Jeehye Jung v. El Tinieblo International, Inc. ( 2022 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
JEEHYE JUNG, )
)
Plaintiff, )
)
v. ) C.A. No. 2021-0798-MTZ
)
EL TINIEBLO INTERNATIONAL, )
INC., TAMA IMPORTS, LLC, )
EDGAR D. MCKEAN, III, AND )
ALFREDO PEREZ-SALINAS )
TIJERINA, )
)
Defendants. )
MEMORANDUM OPINION
Date Submitted: July 15, 2022
Date Decided: October 31, 2022
Gregory F. Birney, BIRNEY LAW, LLC, Claymont, Delaware; Matt Simmons, LAW
OFFICES OF MATT SIMMONS, ESQ., Rockville, Maryland, Attorneys for
Plaintiff Jeehye Jung.
Robert K. Beste, SMITH, KATZENSTEIN & JENKINS LLP, Wilmington,
Delaware; Kimberly E. Blair and Deanna M. Williams, WILSON ELSER
MOSKOWITZ EDELMAN & DICKER LLP, Chicago, Illinois, Attorneys for
Defendants El Tinieblo International, Inc., TAMA Imports, LLC, Edgar D. McKean,
III, and Alfredo Perez-Salinas Tijerina.
ZURN, Vice Chancellor.
In December 2017, the plaintiff in this action contracted to provide
marketing services to a New Hampshire limited liability company operating in the
mezcal market. In exchange, the plaintiff received an approximately 2% interest
in the LLC and earned thousands of dollars in monthly pay and commissions. The
LLC terminated the contract within six months. The plaintiff and two LLC
members discussed buying the plaintiff out, but no money changed hands.
In April 2019, another entity formed by two members of the LLC purported
to acquire 100% of the LLC’s outstanding interests. The plaintiff alleges she still
owned approximately 2% of the LLC, but received no consideration. She
contends the acquisition was part of a conspiracy to repossess her stake in the LLC
without compensation.
The plaintiff sued two of the former LLC members, the LLC, and the
acquirer, seeking a declaration that she is still an LLC member or that she is
entitled to compensation for her interest. The plaintiff also asserts breach of
fiduciary duty claims for causing the purported transfer of her interest and breach
of contract claims for the amounts owed under her contract with the LLC.
The defendants moved to dismiss, primarily arguing that this Court lacks
subject matter jurisdiction because two provisions in the New Hampshire LLC
Act confer exclusive jurisdiction on New Hampshire for LLC internal affairs
1
claims “[u]nless the operating agreement provides otherwise.”1 That argument
fails under the Full Faith and Credit Clause of the United States Constitution. To
the extent the New Hampshire statutes purport to divest this Court of jurisdiction,
the plaintiff’s claims are not the sort of claims for which a state can seize exclusive
jurisdiction.
The LLC also moved to dismiss the breach of contract count for lack of
personal jurisdiction. Because the LLC has effectively consented to personal
jurisdiction as to other sufficiently related claims, the Court may and will exercise
personal jurisdiction over the LLC for the breach of contract claim as well.
Finally, the defendants challenged the merits of most of the plaintiff’s
claims. They have limited success.
I. BACKGROUND2
Defendant TAMA Imports, LLC (“TAMA”) is a New Hampshire limited
liability company that operates a mezcal business in the United States. TAMA
was founded by defendants Edgar McKean and Alfredo Perez-Salinas Tijerina,
1
N.H. Rev. Stat. 304-C:186.
2
The facts are drawn from well-pled allegations in the Verified Complaint (the
“Complaint”), available at Docket Item (“D.I.”) 1, as well as the documents incorporated
therein by reference and those that are integral to the Complaint. See Wal-Mart Stores,
Inc. v. AIG Life Ins. Co., 860 A.2d 312, 320 (Del. 2004).
2
and nonparty Matthew McKean, in September 2016. Initially, Edgar held 25% of
TAMA’s units, Tijerina owned 70%, and Matthew owned 5%.3
In December 2017, Plaintiff Jeehye Jung and TAMA executed a services
agreement (the “Services Agreement”) by which Jung would assume the role of
TAMA’s Chief Marketing Officer and “provide input and expertise for digital
strategy and commercialization.”4 TAMA agreed to pay Jung $3,000 each month
plus commissions on certain sales. TAMA would also provide Jung “an interest
in [TAMA] at the rate of 0.416/unit, per month, up to 5% total equity.”5 Jung was
not given a copy of TAMA’s operating agreement when she entered into the
Services Agreement.
On April 13, 2018, TAMA notified Jung it was terminating the Services
Agreement. By then, Jung had accrued a 2.08% interest in TAMA, and TAMA
owed her $6,596 under the Services Agreement.
On April 15, TAMA’s general counsel emailed Jung, acknowledging her
2.08% interest, and stating that “TAMA’s shares are currently valued at $1,000.00
per unit,” her units were collectively worth “approximately $2,080.00,” and “[t]he
3
In pursuit of clarity, I refer to Edgar McKean and Matthew McKean by their first
names. I intend no familiarity or disrespect.
4
Docket Item (“D.I.”) 1 [hereinafter “Compl.”] at Ex. B § 1.
5
Id. § 4.
3
value of the Company itself is well in the negative as of today.”6 This per unit
valuation is consistent with TAMA’s Limited Liability Company Agreement (the
“Operating Agreement”), which states that each TAMA unit is valued at $1,000.7
Later that month, Jung met with Edgar and Matthew to discuss the
acquisition of her interest in TAMA and payment of amounts owed to her under
the Services Agreement. They discussed the possibility of Jung accepting a
payment of $8,080 for both her equity and amounts owed. They did not agree on
a date the payment would be made, and they did not sign any written agreements
at the time. To date, no payments have been made pursuant to that conversation.
In 2019, defendant El Tinieblo International, Inc. (“ETI”), a Delaware
corporation Tijerina and Edgar had formed in 2018, purportedly acquired all of
TAMA’s outstanding units, including Jung’s interest. On April 13, 2019, ETI
filed an offering memorandum with the SEC, which announced that ETI
“purchased 100% interest [sic] in TAMA Imports, LLC April 3, 2019 [sic] using
company stock.”8 According to the filing, the only outstanding company shares
consisted of Class A Preferred Stock, of which Tijerina and Edgar collectively
owned 95% at the time of the offering. The filing describes that Tijerina, Edgar,
6
Compl. at Ex. D.
7
D.I. 36 [hereinafter “TAMA Operating Agreement”] at Ex. A.
8
Compl. at Ex. A, at JJ000022 [hereinafter “ETI Offering Mem.”].
4
and Matthew “contributed 100% of their membership interest in TAMA . . . in
exchange for a total of 675,000 shares of stock,” and that TAMA became a
wholly-owned ETI subsidiary.9 Jung has not received any compensation for her
TAMA units.
Jung filed her Complaint on September 15, 2021, asserting various claims
against Tijerina, Edgar, ETI, and TAMA (collectively, “Defendants”). Count I,
against all Defendants, seeks a declaratory judgment that she “is the rightful owner
of 2.08% of TAMA” or that she is entitled to compensation for the deprivation of
her interest.10 In Count II, Jung asserts Tijerina, Edgar, and TAMA breached their
fiduciary duties of care and loyalty owed to her as a TAMA member. Count III
alleges ETI aided and abetted those breaches by paying Tijerina, Edgar, and
Matthew 100% of the proceeds from its acquisition of TAMA despite knowing
Tijerina, Edgar, and TAMA were breaching their fiduciary duties in entering into
that acquisition. Count IV claims ETI was unjustly enriched because it
“purchased 100% of TAMA but paid 2.08% of the consideration to the wrong
persons,” and nevertheless accepted the benefit of that transaction.11 Count V is
a conspiracy claim against all Defendants, alleging they “conspired to unlawfully
9
Id. at JJ000004, JJ000022.
10
Compl. ¶ 28.
11
Id. ¶ 40.
5
cut [Jung] out of TAMA and to steal from the value of her interest in it.”12
Count VI asserts a breach of contract claim against TAMA for failure to pay Jung
under the Services Agreement.
On December 6, 2021, Defendants moved to dismiss the Complaint (the
“Motion”).13 Defendants primarily argue the Court lacks subject matter
jurisdiction over all but one of Jung’s claims, because the New Hampshire LLC
Act (the “NH Act”) mandates those claims be brought in New Hampshire. As to
the remaining breach of contract claim, Defendants argue Delaware courts lack
personal jurisdiction over TAMA. Defendants contend Tijerina and TAMA did
not owe Jung fiduciary duties under New Hampshire law. Finally, Defendants
assert Jung has failed to state claims for aiding and abetting and conspiracy.
