D. Jackson Milhollan v. Live Ventures, Inc. ( 2023 )

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
PAUL A. FIORAVANTI, JR. LEONARD L. WILLIAMS JUSTICE CENTER
VICE CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734
Date Submitted: January 13, 2023
Date Decided: April 13, 2023
Gregory W. Hauswirth, Esquire
Carothers & Hauswirth LLP
1007 North Orange Street, 4th Fl.
Wilmington, DE 19801
Re: D. Jackson Milhollan v. Live Ventures, Inc.,
C.A. No. 2022-0915-PAF
Dear Counsel:
On October 10, 2022, plaintiff D. Jackson Milhollan (“Plaintiff”) filed a one-
count complaint (the “Complaint”) asserting a breach of contract claim against
defendant Live Ventures, Incorporated (“LVI” or “Defendant”). 1 The Complaint
seeks money damages. On December 26, 2022, Plaintiff filed a motion for a default
judgment (the “Motion”) due to the Defendant’s failure to respond to the
Complaint.2
1
Citations to the docket in this action are in the form of “Dkt. [#].” In citations, the
Complaint in this action, Dkt. 1, will be cited as “Compl.”
2
On October 28, 2022, Plaintiff requested that the Register in Chancery issue a summons
to be served on Defendant by special process server. Dkt. 3. The letter indicated that
service would be made on the Defendant’s registered agent in Delaware, Corporation Trust
Company. Id. at 2. The Register in Chancery issued a summons to a special process server
on November 1, 2022. Dkt. 4. The court has no way to verify through the filings in this
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On December 28, 2022, the court issued a letter order that questioned whether
this court has subject matter jurisdiction over this action.3 The court deferred
consideration on the Motion and requested a supplemental submission to address
subject matter jurisdiction. On January 13, 2023, Plaintiff filed an eight-page
memorandum of law responding to the court’s request (the “Memorandum”). 4 The
Memorandum maintains that this court has subject matter over this dispute. Having
carefully reviewed the Memorandum, the court must dismiss this action for lack of
subject matter jurisdiction.
I. BACKGROUND
Precision Industries, Inc. (“Precision”), a Pennsylvania corporation, and LVI
are parties to a merger agreement, dated as of July 14, 2020 (the “Merger
case whether LVI, a Nevada corporation, has a registered agent in Delaware. Assuming
that it does, there is no return of service on the docket indicating that LVI’s registered agent
was ever served with the summons and Complaint.
3
Dkt. 6. See Ct. Ch. R. 12(h)(3) (“Whenever it appears by suggestion of the parties or
otherwise that the Court lacks jurisdiction of the subject matter, the Court shall dismiss the
action.” (emphasis added)); Envo, Inc. v. Walters, 2009 WL 5173807, at *4 n.10 (Del. Ch.
Dec. 30, 2009) (“The issue of subject matter jurisdiction is so crucial that it may be raised
. . . by the court sua sponte.”), aff’d, 2013 WL 1283533 (Del. Mar. 28,
2013) (TABLE); Int’l Bus. Machs. Corp. v. Comdisco, Inc., 602 A.2d 74, 77 n.5 (Del. Ch.
1991) (“[U]nlike many jurisdictions, judges in the Delaware Court of Chancery are
obligated to decide whether a matter comes within the equitable jurisdiction of this Court
regardless of whether the issue has been raised by the parties.”).
4
Dkt. 7. The Memorandum is cited as “Mem.”
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Agreement”). Compl. Ex. A. Pursuant to the Merger Agreement, LVI acquired
Precision. Plaintiff is the representative of the stockholders of Precision under the
Merger Agreement. The Merger Agreement contemplated that part of the
consideration to be paid in the merger would be held back and paid at a later date.
The Merger Agreement refers to this as the “Indemnity Holdback Amount” of $2.5
million. Id. at 8. Plaintiff alleges that the Indemnity Holdback Amount was due and
owing in full to the Plaintiff by January 31, 2022. Compl. ¶¶ 8–10. LVI has
informed Plaintiff that LVI will not pay the Indemnity Holdback Amount and, in
fact, has not paid it. Id. ¶¶ 11–12.
The Complaint alleges that LVI’s failure to pay the Indemnity Holdback
Amount breached the Merger Agreement. Plaintiff alleges that he “has and will
continue to suffer direct and indirect damages as a result of the Defendant’s breach
of the Merger Agreement, in the amount of the [Indemnity] Holdback [Amount] and
consequential or special damages, in addition to interest, the costs of litigation, and
reasonable attorney fees.” Id. ¶ 16.
