Turf Nation, Inc. v. UBU Sports, Inc. ( 2017 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
TURF NATION, INC., )
)
Plaintiff, )
)
v. ) C.A. No.: N17C-01-271 EMD CCLD
)
UBU SPORTS, INC., n/k/a/ ARTIFICIAL )
TURF SPORTS FIELD, INC., and )
JOSEPH MICHAEL VRANKIN, )
)
Defendants. )
)
__________________________________ )
)
UBU SPORTS, INC., n/k/a/ ARTIFICIAL )
TURF SPORTS FIELD, INC., )
)
Counterclaim Plaintiff, )
)
v. )
)
TURF NATION, INC., )
)
Counterclaim Defendant )
Submitted: July 28, 2017
Decided: October 11, 2017
Upon Defendant Joseph Michael Vrankin’s Motion to Dismiss for Lack of Personal Jurisdiction
GRANTED
Upon Counter-Defendant Turf Nation, Inc.’s Motion to Dismiss Count I of Counter-Plaintiff
UBU Sports Inc., n/k/a Artificial Turf Sports Field, Inc.’s Counterclaims
DENIED
Upon Counter-Defendant Turf Nation, Inc.’s Motion for Judgment on the Pleadings on Counts II
and III of Counter-Plaintiff UBU Sports Inc., n/k/a Artificial Turf Sports Field, Inc.’s
Counterclaims
DENIED
Kenneth J. Enos, Esquire, Kathaleen S. McCormick, Esquire, Mary F. Dugan, Esquire, Young
Conaway Stargatt & Taylor, LLP, Wilmington, Delaware, and William S. Sugden, Esquire,
Thomas P. Clinkscales, Esquire, Alston & Bird, LLP, Atlanta, Georgia, Attorneys for Plaintiff
Turf Nation, Inc.
Stephen E. Jenkins, Esquire, Peter H. Kyle, Esquire, Ashby & Geddes, Wilmington, Delaware
and Stephen J. Brown, Esquire, Pedersen & Houpt, P.C., Chicago, Illinois, Attorneys for
Defendant Joseph Michael Vrankin.
Stephen E. Jenkins, Esquire, Peter H. Kyle, Esquire, Ashby & Geddes, Wilmington, Delaware
and Stephen J. Brown, Esquire, Pedersen & Houpt, P.C., Chicago, Illinois, Attorneys for
Defendant UBU Sports, Inc.
DAVIS, J.
I. INTRODUCTION
This breach of contract action is assigned to the Complex Commercial Litigation
Division of the Court. Plaintiff Turf Nation, Inc. (“Turf Nation”) brings this action against
Defendant UBU Sports, Inc. (“UBU”) for breach of contract. Turf Nation also asserts claims
against UBU and Defendant Joseph Michael Vrankin for violations of several state Trust Fund
Statutes. Turf Nation filed an initial complaint (the “Initial Complaint”) on January 12, 2017.
UBU answered the Initial Complaint on March 6, 2017, and asserted counterclaims against Turf
Nation for: (i) Fraud (Count I); (ii) Breach of Contract (Count II), and (iii) Tortious Interference
with Contractual Relations (Count III).
Mr. Vrankin did not answer the Initial Complaint. Instead, on March 10, 2017, Mr.
Vrankin moved to dismiss the Initial Complaint for lack of personal jurisdiction (the “Vrankin
Motion to Dismiss”). Subsequently, Turf Nation sought leave to amend the Initial Complaint to
clarify the grounds for personal jurisdiction over Mr. Vrankin under 10 Del. C. § 3114. Turf
Nation filed an amended complaint (the “Amended Complaint”) on May 10, 2017. UBU filed an
amended answer on May 24, 2017 and reasserted the counterclaims against Turf Nation (the
“Amended Counterclaim”).
2
Turf Nation then moved to dismiss Count I of the Amended Counterclaim (“Turf Nation
Motion to Dismiss”) pursuant to Superior Court Civil Rule 12(b)(6) (“Civil Rule 12(b)(6)”).