The parties briefed the Motion, and I heard oral argument on June 2, 2022.14
I asked Defendants to file the Operating Agreement, which they did on June 3.15
I also asked for supplemental briefing characterizing Jung’s claims for purposes
12
Id. ¶ 42.
13
In the same motion, Defendants moved to enforce a purported oral agreement that
Jung and TAMA, through Edgar and Matthew, purportedly reached in 2018. On
Defendants’ suggestion, that request for relief was stayed pending resolution of the
motion to dismiss. D.I. 38 at 4–5, 56–57.
14
D.I. 37; D.I. 38.
15
D.I. 38 at 17; TAMA Operating Agreement.
6
of the NH Act’s venue statute and addressing the Operating Agreement.16 The
parties submitted that briefing on July 15.17
II. ANALYSIS
Defendants argue the Complaint should be dismissed under Court of
Chancery Rules 12(b)(1), (2), and (6).18 I must first determine whether the Court
has subject matter jurisdiction over each claim before considering whether
personal jurisdiction exists.19 After addressing subject matter jurisdiction and
personal jurisdiction, I will determine whether the Complaint adequately pleads
each claim Defendants moved to dismiss under Rule 12(b)(6).20
16
D.I. 38 at 58.
17
D.I. 41; D.I. 42.
18
The Motion stated Defendants were also moving to dismiss on Court of Chancery
Rules 12(b)(3), (4), and (5), but they have not briefed dismissal under those rules.
Accordingly, any argument that the Complaint should be dismissed under those rules is
deemed waived. Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not
briefed are deemed waived.”).
19
See Preston Hollow Cap., LLC v. Nuveen, LLC, 2019 WL 3801471, at *4 (Del. Ch.
Aug. 13, 2019) (“Equitable jurisdiction is a predicate issue for every matter in this court
of limited jurisdiction.”).
20
See Gibralt Cap. Corp. v. Smith, 2001 WL 647837, at *5 (Del. Ch. May 9, 2001)
(describing personal jurisdiction as a “threshold issue”).
7
A. The Court Has Subject Matter Jurisdiction Over All Of
Jung’s Claims.
“The Court of Chancery is proudly a court of limited jurisdiction.”21 “The
Court of Chancery can exercise subject matter jurisdiction only when a case falls
into one of three buckets.”22 Those buckets contain cases in which (i) “a plaintiff
states an equitable claim,” (ii) “a plaintiff requests equitable relief and there is no
adequate remedy at law,” and (iii) “jurisdiction exists by statute.”23 Jung seeks to
invoke this Court’s subject matter jurisdiction under the first bucket through her
breach of fiduciary duty claim, and contends the Court should exercise its
equitable cleanup jurisdiction over the remaining claims.24
Defendants contend two provisions of the NH Act preclude this Court from
exercising subject matter jurisdiction over claims concerning the internal affairs
of New Hampshire LLCs. Defendants’ opening brief described those provisions
as “mandatory statutory provision[s]” that require this litigation to be brought in
21
Perlman v. Vox Media, Inc., 2019 WL 2647520, at *4 (Del. Ch. June 27, 2019), aff’d,
249 A.3d 375 (Del. 2021).
22
Delawareans for Educ. Opportunity, 2018 WL 4849935, at *5 (Del. Ch. Oct. 5, 2018);
see also Candlewood Timber Grp., LLC v. Pan Am. Energy, LLC, 859 A.2d 989, 997
(Del. 2004) (identifying the three ways the “Court of Chancery can acquire subject
matter jurisdiction”).
23
Delawareans for Educ. Opportunity, 2018 WL 4849935, at *5.
24
Jung also asserts this Court has subject matter jurisdiction via 10 Del. C. § 341, but
that statute confers jurisdiction only as to Delaware LLCs.
8
New Hampshire.25 Jung argues that a state may not seize exclusive jurisdiction
over claims that are doctrinally described as transitory, rather than local. She also
argues that internal affairs and contract claims like hers are transitory. I agree
with Jung. I also conclude one of the NH Act provisions is inapplicable as to the
claims against TAMA, and the other is inapplicable to the question of subject
matter jurisdiction in this case.
The sections at issue are New Hampshire Revised Statutes Annotated
Sections 304-C:59 (“Section 59”) and 304-C:186 (“Section 186”). They read as
follows:
Section 59: Any dispute as to whether a person was or is or will be
entitled to become a member of a limited liability company and as to
when the person was admitted or will be entitled to be admitted as a
member shall be resolved in a proceeding in the superior court.26
Section 186: Unless the operating agreement provides otherwise,
disputes between the members and disputes between the members
and the managers relating to the limited liability company shall be
resolved by litigation in the courts of the state of New Hampshire.27
As best I can tell, no New Hampshire court has yet interpreted the scope of
these statutes, so I must predict how a New Hampshire court would construe
25
D.I. 24 at 9–10.
26
N.H. Rev. Stat. Ann. § 304-C:59.
27
Id. § 304-C:186.
9
them.28 I will do my best to do so under the principles of statutory interpretation
New Hampshire courts use.
New Hampshire courts interpret statutes to determine the “legislature’s
intent as expressed in the words of the statute considered as a whole,” with the
goal of effectuating the underlying policy.29 The NH Act’s stated policy is “to
give the maximum effect to the principle of freedom of contract and to the
enforceability of operating agreements.”30 New Hampshire courts look to the
“plain and ordinary meanings of the words used.”31 Statutes should be interpreted
“to give meaning to every word and phrase.”32 Where a statute’s plain text is
unambiguous, a court should not consider its legislative history.33 Though statutes
should be read in a manner that renders them constitutional, a court may not ignore
a statute’s plain unambiguous language in doing so.34
28
See Berger v. Intelident Sols., Inc., 911 A.2d 1164, 1169 (Del. Ch. 2006) (“But given
the complete absence of Florida case law interpreting section 607.1302(4), this court
must predict how a Florida tribunal would construe that provision.”).
29
In re A.D., 214 A.3d 1213, 1216 (N.H. 2019).
30
N.H. Rev. Stat. Ann. § 304-C:2.
31
O’Brien v. N.H. Democratic Party, 89 A.3d 1202, 1205 (N.H. 2014).
32
In re A.D., 214 A.3d at 1216 (internal quotation marks omitted) (quoting O’Brien, 89
A.2d at 1204).
33
DeBenedetto v. CLD Consulting Engineers, Inc., 903 A.2d 969, 976 (N.H. 2006)
(“When a statute’s language is plain and unambiguous, we need not look beyond it for
further indication of legislative intent, and we will not consider what the legislature
might have said or add language that the legislature did not see fit to include.”).
34
Polonsky v. Town of Bedford, 190 A.3d 400, 406 (N.H. 2018); id. (“A preference for
giving statutes a constitutional meaning is a reason to construe, not to rewrite or
10
1. Section 186 Cannot Confer On New Hampshire Courts
Exclusive Jurisdiction Over Jung’s Claims.
I begin with Section 186’s broad directive that “disputes between the
members and disputes between the members and the managers” relating to their
New Hampshire LLC “shall be resolved by litigation” in New Hampshire courts.35
Defendants wield this statute against all of Jung’s claims.
As an initial matter, the plain text of Section 186 makes clear that it does
not apply to Jung’s claims against TAMA: Section 186 references only disputes
among members and managers, not with the LLC itself. Taking as true Jung’s
assertion that she was a member of TAMA, I will assume that her claims against
ETI as a TAMA member, and her claims against Tijerina and Edgar for actions
taken in their former capacities as TAMA members, fall within Section 186.
TAMA’s Operating Agreement did not opt out of New Hampshire’s jurisdiction.36
I must now resolve whether Section 186 may be enforced as to those claims.
a. The Full Faith And Credit Clause Prohibits This
Court From Enforcing Section 186.
Section 186 provides that, in the absence of contrary provisions in the
operating agreement, certain disputes “shall be resolved by litigation in the courts
‘improve.’” (internal quotation marks omitted) (quoting United States v. Marshall, 908
F.2d 1312, 1318 (7th Cir. 1990)).
35
N.H. Rev. Stat. Ann. § 304-C:186.
36
See TAMA Operating Agreement.
11
of the state of New Hampshire.”37 Under New Hampshire law, “shall” denotes a
mandatory provision.38 If a claim between members of a New Hampshire LLC is
brought in a different state, this mandatory provision purports to divest that state
of jurisdiction.
