warranted, the court retains the power to decide the legal features of
the claim pursuant to the cleanup doctrine.”45
2. Counts II, III, and V: legal claims
Defendants contend, and Doberstein does not dispute, that Counts II, III, and V of
her Complaint are legal claims. Moreover, the harms for which Doberstein seeks relief in
the case of each of these claims can be remedied by money damages. Thus, there is no
basis on which this Court could assert subject matter jurisdiction over one or more of
these claims independently of the claims asserted in the other counts. If any of
Doberstein‟s equitable claims were well-pled, I would have had discretion to resolve
these legal claims under the so-called “cleanup doctrine.”46 Because I do not see a
colorable equitable hook in any of the equitable claims Doberstein advanced in Counts I,
IV, and VI, however, I do not consider it appropriate for this Court to retain jurisdiction
44
Getty Ref. & Mktg. Co. v. Park Oil, Inc., 385 A.2d 147, 149 (Del. Ch. 1978)
(emphasis added).
45
Prestancia Mgmt. Gp. v. Va. Heritage Found., II LLC, 2005 WL 1364616, at *11
(Del. Ch. May 27, 2005) (internal quotation marks omitted) (quoting Beal Bank
SSB v. Lucks, 2000 WL 710194, at *2 (Del. Ch. May 23, 2000)).
46
Darby Emerging Mkts. Fund, L.P. v. Ryan, 2013 WL 6401131, at *6 (Del. Ch.
Nov. 27, 2013) (“[I]f a controversy is vested with equitable features which would
support Chancery jurisdiction of at least part of the controversy, then the
Chancellor has discretion to resolve the remaining portions of the controversy as
well.”).
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over this action. For that reason, and without expressing any opinion as to the merits of
any of the remaining claims, I grant Defendants‟ motion to dismiss for lack of
jurisdiction as to Counts II, III, and V.
III. CONCLUSION
For the foregoing reasons, Defendants‟ motion to dismiss for failure to state a
claim as to Counts I, IV, and VI is granted under Rule 12(b)(6). I also grant Defendants‟
motion to dismiss Counts II, III, and V for lack of subject matter jurisdiction under Rule
12(b)(1). Counts I, IV, and VI are dismissed with prejudice. As to Counts II, III, and V,
Plaintiff may file within 60 days of the date of this Memorandum Opinion and Order a
written election to transfer this action to an appropriate court for hearing and
determination. If no such written election is filed within 60 days, this action will be
dismissed without prejudice.
IT IS SO ORDERED.
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