Turf Nation also moved for judgment on the pleadings on Counts II and III of the Amended
Counterclaim (“Turf Nation Judgment on the Pleadings Motion”).
The Court held a hearing on the Vrankin Motion to Dismiss, the Turf Nation Motion to
Dismiss, and the Turf Nation Judgment on the Pleadings Motion (collectively, the “Motions”) on
July 28, 2017. After hearing argument, the Court took the Motions under advisement. This is
the Court’s decision on the Motions. For the reasons set forth below, the Court will (i) GRANT
the Vrankin Motion to Dismiss, (ii) DENY the Turf Nation Motion to Dismiss, and (iii) DENY
the Turf Nation Judgment on the Pleadings Motion.
II. RELEVANT FACTS1
Turf Nation is a Delaware corporation with its principal place of business in Dalton,
Georgia.2 Turf Nation manufacturers synthetic sports turf and related products.3 UBU4 is a
Delaware corporation with its principal place of business in Downers Grove, Illinois.5 UBU sells
and installs turf products manufactured by companies like Turf Nation.6 Vrankin is a resident of
Illinois who served as the President and CFO of UBU from January 2014 to January 2017. 7
A. TURF NATION’S ALLEGATIONS AND CLAIMS
Between May 2016 and November 2016, UBU placed orders for turf products with Turf
Nation.8 Turf Nation manufactured and supplied the turf products via requests orders, and billed
1
Unless otherwise indicated, the following are the Relevant Facts as alleged in the amended complaint and the
amended counterclaim.
2
Pl.’s Am. Compl. ¶¶ 1, 8.
3
Am. Compl. ¶¶ 1, 8.
4
On or about December 9, 2016, UBU Sports, Inc. changed its name to Artificial Turf Sports Field, Inc. The Court
will refer to the entity as “UBU” throughout this Opinion as is consistent with the parties’ briefing.
5
Am. Compl. ¶¶ 1, 9.
6
Id. ¶¶ 1, 9.
7
Id. ¶ 10.
8
Id. ¶ 16.
3
UBU for the turf products via invoices.9 The invoices represent orders corresponding to at least
twenty installation projects (the “Projects”) across the United States.10
UBU purportedly defaulted on its obligations under the invoices by failing to timely pay
the amounts owed for the turf products.11 On November 15, 2016, Turf Nation sent a letter to
UBU providing notice of UBU’s default.12 To date, UBU has not paid any of the outstanding
debt.13
The Projects and amounts owed for each Project are: (i) $21,667.06 for turf for the
University of Pittsburgh (the “Pittsburgh Project”); (ii) $215,495.59 for turf for Tarleton State
University in Texas; (iii) $202,175.77 for turf for Liberty Christian School in Texas; (iv)
$216,477.79 for turf for the Texan’s NRG Stadium in Texas; (v) $244,540.76 for turf for Indian
River High School in New York (the “Indian River Project”); (vi) $144,555.49 for turf for the
Buffalo Bills training center in New York (the “Buffalo Bills Project”); (vii) $124,594.94 for turf
for Telluride High School in Colorado; (viii) $175,673.06 for turf for Logan High School in
Wisconsin; and (xiv) $19,213.08 for turf for Lincoln Middle School in Wisconsin. 14
Turf Nation alleges that UBU has not paid its subcontractors and suppliers, like Turf
Nation, for their work on the Projects.15 As one example, Turf Nation learned that Adhan Piping
Company, the general contractor for the Indian River Project and the Buffalo Bills Project, paid
UBU approximately $220,246 for work performed on the Indian River Project.16 Adhan Piping
Company also paid UBU approximately $403,916 for work performed on the Buffalo Bills
9
Id.
10
Id.
11
Id. ¶ 17.
12
Id. ¶ 18.
13
Id.
14
Id. ¶¶ 20–22.
15
Id. ¶ 23.
16
Id. ¶ 24.