Jung has turned to our republic’s founding document to assert Section 186
cannot deprive this Court of subject matter jurisdiction over her breach of
fiduciary duty claims. Article IV, Section 1 of the United States Constitution,
referred to as the Full Faith and Credit Clause, requires that a state enforce the
laws of its sister states.39 It also prohibits states from refusing to hear claims
arising under the laws of other states.40 The Full Faith and Credit Clause does not
37
N.H. Rev. Stat. Ann. § 304-C:186.
38
In re Bazemore, 899 A.2d 225, 228 (N.H. 2006) (“It is a general rule of statutory
construction that . . . the word ‘shall’ makes enforcement of a provision mandatory.”).
39
See US. Const. art. IV, § 1; Tenn. Coal, Iron & R. Co. v. George, 233 U.S. 354, 360
(1914).
40
See Hughes v. Fetter, 341 U.S. 609, 613 (1951); Broderick v. Rosner, 294 U.S. 629,
642 (1935) (“[A state] may not, under the guise of merely affecting the remedy, deny
the enforcement of claims otherwise within the protection of the full faith and credit
clause, when its courts have general jurisdiction of the subject-matter and the parties.”);
see also IMO Daniel Kloiber Dynasty Tr., 98 A.3d 924, 940 (Del. Ch. Aug. 6, 2014)
(“[T]he United States Supreme Court has interpreted the Full Faith & Credit Clause as
requiring that state courts not only respect the laws of their sister states but also entertain
claims under their laws.”).
12
require—or permit—states to enforce laws that purport to confer exclusive
jurisdiction upon a different state to hear certain claims.41
As made clear by the United States Supreme Court in Tennessee Coal v.
George,42 statutory venue provisions that limit claims to being heard in only one
state are generally not enforceable.43 There, the Supreme Court held that while
states are obliged to recognize claims arising under the laws of other states, they
are not required to enforce a statutory venue provision:
The courts of the sister state, trying the case, would be bound to give
full faith and credit to all those substantial provisions of the statute
which inhered in the cause of action, or which name conditions on
which the right to sue depend. But venue is no part of the right; and a
state cannot create a transitory cause of action and at the same time
destroy the right to sue on that transitory cause of action in any court
having jurisdiction.44
As this Court has explained, “[t]he fifty states in our federal republic are peers,”
and a state may “not mak[e] a claim against the world that no court outside of [that
41
See Tenn. Coal, 233 U.S. at 360; Kloiber, 98 A.3d at 939 (“Nor, as a matter of power
within our federal republic, could the State of Delaware arrogate [exclusive jurisdiction]
to itself.”); Restatement (Second) of Conflict of Laws § 91 (1971) (“A State may
entertain an action even though the state of the applicable law has provided that action
on the particular claim shall not be brought outside its territory.”); Hughes, 341 U.S. at
613 (“[W]e conclude that Wisconsin’s statutory policy which excludes this Illinois cause
of action is forbidden by the national policy of the Full Faith and Credit Clause.”).
42
233 U.S. 354 (1914).
43
See id. at 360.
44
Id.13
state] can exercise jurisdiction over that type of case.”45 “If [a state] sought to
preclude a sister state from hearing a matter of [the first state’s] law, it would not
be giving constitutional respect to the judicial proceedings of the sister state.”46
And a court may not refuse to hear a cause of action arising under the laws of
another state.47
As relevant here, the Full Faith and Credit Clause contains a requirement
and an exception to that requirement. The Full Faith and Credit Clause requires
that states enforce the laws of other states. For example, a plaintiff may file suit
in Delaware asserting claims that arise under New Hampshire statutes. The
Delaware court cannot decline to hear those claims on the grounds that they arose
under New Hampshire’s laws. It must enforce New Hampshire’s laws. But there
is an exception, further in aid of the goal that every state’s laws be enforceable in
every other state: a state may not enforce another state’s venue statute. To
continue the example, while the Delaware court must enforce New Hampshire’s
laws, it may not enforce a New Hampshire law that prohibits the Delaware court
from enforcing the rest of New Hampshire’s laws. A state must entertain a claim
arising under another state’s laws notwithstanding the presence of a venue statute.
45
Kloiber, 98 A.3d at 939.
46
Id. (collecting authorities).
47
Supra note 40.
14
Section 186 is a mandatory statutory venue provision. This Court cannot
enforce Section 186. Section 186’s language allowing New Hampshire LLCs to
opt out of this provision does not compel a different result. TAMA did not opt
out, and Defendants now ask this Court to enforce Section 186 as a mandatory
venue statute. United States Supreme Court precedent precludes me from doing
so.48
b. Jung’s Claims Are Not Local To New Hampshire.
Defendants assert that Section 186 can properly mandate that Jung’s claims
be heard in New Hampshire because the claims are local to New Hampshire.
Local claims, i.e. claims in rem or otherwise focused on real property, may be
brought in only the jurisdiction in which the property at issue is located.49
48
Supra note 41.
49
See Ellenwood v. Marietta Chair Co., 158 U.S. 105, 107 (1895) (“By the law of
England, and of those states of the Union whose jurisprudence is based upon the
common law, an action for trespass upon land, like an action to recover the title or the
possession of the land itself, is a local action, and can only be brought within the state
in which the land lies.”); The L’Invincible, 14 U.S. 238, 242 (1816) (“An injury of this
nature is either to be redressed by a process in rem or in personam, and in either case,
application must be made where the thing, or person, is found.”); Hayes v. Gulf Oil
Corp., 821 F.2d 285, 287 (5th Cir. 1987) (“A local action involving real property can
only be brought within the territorial boundaries of the state where the land is located.”);
French v. Clinchfield Coal Co., 407 F. Supp. 13, 15 (D. Del. 1976) (“‘[L]ocal’ actions
may be tried only in the District in which the property is found.”); 14D Charles A.
Wright & Arthur R. Miller, Federal Practice & Procedure § 3822 (4th ed.) [hereinafter
“Wright & Miller”] (“Under the [local action] doctrine, local actions could be brought
only where the property involved in the litigation was located.”); see also In re Sch.
Asbestos Litig., 921 F.2d 1310, 1319 (3d Cir. 1990) (“The law distinguishes between
transitory and local actions. Local actions are essentially in rem and may only be
prosecuted ‘where the thing on which they are founded is situated.’” (quoting 15 Charles
15
Additionally, a state may localize a claim by statute.50 If Jung’s claims are local
in nature, or if the NH Act localizes Jung’s claims, this Court must dismiss Jung’s
claims for lack of subject matter jurisdiction.51 For the reasons that follow, I find
that Jung’s claims are not local and have not been localized, and so the prohibition
on a state statutory venue provision for transitory claims precludes this Court’s
enforcement of Section 186.
A. Wright, Arthur R. Miller, Federal Practice and Procedure: Jurisdiction § 3822, at
204–05 (2d ed. 1986)).
50
See Taylor v. LSI Logic Corp., 715 A.2d 837, 839–41 (Del. 1998) (concluding a
Canadian statute provided that an exclusive equitable remedy was available only in the
courts of Canada, and so a claim tied that remedy must be heard in Canada), overruled
on other grounds by Martinez v. E.I. DuPont de Nemours & Co., 86 A.3d 1102, 1107
(Del. 2014).
51
See id.16
State law claims are either local or transitory.52 Local claims include in rem
actions and those that “involve specific types of claims concerning real
property.”53 Local claims generally involve claims for title to property, injunctive
relief to stop injury to property, “or an action for trespass . . . or waste.”54 All in
rem actions are local,55 but not all local actions are in rem.56
The term “transitory claim” has eluded clear definition.57 Often,
“transitory” is defined by negation; transitory claims are claims that are not
52
See Wright & Miller § 3822 (“Transitory actions consist of all cases that are not local
actions. In other words, for purposes of venue, every civil action is either local or
transitory. If a case is not local, it is transitory.”).
At English common law, all actions were local. See Livingston v. Jefferson, 239
Fed. Cas. 660, 663 (C.C.D. Va. 1811). In 1811, Chief Justice John Marshall
incorporated the “local doctrine” into American law while riding as a circuit judge, in
Livingston v. Jefferson. See id.; Bigio v. Coca-Cola Co., 239 F.3d 440, 450 (2d Cir.
2000). Two hundred years later, Congress “abolished the local doctrine in federal court”
through the Federal Courts Jurisdiction and Venue Clarification Act of 2011. Wright &
Miller § 3822; 28 U.S.C. § 1391(a)(2) (“[T]he proper venue for a civil action shall be
determined without regard to whether the action is local or transitory in nature.”).