II. ANALYSIS
The Court of Chancery is “proudly a court of limited subject matter
jurisdiction.” Crown Castle Fiber LLC v. City of Wilm., 2021 WL 2838425, at *1
(Del. Ch. July 8, 2021). This court may acquire subject matter jurisdiction in any
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one of three ways: (i) the assertion of an equitable claim; (ii) a request for equitable
relief; and (iii) by statutory grant. Candlewood Timber Gp., LLC v. Pan Am. Energy,
LLC, 859 A.2d 989, 997 (Del. 2004). Plaintiff does not contend that the Complaint
asserts an equitable claim or that there is a statutory basis for jurisdiction.5
The Complaint alleges that the Merger Agreement itself establishes exclusive
jurisdiction in this court. Section 11.12 of the Merger Agreement provides that any
claims, actions, and proceedings that arise from or relate to the Merger Agreement
“shall be heard and determined exclusively in the Court of Chancery of Delaware”
and that the parties submit to the exclusive jurisdiction of this court. Compl. Ex. A
§11.12. This provision does not establish subject matter jurisdiction in this court.
“It is . . . well-established Delaware law that parties cannot confer subject matter
jurisdiction upon a court.” Butler v. Grant, 714 A.2d 747, 749–50 (Del. 1998); see
also Bruno v. W. Pac. R.R. Co., 498 A.2d 171, 172 (Del. Ch. 1985) (“The parties to
5
Section 111 of the Delaware General Corporation Law does not provide a basis for
statutory jurisdiction because none of the parties to the merger agreement is a Delaware
entity. See Darby Emerging Mkts. Fund, L.P. v. Ryan, 2013 WL 6401131, at *7 (Del. Ch.
Nov. 27, 2013) (“To the extent Section 111 is ambiguous with respect to its application to
foreign entities, the synopsis appears to resolve that ambiguity by limiting Section 111’s
application to Delaware corporations.”); 1 Robert S. Saunders et al., Folk on the Delaware
General Corporation Law § 111.01 (7th ed. 2022) (“The application of section 111 is
limited to Delaware corporations.”).
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an action may not confer subject matter jurisdiction by agreement.”), aff’d, 508 A.2d
72 (Del. 1986) (TABLE).
The Complaint asserts a claim for breach of contract and seeks money
damages, a classic legal claim where there exists an adequate remedy at law. See
Candlewood Timber Gp., LLC v. Pan Am. Energy, LLC, 2003 WL 22417235, at *2
(Del. Ch. Oct. 22, 2003) (holding the Court of Chancery lacked subject matter
jurisdiction over a breach of contract claim seeking money damages), aff’d in
pertinent part and rev’d in part, 859 A.2d 989 (Del. 2004); Prestancia Mgmt. Gp.,
Inc. v. Va. Heritage Found., II LLC, 2005 WL 1364616, at *4 (Del. Ch. May 27,
2005) (“Damages for breach of a contract . . . are available at law.”). The Complaint
does not allege that the Plaintiff lacks an adequate remedy at law.
In an attempt to establish a jurisdictional hook, Plaintiff points to the
Complaint’s catchall phrase seeking “other relief as the Court deems equitable, just,
and proper.” Compl. at 5 (Prayer for Relief (ii)). Plaintiff then tries to leverage this
vague and nonspecific plea for other equitable relief as encompassing a prayer for a
constructive trust. Mem. 2–3 (“[I]t is readily apparent that the Complaint plausibly
sets forth the facts necessary to support claims for the legal remedy of a constructive
trust based upon a breach of trust.”). There is no merit to this argument. First, the
words “constructive” and “trust” are nowhere to be found in the Complaint. Plaintiff
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cannot insert those words or a request for equitable relief into the Complaint through
his Memorandum. See Parseghian v. Frequency Therapeutics, Inc., 2022 WL
2208899, at *8 n.75 (Del. Ch. June 21, 2022) (“Plaintiffs cannot amend their
Complaint through their brief.”). Second, the mere request for a form of equitable
relief does not confer equity jurisdiction where, as here, the Plaintiff has an adequate
remedy at law. “‘[W]hen there exists an adequate and sufficient remedy at law, a
claim cannot be converted to a cause in equity by the mere invocation of a formulaic
prayer for traditional equitable relief.’” Intel Corp. v. Fortress Inv. Gp., LLC, 2021
WL 4470091, at *5 (Del. Ch. Sept. 30, 2021) (quoting 1 Donald J. Wolfe, Jr. &
Michael A. Pittenger, Corporate and Commercial Practice in the Delaware Court
of Chancery § 2.03[a], at 2–3 (2021)); see also, e.g., Yu v. GSM Nation, LLC, 2017
WL 2889515, at *4 (Del. Ch. July 7, 2017) (dismissing complaint that included a
request for constructive trust and other equitable remedies where the complaint’s
primary remedy sought money damages and plaintiff did not allege or argue that a
money judgment from the Superior Court would not provide a full, fair, and
complete remedy).
III. CONCLUSION
The Complaint alleges a claim for breach of contract claim and seeks money
damages. Plaintiff has asserted a legal claim seeking relief that is compensable at
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law by way of money damages. Plaintiff does not allege or argue otherwise.
Accordingly, this court lacks subject matter jurisdiction over this action, and the
Complaint must be dismissed.
IT IS SO ORDERED.
Very truly yours,
/s/ Paul A. Fioravanti, Jr.
Vice Chancellor