4
Project. UBU, however, has not paid its subcontractors or suppliers for their work on these
Projects.17
Based on the foregoing, Turf Nation initiated this action against UBU for breach of
contract resulting from the unpaid invoices and for violation of Pennsylvania’s Contractor and
Subcontractor Payment Act for the violations associated with the Pittsburgh Project. Turf Nation
also asserted claims against UBU and Mr. Vrankin for violations of Texas, New York, Colorado,
and Wisconsin Trust Fund Statutes. Finally, Turf Nation asserts a claim against Mr. Vrankin
individually for receipt of trust funds in violation of Wisconsin law.
B. UBU’S ALLEGATIONS AND COUNTERCLAIMS
UBU’s counterclaims arise out of an entirely different set of facts and set forth an alleged
fraud scheme executed by Turf Nation’s CEO, Sid Nicholls, and UBU’s former CEO, Mark
Nicholls. Turf Nation’s CEO, Sid Nicholls, is the father of UBU’s former CEO and controlling
stockholder, Mark Nicholls (collectively, the “Nicholls”).18 In the Fall of 2014, Mark Nicholls
sought to obtain equity investments by third parties into UBU through the sale of membership
units in UBU’s parent, Turf Industry Holdings, LLC (“Turf Industry”).19 The investments would
be made pursuant to a Membership Interest Purchase Agreement (“MIPA”).20 Under the MIPA,
Mark Nicholls would represent and warrant that UBU had a solid base of existing contracts with
its suppliers, such as Turf Nation, purportedly to ease concerns of potential investors.21
On October 4, 2014, Mark Nicholls e-mailed Sid Nicholls and stated that he could not
find any contract in place between UBU and Turf Nation.22 Mark Nicholls then stated that he
17
Id.
18
Def.’s Am. Countercl. ¶ 1.
19
Am. Countercl. ¶ 13.
20
Id.
21
Id.
22
Id. ¶ 14.
5
would start creating a contract if one could not be found.23 Mark Nicholls found an old draft
contract from 2008, but, upon speaking to Sid Nicholls, Mark Nicholls realized that he could not
represent the 2008 draft as a contract already in place because UBU was not incorporated until
2009.24
A month later, Mark Nicholls produced a copy of a Manufacture and Supply Agreement
(the “Agreement”), dated January 15, 2013, between UBU and Turf Nation to provide to
potential investors.25 The Agreement contained Sid Nicholls’ signature, as CEO of Turf Nation,
and Mark Nicholls’ signature, as President and CEO of UBU.26 The events precipitating the
Agreement and the Agreement itself give rise to UBU’s counterclaims.
i. The Agreement
Through the Agreement, Turf Nation agrees to manufacture and sell to UBU certain turf
products, and UBU agrees to purchase these turf products from Turf Nation.27 The Agreement
specifies that UBU must make all purchases of turf products by a written purchase order.28 Turf
Nation will then invoice UBU for the purchased turf products.29 Turf Nation agrees not to
charge UBU more for the products than it “charges to its most valued customer for the same or
substantially similar work, services, component materials, or equivalent Products.”30 UBU must
then pay the balance on the invoice within sixty days of delivery and acceptance of the
products.31
23
Id.
24
Id.
25
Id. ¶ 15.
26
Id.
27
See Am. Countercl. Ex. A, Manufacture and Supply Agreement (the “Agreement”) § 2(a)-(b). Exhibit A to the
Amended Counterclaim will be cited to as “Agreement § __”.
28
Agreement § 4(a).
29
Id. § 5(d).
30
Id. § 5(e).
31
Id.
6
As it relates to payment, however, Section 5(e) of the Agreement contains a section
entitled “Credit.”32 This section states that:
The maximum amount outstanding from UBU to TN in respect of issued invoices
at any one time shall not exceed US $5 Million (the “UBU Credit Limit”).