53
Wright & Miller § 3822; 17 James Moore et al., Moore’s Federal Practice § 110.20
(3d ed. 2004) [hereinafter “Moore’s Federal Practice”]; Casey v. Adams, 102 U.S. 66,
68 (1880) (“Local actions are in the nature of suits in rem, and are to be prosecuted
where the thing on which they are founded is situated.”). But see Livingston, 15 F. Cas.
at 664 (reasoning local actions should not be defined as in rem actions).
54
French, 407 F. Supp. at 16; Ex parte Teledyne Expl., 436 So. 2d 880, 881 (Ala. 1983);
Wright & Miller § 3822 (“Among various actions that have been held to be local for
federal venue purposes are those to set aside a preferential transfer of property, to
foreclose or cancel a mortgage, for trespass to land, to abate a nuisance, to try title to
land, as well as others collected in the margin.” (footnotes omitted)); see also Sheppard
v. Coeur d’Alene Lumber Co., 112 P. 932, 936 (Wash. 1911) (“Under all authority, the
action of trespass is held to be local, and the damage following the trespass is of the
same class.”). Delaware does not consider trespass actions as local. See Candlewood,
859 A.2d at 1005 (citing with approval Restatement (Second) Conflict of Laws
17
§ 87 (1971)); Restatement (Second) Conflict of Laws § 87 (1971) (“A State may
entertain an action that seeks to recover compensation for a trespass upon or harm done
to land in another state.”).
55
See Casey, 102 U.S. at 68 (“Local actions are in the nature of suits in rem . . . .”);
Thormann v. Frame, 176 U.S. 350, 355 (1900) (“[A] judgment in rem binds only the
property within the control of the court which rendered it; and a judgment in personam
binds only the parties to that judgment and those in privity with them. The appointment
cannot be treated as a judgment in personam, and as a judgment in rem it merely
determines the right to administer the property within the jurisdiction, whether
considered as directly operating on the particular things seized, or the general status of
assets there situated.”); Nelson v. Miller, 201 F.2d 277, 280 (9th Cir. 1952) (“Each state
court can stand upon its findings as to domicile and apply its probate laws to the estate
property situate within it. Having no jurisdiction over property outside its borders, its
orders as to such property imposed no duty upon another state to recognize them on the
doctrine of full faith and credit.”); Am. Druggists’ Ins. Co. v. Carlson, 1989 WL 513218,
at *3 (W.D. Mich. May 1, 1989) (“It is well-established that a judgment in rem binds
only the property within the control of the court which rendered it.”); Copeland v. Wiley,
1976 WL 8263, at *1 (Del. Ch. Feb. 25, 1976) (“[I]t is generally recognized that a court
cannot issue decrees directly affecting extraterritorial real estate . . . .”); 21 C.J.S. Courts
§ 40 (2022) (“[A] court of one state has no power of in rem jurisdiction to directly affect
title to land located wholly within the borders of another.”); see also Thormann, 176
U.S. at 356 (“[I]t is thoroughly settled that the constitutional provision that full faith and
credit shall be given in each state to the judicial proceedings of other states, does not
preclude inquiry into the jurisdiction of the court in which the judgment is rendered,
over the subject-matter, or the parties affected by it, or into the facts necessary to give
such jurisdiction.”).
56
See French, 407 F. Supp. at 15 (stating that local actions include claims for injunctive
relief and waste, among others).
57
Brainerd Currie, The Constitution and the “Transitory” Cause of Action, 73 HARV.
L. REV. 36, 66 (1959) (“It is not easy to find a satisfactory definition of a transitory
action.”).
18
local.58 All other claims, including those claiming injuries in contract and tort, or
concerning personal property, are transitory.59 Put another way, in personam
actions are transitory, 60 and a claim seeking a personal judgment will be transitory
even if the action concerns real property.61
58
Wright & Miller § 3822 (“Transitory actions consist of all cases that are not local
actions. . . . If a case is not local, it is transitory.”). Transitory claims are also defined
as those that “could have arisen anywhere.” See Minichiello Realty Assocs., Inc. v. Britt,
460 F. Supp. 896, 898 (D.N.J. 1978) (“The traditional test, even though not entirely
perfect, is whether the specific cause of action could have arisen elsewhere than where
it did. If it could not, the action is local; if it could, it is transitory.”); see also
Candlewood, 859 A.2d at 1006 (“By definition a transitory claim is one that can be
brought in the jurisdiction where a defendant resides . . . .”).
59
AlixPartners, LLP v. Mori, 2019 WL 6327325, at *8 (Del. Ch. Nov. 26, 2019) (“As
Candlewood explains, ‘[n]o contemporary legal order’s law of contract or tort seeks to
localize . . . actions sounding in tort or contract.’” (alterations in original) (quoting
Candlewood, 859 A.2d at 1007)); McGonigle v. Atchison, 7 P. 550, 552 (Kan. 1885)
(“[A]ctions for injuries to persons or to personal property, or relating thereto, are
generally transitory, and may be brought in any county where the wrong–doer may be
found.”); Mason v. Warner, 31 Mo. 508, 511 (1862) (“Actions for injuries to persons or
personal property have been held to be transitory by the law of England for more than
two hundred years.”).
60
See Raphael J. Musicus, Inc. v. Safeway Stores, Inc., 743 F.2d 503, 506–07 (7th Cir.
1984) (“[T]o provide in personam relief, the court need only have personal jurisdiction
over the defendant, and thus a transitory action may be brought in any jurisdiction in
which the defendant can be found.”); Moore’s Federal Practice §110.20 (“Generally,
local actions were those that directly affected real property; the traditional distinction
therefore was the same as the traditional division between in personam and in rem
jurisdiction.”).
61
Raphael J. Musicus, Inc., 743 F.2d at 507 (reasoning an action affecting real property
can be transitory “so long as the action is based in fraud, trust or contract”); Potomac
Milling & Ice Co. v. Baltimore & O.R. Co., 217 F. 665, 667 (D. Md. 1914) (reasoning
an action was transitory where both real property and personal property were damaged).
19
Jung’s claims are transitory.62 Her breach of fiduciary duty claims sound
in tort and seek judgment against individual defendants.63 Her breach of contract
claim is likewise transitory.64 Declaratory judgment claims not affecting the title
to real property are transitory because the Court need not exercise control over the
property at issue.65 Jung’s claims are transitory unless they have been localized
by New Hampshire law.66
62
In furtherance of her argument that this Court has personal jurisdiction over TAMA,
Jung stated that her claims are in rem. Specifically, she argued that “Tama equity is a
res the ownership of which Plaintiff seeks to establish.” D.I. 29 at 11. This statement
does not defeat her subject matter jurisdiction argument that her claims are transitory.
In determining whether an action is in rem or quasi in rem, the Court looks to “the
‘practical effect of the relief’ sought” and whether that relief requires the Court “to assert
control over property.” In re Doehler Dry Ingredient Sols., LLC, 2022 WL 4281841, at
*4 (Del. Ch. Sept. 15, 2022) (quoting Dyno v. Dyno, 2021 WL 3508252, at *3 (3d Cir.
Aug. 10, 2021)). Jung seeks a declaratory judgment, namely an acknowledgement that
she never relinquished her stock, or damages in the form of monetary compensation or
ETI stock. (If Jung never relinquished her interest in TAMA, then she still holds that
interest and there would be no need to compel the return of that interest.) Neither claim,
and neither remedy, requires the Court to exercise control over TAMA or its equity.
Thus, Jung’s claims are in personam.
63
See In re Rural Metro Corp., 88 A.3d 54, 98 (Del. Ch. 2014), (“A breach of fiduciary
duty is an equitable tort.”); Sloan v. Segal, 2008 WL 81513, at *9 (Del. Ch. Jan. 3, 2008)
(reasoning a breach of fiduciary duty could be viewed “as having committed actions in
the nature of a tort”); J. Travis Laster & Michelle D. Morris, Breaches of Fiduciary Duty
and the Delaware Uniform Contribution Act, 11 DEL. L. REV. 71 (2010).
64
See AlixPartners, 2019 WL 6327325, at *8.
65
See In re Doehler Dry Ingredient, 2022 WL 4281841, at *4; Raphael J. Musicus, Inc.,
743 F.2d at 508 (“The determinative element in defining a transitory action is whether
the type of relief requested is of a ‘personal’ nature so that the court, in acting upon the
person or personal property of the defendant which is within its control, need not act
directly upon the lands involved.”); see also supra note 55.
66
See Candlewood, 859 A.2d 1007.
20
A statutory scheme will localize an otherwise transitory claim where (i) the
cause of action is created by a statute, (ii) “the provision for the liability is coupled
with a provision for the special remedy,” and (iii) “that remedy . . . alone, must be
employed.”67 That is, providing a statutory remedy is not enough to localize the
claim: “a state cannot create a transitory cause of action and at the same time
destroy the right to sue on that transitory cause of action in any court having
jurisdiction.”68 Rather, that remedy must be “inseparably intertwined” such that
“relief under the statute could only be obtained from one of the” jurisdiction’s
tribunals.69 If the claim has been localized, the state that created the claim will
have exclusive jurisdiction.70 Delaware courts apply the Tennessee Coal test to
determine if a claim is localized, asking whether the statutory right and remedy
are so closely related that the plaintiff’s claims must be brought in the jurisdiction
which created the statutory right.71
67
Tenn. Coal, 233 U.S. at 359 (internal quotation marks omitted) (quoting Pollard v.
Bailey, 87 U.S. (20 Wall.) 520, 527 (1874)).
68
Id. at 360.
69
Candlewood, 859 A.2d at 1007; see also Tenn. Coal, 233 U.S. at 359 (“[T]he right
and the remedy are not so inseparably united as to make the right dependent upon its
being enforced in a particular tribunal.”); Pollard, 87 U.S. at 527 (“A general liability
created by statute without a remedy may be enforced by an appropriate common-law
action. But where the provision for the liability is coupled with a provision for a special
remedy, that remedy, and that alone, must be employed.”).
70
See Tenn. Coal, 233 U.S. at 359.
71
AlixPartners, 2019 WL 6327325, at *5–8; Candlewood, 859 A.2d at 1006–07; Taylor,
715 A.2d 837; see also Tenn. Coal, 233 U.S. at 360.
21
Jung’s request for a declaratory judgment arises under a New Hampshire
statute.72 For purposes of this opinion, I assume, without deciding, that her breach
of fiduciary duty claim arises under New Hampshire statute.73 The NH Act does
not prescribe a remedy, much less one that is so intertwined with the right that
only a New Hampshire court could award it. Tennessee Coal compels the
conclusion that New Hampshire law has not localized Jung’s declaratory
judgment and breach of fiduciary duty claims. The remaining claims arise under
common law, and the NH Act provides no remedy for them. I conclude that the
NH Act did not localize any of Jung’s claims.
United States Supreme Court precedent precludes the enforcement of a
statutory venue provision. Having concluded Jung’s claims are transitory and
have not been localized by statute, I must also conclude this Court cannot enforce
Section 186 and commit those claims solely to New Hampshire’s subject matter
jurisdiction.
72
See N.H. Rev. Stat. Ann. § 491:22; see also El Dia, Inc. v. Hernandez Colon, 963 F.2d
488, 493 (1st Cir. 1992) (describing declaratory judgment actions as “statutory
creatures”).
73
New Hampshire Revised Statutes Annotated § 304-C:108 provides that managers—
and members in some instances—owe a duty of care. N.H. Rev. Stat. Ann. § 304-C:108.
New Hampshire Revised Statutes Annotated § 304-C:110 provides that the same persons
owe a duty of loyalty and specifies what that duty of loyalty includes. Id. § 304-C:110.
For purposes of this opinion, I need not decide whether these statutes represent a
codification of the common law, and whether such a codification would mean that New
Hampshire has “created” such claims for purposes of Tennessee Coal and its progeny.
22
c. Defendants Waived Their Contractual Forum
Selection Arguments.
While Defendants’ opening brief wields Section 186 as a statutory venue
provision, their reply brief argues Section 186 created a contractual forum
selection clause enforceable as part of TAMA’s Operating Agreement.
Defendants waived this contractual argument by failing to raise it in their opening
brief.
Whether a party waived an argument is a matter of discretion.74 Generally,
the failure to raise an argument in one’s opening brief constitutes a waiver of that
argument.75 Waiver is fundamentally an issue of fairness: the belated presentation
of an argument can deprive the opposing party of notice and the opportunity to
74
REJV5 AWH Orlando, LLC v. AWH Orlando Member, LLC, 2018 WL 1109650, at
*4 (Del. Ch. Feb. 28, 2018) (“The determination of whether vel non an argument is
waived is highly contextual and ultimately a matter within this Court’s discretion . . . .”).
75
Emerald P’rs, 726 A.2d at 1224 (“Issues not briefed are deemed waived.”).
23
respond.76 A party does not necessarily preserve an argument merely by
presenting some related facts in their opening brief.77
Some arguments, including subject matter jurisdiction arguments, cannot
be waived.78 That bar is not absolute. A party may waive contractual provisions
that would strip this Court of subject matter jurisdiction, such as a forum selection
provision.79
76
PharmAthene, Inc. v. SIGA Techs., Inc., 2011 WL 6392906, at *2 (Del. Ch.
Dec. 16, 2011) (“The general rule [is] that a party waives any argument it fails properly
to raise shows deference to fundamental fairness and the common sense notion that, to
defend a claim or oppose a defense, the adverse party deserves sufficient notice of the
claim or defense in the first instance.”); Mack v. Rev Worldwide, Inc., 2020 WL
7774604, at *16 (Del. Ch. Dec. 30, 2020) (“This Court’s briefing rules and practices
mitigate the risk of unfair surprise from new or unreasonably expanded arguments. It is
well settled that arguments that were not raised in an opening brief and are beyond the
scope of matter asserted in a responsive brief are deemed waived.”); Asbestos Workers
Loc. 42 Pension Fund v. Bammann, 2015 WL 2455469, at *20 (Del. Ch. May 21, 2015)
(rejecting as waived an argument presented for the first time at oral argument).
77
Bammann, 2015 WL 2455469, at *20 (“While the agency decisions were presented,
at least partially, as background facts in the Plaintiff’s briefing, the briefing did not
contend that these agency decisions separated the issue before me from those decided in
the New York Actions, precluding collateral estoppel, and the Defendants had no
meaningful opportunity to respond to such an argument. Accordingly, I find that any
such argument was waived.”).
78
Delawareans for Educ. Opportunity, 2018 WL 4849935, at *11 (“Ordinarily, raising
a new argument so tardily would result in waiver, but to the extent the argument would
affect this court’s subject matter jurisdiction, it would not be waivable.”).
79
See Botman Int’l, B.V. v. Int’l Produce Imports, Inc., 205 F. App’x 937, 941 (3d Cir.
2006) (“[T]he applicability of a forum selection or choice-of-law clause is not a
jurisdictional issue and a party may waive its right to enforce it.”); see also Falcon Steel
Co. v. Weber Eng’g Co., 517 A.2d 281, 288 (Del. Ch. 1986) (reasoning a party may
waive the right to compel arbitration through active participation in a lawsuit or taking
action inconsistent with arbitration right); Halpern Med. Servs., LLC v. Geary, 2012 WL
691623, at *3 (Del. Ch. Feb. 17, 2012) (same).
24
In their opening brief, Defendants argued this Court lacks subject matter
jurisdiction because the express language of Section 186 requires Jung’s claims
to be filed in New Hampshire.80 In their reply, Defendants argued that Section 186
supplied a contractual provision to TAMA’s Operating Agreement that compels
Jung, as a TAMA member, to sue in New Hampshire.81 These arguments differ
substantively and materially, with the first drawing on the state’s power to
mandate a venue and the other drawing on the power of private parties to agree to
a venue.82 Defendants’ opening statutory argument would not put Jung on notice
80
D.I. 24 at 10 (“As in Delaware, under New Hampshire law, the word ‘shall’ denotes
a mandatory statutory provision, and thus any ‘disputes between the members and
disputes between the members and managers,’ such as the action before the Court, must
be resolved in New Hampshire’s Courts.”); id. at 10–11 (“These allegations place the
dispute squarely within the language of sections 59 and 186 of New Hampshire’s limited
liability company act, and New Hampshire law mandates that Jung proceed with her
claims in New Hampshire.”); id. at 18 (“As explained above, New Hampshire law
requires that Jung bring her claims in a New Hampshire court. The statute is broad and
mandates that any ‘disputes between the members and disputes between the members
and the managers relating to the limited liability company shall be resolved by litigation
in the courts of the state of New Hampshire.’” (quoting N.H. Rev. Stat. 304-C:186)).
81
D.I. 32 at 4 (“Thus, New Hampshire has not claimed, in N.H. Rev. Stat. 304-C:186,
that its courts are the only courts which may resolve disputes between members and
managers of New Hampshire limited liability companies, as Jung suggests. Instead, the
statute simply provides for, and incorporates into all operating agreements governing
New Hampshire limited liability companies, a default venue selection provision . . . .”
(citation omitted)); id. at 5 (“Tama’s operating agreement, by default and in conjunction
with the statute, mandates Tama’s members litigate in New Hampshire, and thus this
Court lacks subject matter jurisdiction.”).