However, on an annual basis or as otherwise reasonably requested by UBU, TN
and UBU shall review the amount of the UBU Credit Limit in light of other factors
in the Parties reasonable discretion. TN and UBU will mutually agree if an increase
in the UBU Credit Limit is warranted, and if so, the amount of such increase.33
In order to ensure payment of invoices, Section 5(g) of the Agreement allows Turf Nation to,
upon a minimum of ten days’ notice in writing:
[T]ake any and all actions necessary or appropriate to establish or perfect security
interest on Products released to UBU, including, without limitation, filing a lien or
liens on fields installed or in the process of being installed with such Products
supplied by TN, filing claims against any performance bonds relating to such fields,
or filing claims against payments due to UBU in respect of such fields.34
Section 13 of the Agreement then contemplates possible events giving rise to an
UBU default, including:
The failure of UBU to pay TN any amount that shall become due and payable under
the terms and timing as set out in this Agreement and the continuance of said failure
for fifteen (15) days after the giving of written notice of non-payment; or the failure
of UBU to perform and observe any other term, condition, covenant, or provision
contained in this Agreement and the continuance of such failure for thirty (30) days
after the giving of written notice of such failure.35
Should UBU fail to cure its default, Section 14 of the Agreement provides Turf Nation certain
remedies:
If a UBU Default within the meaning of Section 13 above has occurred and is continuing,
then TN may take any or all of the following actions in addition to any and all rights and
remedies available at law or in equity:
(d) Terminate this Agreement upon thirty (30) days written notice to UBU; provided,
however, that if UBU pays in full any amounts owing under the Agreement, and
32
Id. § 5(e).
33
Id.
34
Id. § 5(g).
35
Id. § 13(a).
7
otherwise cures all UBU Defaults existing under this Agreement, before the effective
date of termination, the notice of termination shall be cancelled and the parties shall be
restored to their prior position.
(e) Notwithstanding any other provision in this Section 14 or any other Section contained
in this Agreement, TN may terminate this Agreement upon thirty (30) days written notice
to UBU, for any reason.36
All notices, including notice of default, must be mailed to:
UBU SPORTS, INC.
23022-800 Niagara Street
Welland, Ontario, Canada
L3C 7E7
Attention: Mark Nicholls
Telephone: 800-828-8700
Telecopier: 800-828-1300
TURF NATION, INC.
3525 Old Dixie Highway
Dalton, Georgia 30721
Attention: Sid Nicholls
Telephone: (706) 278-4001
Telecopier: (706) 278-400237
ii. Turf Nation Terminates the Agreement
The term of the Agreement was set to expire on December 31, 2023.38 However, on
November 7, 2014, Sid Nicholls sent Mark Nicholls a letter terminating the Agreement.39
However, the MIPA, which was dated November 25, 2014, still listed the Agreement as a
material contract.40 In other words, Turf Nation apparently terminated the Agreement two weeks
before Mark Nicholls represented to future investors that the Agreement was in effect.41
36
Id. § 14.
37
Id. § 23.
38
Id. § 3.
39
Am. Countercl. ¶ 16.
40
Id.
41
Id.
8
While Mark Nicholls received notice of the termination, Mark Nicholls, together with
Turf Nation, purportedly hid the termination from UBU’s officers, investors, and agents for over
two years.42 Turf Nation purportedly did not reveal that it terminated the Agreement until
November 22, 2016—after UBU had fired Mark Nicholls as CEO.43 Prior to that time, UBU
believed that it was making payments to Turf Nation in satisfaction of its outstanding credit
balance under the Agreement, not in satisfaction of particular invoices.44 In fact, UBU was
paying a 30% premium on all turf products it ordered, which UBU believed Turf Nation was
applying to UBU’s loan balance.45 Turf Nation continued accepting UBU’s payment under the
terms of the $5M line of credit in the Agreement, and it never designated the payment to a
particular invoice.46
Based on the foregoing, UBU counterclaimed against Turf Nation for: (i) Fraud, based on
Turf Nation’s conduct in executing and terminating the Agreement; (ii) Breach of Contract,
based on Turf Nation’s improper termination of the Agreement and breach of the Agreement’s
material terms; and (iii) Tortious Interference with Contractual Relations, based on Turf Nation’s
conduct in contacting UBU’s clients to seek repayment of UBU’s purportedly defaulted loans. 47
42
Id. ¶ 19.
43
Id.
44
Id.
45
Answer ¶ 19; Am. Countercl. ¶ 20.