82
See Kloiber, 98 A.3d at 940 (contrasting a statutory arrogation of exclusive
jurisdiction from “a situation where parties have agreed voluntarily by contract to an
exclusive forum”). Some are pondering the extent to which an LLC agreement manifests
state power. See, e.g., XRI Inv. Hldgs. LLC v. Holifield, 2022 WL 4350311, at *61 n.84
25
that Defendants intended to raise the contractual argument. Presenting an
argument in an opening brief does not entitle a party to argue a new and alternative
argument in reply.
Defendants also waived their argument that the New Hampshire statute
created a contractual forum selection provision by failing to offer any legal
support or citation.83 Rather, Defendants accuse Jung of not citing any contrary
authority.84 Presenting an argument in such cursory and conclusory fashion can
alone justify a finding of waiver.85
In sum, I conclude Defendants waived their argument that Section 186
created a contractual forum selection clause in TAMA’s Operating Agreement,
and I do not consider it.
2. Section 59 Is Inapplicable To The Question Of Subject
Matter Jurisdiction.
Defendants also invoke Section 59 of the NH Act in seeking dismissal of
this action. Section 59 does no work for Defendants.
(Del. Ch. Sept. 19, 2022); Mohsen Manesh, Creatures of Contract: A Half-Truth About
LLCs, 42 DEL. J. CORP. L. 391, 397, 407 (2018).
83
D.I. 32 at 4–5.
84
Id. at 5 (“Jung cites no authority for the proposition that a statute providing a default
forum selection provision, but at the same time permitting contracting parties to opt out
of the default, violates the constitution or any other law.”).
85
See Voigt v. Metcalf, 2020 WL 614999, at *8 n.3 (Del. Ch. Feb. 10, 2020).
26
Section 59 directs that disputes over who is a member of a New Hampshire
LLC, among others, “shall be resolved in a proceeding in the superior court.”86
This plain text allocates jurisdiction among New Hampshire courts by clarifying
that certain suits should be brought in the superior court, rather than the district
court.87 Nothing in the language of Section 59 mandates any actions be filed in
New Hampshire.
This view is bolstered when Section 59 is read in view of Section 186.88
First, many disputes covered by Section 59 would also be covered by Section
186—that is, Section 186 would already mandate that many such disputes be
brought in New Hampshire, making any interstate jurisdictional function of
Section 59 superfluous.89 Second, the two sections use different language, with
86
N.H. Rev. Stat. Ann. § 304-C:59.
87
In New Hampshire, the district court and the superior court have concurrent
jurisdiction over claims seeking damages between $1,500 and $25,000 and not
concerning real estate. See id. § 502-A:14; id. § 491:22(II) (granting district courts
concurrent jurisdiction with the superior court for claims arising under New Hampshire
Revised Statutes Annotated § 502-A, but permitting defendants to remove cases to
superior court “if the claim exceeds $1,500.”). If the New Hampshire legislature sought
to require certain claims, such as actions seeking a declaration that one is a member of
an LLC, to be brought in the superior court, such statutory language would be necessary.
88
See New Hampshire v. Zubhuza, 90 A.3d 614, 618 (N.H. 2014) (“Finally, we interpret
a statute in the context of the overall statutory scheme and not in isolation.” (internal
quotation marks omitted) (quoting State v. Burke, 33 A.3d 1194, 1196 (N.H. 2011)).
89
See Petition of N.H., 986 A.2d 592, 594 (N.H. 2009) (“We must give effect to all
words in a statute, and presume that the legislature did not enact superfluous or
redundant words.”).
27
Section 59 making no reference to bringing suit in New Hampshire and instead
referring only to one of two courts within the state that could otherwise have
jurisdiction.90 The use of different language evinces an intent to give these
provisions different meaning.91
Lastly, reading Section 59 as mandating certain claims be filed in New
Hampshire would render the statute unconstitutional for the reasons I have
explained. Avoiding that result favors construing the statute as allocating
jurisdiction for suits filed in New Hampshire.92 Thus, I read Section 59 to allocate
jurisdiction among courts within New Hampshire, rather than mandating that
90
Compare N.H. Rev. Stat. Ann. § 304-C:59 (providing claims “shall be resolved in a
proceeding in the superior court”), with id. § 304-C:186 (providing claims “shall be
resolved by litigation in the courts of the state of New Hampshire”).
91
See New Hampshire v. Zhukovskyy, 265 A.3d 27, 31 (N.H. 2021) (“Contrary to the
defendant's contention, this language demonstrates that, when the legislature intends to
grant a right to a hearing, it knows how to do so.”); New Hampshire v. Surrell, 189 A.3d
883, 886 (N.H. 2018) (“Other provisions in RSA 651:20, I, demonstrate that the
legislature knows how to impose limitations on the trial court when it chooses to do
so.”); In re Baldoumas Enters., Inc., 829 A.2d 1056, 1058 (N.H. 2003) (“Moreover, to
the extent that RSA 507–F:4 is relevant in determining the scope of RSA 179:5, I, it
demonstrates that when the legislature intends to create liability for negligence instead
of strict liability, it knows how to do so.”); Balke v. City of Manchester, 834 A.2d 306,
309 (N.H. 2003) (“As the other statutes within the statutory scheme make clear, the
legislature knows how to use the term ‘public water system,’ and we will not add words
that the legislature has chosen not to include.”).
92
See Polonsky, 190 A.3d at 406.
28
certain suits be filed exclusively in New Hampshire.93 It follows that Section 59
has no bearing on Delaware’s jurisdiction over this case.
*****
This Court may exercise subject matter jurisdiction over Jung’s equitable
claims asserting other members of TAMA breached fiduciary duties owed to
Jung.94 With all respect to New Hampshire’s legislature and judiciary, the NH
Act offers no valid impediment to this Court’s constitutional role in applying New
Hampshire’s laws to transitory claims that are properly before this Court. Jung’s
equitable claims properly invoke this Court’s subject matter jurisdiction, and the
Court may exercise its cleanup jurisdiction over the remaining claims.95
B. The Court Has Personal Jurisdiction Over TAMA.
Defendants, presuming victory on their subject matter jurisdiction
argument, next argue the Court lacks personal jurisdiction over only TAMA, and
93
See Kloiber, 98 A.3d at 938–39 (interpreting statute providing that “[t]he Court of
Chancery shall have exclusive jurisdiction over any action brought with respect to a
qualified disposition” to mean that such actions should be brought in the Court of
Chancery, rather than the Superior Court, and finding that the provision did not divest
other states of jurisdiction).
94
10 Del. C. § 341 (“The Court of Chancery shall have jurisdiction to hear and determine
all matters and causes in equity.”); see, e.g., Delawareans for Educ. Opportunity, 2018
WL 4849935, at *5 (“[J]urisdiction exist if a plaintiff states an equitable claim.”).
95
Getty Ref. & Mktg. Co. v. Park Oil, Inc., 385 A.2d 147, 149 (Del. Ch. 1978).
29
only as to the breach of contract claim.96 “When a defendant moves to dismiss a
complaint pursuant to Court of Chancery Rule 12(b)(2), the plaintiff bears the
burden of showing a basis for the court’s exercise of jurisdiction over the
defendant.”97
TAMA’s personal jurisdictional argument is limited to the breach of
contract claim, and gains little traction because TAMA has not disputed personal
jurisdiction for any of the other substantially related claims against it. A plaintiff
faced with a Rule 12(b)(2) challenge is tasked only with responding to those
arguments raised by the moving defendants.98 Any arguments not made or not
96
D.I. 24 at 7 (“To the extent that any claims remain, the Court also lacks subject matter
and personal jurisdiction over those claims . . . .”); id. at 14 (“[The breach of contract]
count seeks $6,596 in damages arising from a contract with no relation to Delaware, it
is against a New Hampshire entity and the count fails to explain how the long-arm statute
might provide personal jurisdiction over Tama with respect to that claim, and Jung has
an adequate remedy at law: the $6,596 owed under an employment contract.”); id. at 17
(“But because Tama is a New Hampshire entity, and because the breach of contract has
no apparent connection to Delaware, the Court lacks personal jurisdiction over Tama.”).
Defendants clarified they were making this argument in this limited context in their reply
brief and stated they intended to “limit[] their personal jurisdiction arguments to Jung’s
discrete breach of contract claim,” but did not contest personal jurisdiction as to the
conspiracy claim. D.I. 32 at 1.
Tijerina, Edgar, and ETI have not argued this Court lacks personal jurisdiction
over them.
97
Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007).
98
See Mack, 2020 WL 7774604, at *16 (“The defendant then bears the burden of
asserting all grounds supporting the defense in his opening brief, filed either
contemporaneously with or shortly after the motion. At that point, substantive
arguments not briefed are deemed waived.”).
30
sufficiently developed are deemed waived.99 Further, “[t]he court may exercise
its discretion to litigate a claim for which personal jurisdiction would not
otherwise exist where the claim is brought along with other claims for which
jurisdiction does exist that are sufficiently related to that claim to warrant
prosecution before a single tribunal.”100 Where a defendant has not contested the
court’s jurisdiction over some claims, “it is not necessary to engage in a
comprehensive personal jurisdiction review ‘from scratch.’”101 Rather, the Court
should consider “whether the defendants would be substantively or unfairly
prejudiced by this Court’s exercise of jurisdiction,” i.e. whether that exercise
would comport with due process.102 If due process is not offended, the Court
should consider “whether judicial economy warrants such an exercise.”103 That
inquiry asks whether the additional claim is “sufficiently related,” by considering
whether it presents a significant number of unrelated facts, seeks similar or
99
Voigt, 2020 WL 614999, at *8 n.3 (reasoning the defendants “invested so little in those
arguments that they can be regarded as waived.”); see also Voss v. Voss, 2022 WL
3371608, at *7 (E.D. Mich. Aug. 16, 2022) (“Therefore, the claim for lack of personal
jurisdiction is waived because Defendant did not develop an argument for it.”).
100
Cap. Grp. Cos. Inc. v. Armour, 2004 WL 2521295, at *4 (Del. Ch. Oct. 29, 2004).
101
Cap. Grp., 2004 WL 2521295, at *4 (quoting Fitzgerald v. Chandler, 1999 WL
1022065, at *4 (Del. Ch. Oct. 14, 1999)).
102
Fitzgerald, 1999 WL 1022065, at *4; Pacira BioSciences v. Fortis Advisors LLC,
2021 WL 4949179, at *22 (Del. Ch. Oct. 25, 2021).
103
Fitzgerald, 1999 WL 1022065, at *4.
31
different relief, and is governed by Delaware law.104 The Court also considers
whether Delaware has a strong interest in adjudicating the claim, and whether
exercising jurisdiction would offend notions of comity.105
Here, TAMA has not asserted any prejudice or offense to due process from
this Court hearing the breach of contract claim alongside the rest of the claims,
and I see none. Trying the claims together supports judicial economy. The breach
of contract claim is sufficiently related to the declaratory judgment, breach of
fiduciary duty, and conspiracy claims against TAMA. Jung’s membership in
TAMA, which anchors the rest of her claims against TAMA, resulted from the
Services Agreement. Defendants rely on the existence of a settlement agreement
as a defense to all four claims, claiming that agreement caused Jung to relinquish
her interest in TAMA. Defendants have sought enforcement of that settlement
agreement, which will have to be adjudicated regardless of whether the Court
exercises jurisdiction over the breach of contract claim. The adjudication of the
breach of contract claim therefore involves litigating the same elements and facts
as the other claims against TAMA.106 Finally, it appears New York law may
104
Ruggiero v. FuturaGene, 948 A.2d 1124, 1139 (Del. Ch. 2008); Pacira BioSciences,
2021 WL 4949179, at *23.
105
Ruggiero, 948 A.2d at 1139; Pacira BioSciences, Inc., 2021 WL 4949179, at *22–
23; Cap. Grp., 2004 WL 2521295, at *5.
106
See Cap. Grp., 2004 WL 2521295, at *4 (exercising pendent personal jurisdiction
where the claims involved the same facts and sought the same relief); Fitzgerald, 1999
WL 1022065, at *4–5 (exercising pendent personal jurisdiction where two claims
32
govern the breach of contract claim, as explained below, such that the interest of
comity does not compel any particular restraint in favor of TAMA’s home state
of New Hampshire.
Defendants’ motion to dismiss the breach of contract claim against TAMA
for lack of personal jurisdiction is denied.
C. Defendants’ Motion To Dismiss Under Rule 12(b)(6)
I now turn to Defendants’ motion to dismiss under 12(b)(6). The standard
governing a motion to dismiss under Court of Chancery Rule 12(b)(6) for failure
to state a claim for relief is well settled:
(i) all well-pleaded factual allegations are accepted as true; (ii) even
vague allegations are “well-pleaded” if they give the opposing party
notice of the claim; (iii) the Court must draw all reasonable
inferences in favor of the non-moving party; and (iii) dismissal is
inappropriate unless the “plaintiff would not be entitled to recover
under any reasonably conceivable set of circumstances susceptible of
proof.”107
involved the same acts); Technicorp Int’l II, Inc. v. Johnston, 1997 WL 538671, at *20
(Del. Ch. Aug. 25, 1997) (exercising pendent personal jurisdiction where one claim was
“subsumed” within the other, as they required proof of the same elements).
107
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (footnotes omitted).
33
The touchstone “to survive a motion to dismiss is reasonable ‘conceivability.’”108
This standard is “minimal”109 and plaintiff-friendly.110 “Indeed, it may, as a
factual matter, ultimately prove impossible for the plaintiff to prove [its] claims at
a later stage of a proceeding, but that is not the test to survive a motion to
dismiss.”111 Despite this forgiving standard, the Court need not accept conclusory
allegations unsupported by specific facts or draw unreasonable inferences in favor
of the nonmoving party.112 “Moreover, the court ‘is not required to accept every
strained interpretation of the allegations proposed by the plaintiff.’”113 In
determining whether to grant a motion to dismiss, the Court may consider any
documents incorporated into the complaint by reference.114 Defendants have
moved to dismiss Counts I, II, III, and VI. I will consider each in turn.
108
Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536–37
(Del. 2011).
109
Id. at 536.
110
E.g., Clouser v. Doherty, 175 A.3d 86, 2017 WL 3947404, at *9 (Del. 2017)
(TABLE); In re USG Corp. S’holder Litig., 2021 WL 930620, at *3–4 (Del. Ch.
Mar. 11, 2021); In re Trados Inc. S’holder Litig., 2009 WL 2225958, at *8 (Del. Ch.
July 24, 2009).
111
Cent. Mortg. Co., 27 A.3d at 536.
112
E.g., Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009).
113
In re Trados Inc., 2009 WL 2225958, at *4 (quoting In re Gen. Motors (Hughes)
S’holder Litig., 897 A.2d 162, 168 (Del. 2006)).
114
See Wal-Mart Stores, 860 A.2d at 320. Specifically, in addition to the documents
attached to the Complaint, I will consider the Operating Agreement.
34
1. Jung Stated A Claim For A Declaratory Judgment That
She Owns An Interest In TAMA Or Is Entitled To
Compensation For The Wrongful Dispossession Of Her
Interest.
Count I seeks a declaratory judgment that Jung is the rightful owner of a
2.08% interest in TAMA or that she is entitled to compensation for the wrongful
dispossession of her TAMA interest. Defendants argue this claim should be
dismissed because “according to the complaint, Jung was the rightful owner of
membership interests, and the complaint recognizes that Tama treated her as the
owner of those interests,” and “[t]he complaint instead attempts to state a claim
that defendants wrongfully deprived her of those interests without paying her the
claimed value, $140,400, but not that she never owned those membership interests
in the first place.”115
I do not read Count I as seeking merely a declaration that Jung was formerly
a TAMA member. The Complaint pleads facts consistent with Jung still holding
a 2.08% interest in TAMA because she never relinquished that interest.
Alternatively, the pled facts show it is reasonably conceivable that Defendants
wrongfully appropriated her interest in TAMA, in which case she may be entitled
115
D.I. 24 at 15–16 (emphasis in original).
35
to fair compensation.116 Either case states a claim upon which relief could
conceivably be granted. Defendants’ Motion as to Count I is denied.
2. The Complaint States A Claim For Breach Of Fiduciary
Duty As To Tijerina and Edgar But Not As To TAMA.
Count II alleges that Tijerina, Edgar, and TAMA breached their fiduciary
duties of care and loyalty to Jung. Jung alleges Tijerina and Edgar engaged in
self-dealing at Jung’s expense “[b]y selling TAMA to ETI (and causing TAMA
to be party to the transaction without including [Jung] and appropriating her
rightful share of the proceeds.”117 Jung alleges TAMA breached its fiduciary
duties “[b]y allowing the transaction to occur without including [Jung], who was
a member in it.”118 Defendants do not dispute that the Complaint states a claim
that Edgar breached his fiduciary duties. Over Defendants’ Motion, I conclude
the Complaint adequately pleads a claim for breach of fiduciary duty against
Tijerina. Jung abandoned her claim that TAMA breached its fiduciary duties.