46
Am. Countercl. ¶ 20.
47
On March 17, 2017, UBU also filed a complaint in the Delaware Court of Chancery (the “Court of Chancery
Action”) against Mark Nicholls for breach of fiduciary duty and against Turf Nation for aiding and abetting breach
of fiduciary duty. The complaint states equitable claims against Mark Nicholls and Turf Nation arising from the
same facts and circumstances at issue in these proceedings. By order dated July 25, 2017, Chief Justice Strine
designated this judicial officer to sit as Vice Chancellor on the Court of Chancery under Del. Const. art. IV, § 13(s)
for purposes of adjudicating all issues in the Court of Chancery Action.
9
III. PARTIES’ CONTENTIONS
A. VRANKIN MOTION
i. Mr. Vrankin’s Contentions
MR. Vrankin first contends that the Court cannot assert personal jurisdiction over him
under 10 Del. C. § 3104 (“Section 3104”) because had had no contact with the State of Delaware
other than through his role as CFO of UBU, a Delaware corporation. Mr. Vrankin also contends
that his status as CFO of UBU, on its own, does not satisfy the due process requirement for
personal jurisdiction under 10 Del. C. § 3114 (“Section 3114”).
ii Turf Nation’s Contentions
Turf Nation concedes that personal jurisdiction is not appropriate under Section 3104
because Mr. Vrankin did not have sufficient minimum contacts with the State of Delaware.
However, Turf Nation argues that personal jurisdiction is appropriate under Section 3114
because Mr. Vrankin is a “necessary and proper party” to this civil action and because Mr.
Vrankin controlled the finances of a Delaware corporation.
B. TURF NATION DISMISSAL MOTION
i. Turf Nation’s Contentions
Turf Nation contends that the allegations of fraud are not pleaded with the requisite
particularity. Alternatively, Turf Nation contends UBU lacks standing to bring a fraud claim
because the harm alleged was to investors in UBU’s parent, not UBU itself.
ii. UBU’s Contentions
UBU contends it pleaded its fraud claim with particularity because the Amended
Counterclaim names the time, place, content, and source of the fraud. UBU further contends it
10
has standing to assert a fraud claim because the Amended Counterclaim pleads several instances
of harm caused directly to UBU.
C. TURF NATION JUDGMENT ON THE PLEADINGS MOTION
i. Turf Nation’s Contentions
Turf Nation argues that the breach of contract and tortious interference with contractual
relations claims cannot stand because Turf Nation properly terminated the Agreement in 2014.
Alternatively, Turf Nation asserts that even if it did not terminate the Agreement, none of its
conduct violated the Agreement for purposes of establishing breach of contract and alike.
ii. UBU’s Contentions.
UBU contends that Turf Nation improperly terminated the Agreement and breached the
Agreement by failing to provide the $5M line of credit to UBU and by charging 30% premiums
to UBU. Because UBU did not default on its payments based on the terms of the Agreement,
UBU contends Turf Nation interfered with its business by contacting UBU’s clients.
IV. STANDARDS OF REVIEW
A. CIVIL RULE 12(B)(2)
Upon a motion to dismiss under Civil Rule 12(b)(2), the plaintiff is obligated to establish
a prima facie case, that personal jurisdiction is sound.48 “Although the plaintiff must plead
specific facts and cannot rely on mere conclusory assertions, the factual record is read in the light
most favorable to the plaintiff.”49 “There are two legal questions to be answered in considering a
motion under Rule 12(b)(2) . . . whether there is a statutory basis for serving the defendant [and]
48
See In re USA Cafes, 600 A.2d 43, 47 (Del. Ch. 1999).
49
Mobile Diagnostic Grp. Holdings, LLC v. Suer, 972 A.2d 799, 802 (Del. Ch. 2009).