116
Compl. ¶¶ 11, 14, 25, 26, 28.
117
Id. ¶ 31.
118
Id. ¶ 32.
36
a. Because TAMA Is A Member-Managed LLC, The
Complaint Adequately Pleads Tijerina Owed
Fiduciary Duties To Jung.
Jung alleges that Tijerina owed duties of care and loyalty to Jung as a “co-
member[] in TAMA.”119 Defendants argue Jung failed to state a claim as to
Tijerina because TAMA is a manager-managed LLC, and Tijerina was not a
manager and so did not owe fiduciary duties under New Hampshire law. In
opposition, Jung points out she could not meaningfully respond as to Tijerina’s
role within TAMA because she did not have a copy of the Operating Agreement.
Defendants provided the Operating Agreement to Jung and the Court in advance
of supplemental briefing.
Whether Tijerina owes fiduciary duties is a question of New Hampshire
law.120 Under the NH Act, whether a member of an LLC owes fiduciary duties to
the other members depends on whether the LLC is manager-managed LLC or
member-managed.121 If the LLC is member-managed, then all members owe
fiduciary duties to both the LLC and the other members.122 If the LLC is manager-
managed, then the other members owe fiduciary duties only “to the extent that
119
Id. ¶¶ 30–32.
120
All parties agree New Hampshire law governs this claim.
121
See NH. Rev. Stat. § 304-C:106.
122
Id. § 304-C:106(I).
37
these non-manager members exercise management functions for these limited
liability companies.”123
My first task is to interpret TAMA’s Operating Agreement to determine
whether TAMA is a member-managed or a manager-managed LLC. Operating
agreements are contracts, and must be interpreted according to the same
principles.124 The Court’s goal in interpreting a contract is to give the “agreement
the meaning intended by the parties when they wrote it.”125 Where the agreement
is unambiguous, the Court will ascertain the parties’ intent “from the plain
meaning of the language used in the contract.”126 Under New Hampshire law,
“[t]he language of a contract is ambiguous if the parties to the contract could
reasonably disagree as to the meaning of that language.”127 “If the agreement’s
language is ambiguous, it must be determined, under an objective standard, what
123
Id. § 304-C:106(II).
124
See Lakes Region Gaming v. Miller, 62 A.3d 838, 842 (N.H. 2013) (“Because the
operating agreement is a form of contract, we will apply the general rules of contract
interpretation.”).
125
Birch Broad., Inc. v. Cap. Broad. Corp., 13 A.3d 224, 228 (N.H. 2010).
126
Id. (quoting Ryan James Realty v. Villages at Chester Condo. Assoc., 893 A.2d 661(N.H. 2006)).
127
Id. (quoting In the Matter of Taber–McCarthy & McCarthy, 993 A.2d 240, 244 (N.H.
2010)).
38
the parties, as reasonable people, mutually understood the ambiguous language to
mean.”128
TAMA is a member-managed LLC. Article V of the Operating Agreement,
titled “Management,” provides: “General Powers. The business, properties and
affairs of the Company shall be administered by or under the direction of the
Members.”129 The Operating Agreement appoints Edgar as the “Managing
Member,”130 but the only authority given to him in this role is to sign checks.131
TAMA’s Operating Agreement places management powers in the hands of its
members. And so, under New Hampshire law, TAMA’s members owe each other
fiduciary duties.132
Tijerina owed fiduciary duties as a TAMA member. The fact that he is not
a manager is irrelevant to whether he owes fiduciary duties. Defendants’ Motion
is denied as to Tijerina.
128
Id.129
TAMA Operating Agreement art. V, § 1.
130
Id. art. XI.
131
Id. art. VI, § 3.
132
See N.H. Rev. Stat. Ann. §§ 304-C:106, 110.
39
b. The Complaint Does Not State A Claim That TAMA
Breached Its Fiduciary Duties, Because TAMA Did
Not Owe Fiduciary Duties.
Defendants seek dismissal of Jung’s breach of fiduciary duty claim against
TAMA because the NH Act imposes no such duties on TAMA. As best I can tell,
Defendants are correct: the NH Act imposes fiduciary duties on an LLC’s
fiduciaries, but not the LLC itself.133 Jung did not respond to Defendants’
argument in any meaningful way, and has abandoned this claim.134 The Motion
is granted as to Count II against TAMA.
3. Jung Pled ETI Aided And Abetted Tijerina’s And
Edgar’s Breaches Of Fiduciary Duties.
Count III alleges that ETI aided and abetted Edgar’s and Tijerina’s breaches
of fiduciary duty. Defendants argue that under New Hampshire law, an entity
cannot aid and abet its fiduciary’s wrongdoing. The parties sparred over whether
this proposition is limited to situations in which the fiduciary was acting in the
scope of her employment.
The parties miss the point. Jung alleges ETI aided and abetted breaches of
fiduciary duty Tijerina and Edgar committed in their roles as TAMA fiduciaries.
133
See id. §§ 304-C:106, 108, 110.
134
In re Dow Chem. Co. Deriv. Litig., 2010 WL 66769, at *14 (Del. Ch. Jan. 11, 2010)
(“Plaintiffs quietly abandoned these arguments when they failed to respond to
defendants’ arguments regarding the Caremark[] claims beyond mere reassertions of
broad allegations.”).
40
She does not allege ETI aided and abetted breaches in their roles as ETI
fiduciaries. Tijerina and Edgar are both affiliates of ETI, and they very well may
owe fiduciary duties to ETI. But the claim asserts ETI aided and abetted breaches
of fiduciary duty owed to TAMA.135 The Motion is denied as to Count III.
4. New Hampshire’s Statute Of Limitations Does Not
Mandate Dismissal Of Jung’s Breach of Contract Claim.
Count VI asserts a claim against TAMA for breach of contract, seeking to
recover certain amounts allegedly owed to Jung under the Services Agreement.
Defendants have moved to dismiss under Rule 12(b)(6), arguing Jung’s claim is
barred by New Hampshire’s three-year statute of limitations. Jung argues that
New York law governs her claim, which provides for a six-year statute of
limitations.
The Services Agreement does not contain a choice of law provision. In that
circumstance, Delaware follows Section 188 of the Restatement (Second) of
Conflicts of Law.136 Section 188 sets forth five factors to consider: “(a) the place
of contracting, (b) the place of negotiation of the contract, (c) the place of
135
Defendants’ only remaining argument is that ETI cannot be liable for aiding and
abetting because there is no predicate breach of fiduciary duty, but, as explained above,
Defendants’ motion is denied as to Tijerina’s and Edgar’s breaches of fiduciary duty.
136
See SIGA Techs., Inc. v. PharmAthene, Inc., 67 A.3d 330, 342 (Del. 2013); Certain
Underwriters at Lloyd's, London v. Burlington N. R. Co., 653 A.2d 304, 1994 WL
658483, a *2 (Del. 1994) (TABLE) (citing Oliver B. Cannon & Son, v. Dorr-Oliver,
Inc., 394 A.2d 1160, 1166 (Del. 1978)).
41
performance, (d) the location of the subject matter of the contract, and (e) the
domicil, residence, nationality, place of incorporation and place of business of the
parties.”137 The Complaint alleges the Services Agreement was executed in New
York,138 Jung is a Canadian resident,139 and TAMA is a New Hampshire LLC.140
In briefing, Jung asserted that at least some of her duties under the Services
Agreement were performed in New York.141 Defendants were silent on reply.
With this limited information, Defendants’ lack of response, and my
obligation to make all inferences in Jung’s favor, I conclude there is not presently
an adequate basis to apply New Hampshire’s statute of limitations to an alleged
breach of the Services Agreement. Defendants’ Motion is denied as to Count VI.
III. CONCLUSION
For the forgoing reasons, the Motion is GRANTED IN PART AND
DENIED IN PART. The Motion is denied as to Counts I, III, IV, V, and VI.
Regarding Count II, the Motion is granted as to TAMA but denied as to Tijerina.
137
Restatement (Second) of Conflict of Laws § 188(2) (1971).
138
Compl. ¶ 9.
139
Id. ¶ 1.
140
Id. ¶ 3.
141
The only record support for this contention appears in a document attached to an
affidavit attached to Plaintiff’s answering brief. D.I. 29 at Ex. 1. This affidavit was
submitted solely for purposes of opposing Defendants’ Motion to Enforce the Settlement
Agreement, and is not properly considered for purposes of the motion to dismiss.
42
The parties shall supply a stipulated implementing order within twenty days, and
confer on a scheduling order.
43