11
whether this court’s exercise of personal jurisdiction over the defendants is consistent with the
Due Process Clause.”50
B. CIVIL RULE 12(B)(6)
Upon a motion to dismiss under Civil Rule 12(b)(6), the Court (i) accepts all well-
pleaded factual allegations as true, (ii) accepts even vague allegations as well-pleaded if they
give the opposing party notice of the claim, (iii) draws all reasonable inferences in favor of the
non-moving party, and (iv) only dismisses a case where the plaintiff would not be entitled to
recover under any reasonably conceivable set of circumstances.51 However, the Court must
“ignore conclusory allegations that lack specific supporting factual allegations.”52
C. CIVIL RULE 12(C)
A party may move for judgment on the pleadings pursuant to Civil Rule 12(c).53 In
determining a motion under Civil Rule 12(c) for judgment on the pleadings, the Court is required
to view the facts pleaded and the inferences to be drawn from such facts in a light most favorable
to the non-moving party.54 The Court must take the well-pleaded facts alleged in the complaint
as admitted.55 When considering a motion under Civil Rule 12(c), the Court also assumes the
50
Sample v. Morgan, 925 A.2d 1046, 1056 (Del. Ch. 2007) (citing AeroGlobal Capital Mgmt., LLC v. Cirrus Indus.
Inc., 871 A.2d 428, 438 (Del. 2005)).
51
See Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 227 A.3d 531, 536 (Del. 2011); Doe v.
Cedars Academy, No. 09C-09-136, 2010 WL 5825343, at *3 (Del. Super. Oct. 27, 2010).
52
Ramunno v. Crawley, 705 A.2d 1029, 1034 (Del. 1998).
53
Civil Rule 12(c) provides:
Motion for judgment on the pleadings — After the pleadings are closed but within such time as not
to delay the trial, any party may move for judgment on the pleadings. If, on a motion for judgment
on the pleadings, matters outside the pleadings are presented to and not excluded by the Court, the
motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and
all parties shall be given reasonable opportunity to present all material made pertinent to such a
motion by Rule 56.
Del. Super. Civ. R. 12(c).
54
See Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A.2d 1199, 1205 (Del. 1993);
see also Warner Commc’ns, Inc. v. Chris–Craft Indus., Inc., 583 A.2d 962, 965 (Del. Super.), aff’d without opinion,
567 A.2d 419 (Del. 1989).
55
See Desert Equities, Inc., 624 A.2d at 1205; Warner Commc’ns, Inc., 583 A.2d at 965.
12
truthfulness of all well-pled allegations of fact in the complaint.56 The Court must, therefore,
accord plaintiffs opposing a Rule 12(c) motion the same benefits as a plaintiff defending a
motion under Civil Rule 12(b)(6).57 The Court may grant a motion for judgment on the
pleadings only when no material issue of fact exists and the movant is entitled to judgment as a
matter of law.58
V. DISCUSSION
A. THE COURT DOES NOT HAVE PERSONAL JURISDICTION OVER MR. VRANKIN UNDER 10
DEL. C. § 3114 OR 10 DEL. C. § 3104
Under 10 Del. C. § 3114 (“Section 3114”), a nonresident officer of a Delaware
corporation, by accepting and holding office, consents to the exercise of personal jurisdiction
over him in Delaware courts in two types of cases:
(i) “all civil actions or proceedings brought in this State, by or on behalf of, or
against such corporation, in which such officer is a necessary and proper party”; or
(ii) “any action or proceeding against such officer for violation of a duty in such
capacity” i.e. a claim for breach of a fiduciary or other statutory duty.59
To qualify as a “necessary and proper party” under prong one, the party asserting personal
jurisdiction must establish that: (i) the individual defendant has a legal interest in the dispute
separate from the Delaware corporation’s interest; and (ii) the plaintiff’s claims arose out of the
same facts and occurrences as the claims against the Delaware corporation and it serves judicial
economy to consider the claims together.60
Even if a nonresident officer qualifies as a “necessary and proper party,” however, the
party asserting personal jurisdiction must still prove that personal jurisdiction is consistent with
56
See McMillan v. Intercargo Corp., 768 A.2d 492, 500 (Del. Ch. 2000).
57
See id.58
See Desert Equities, Inc., 624 A.2d at 1205; Warner Commc’ns, Inc., 583 A.2d at 965.
59
Hazout v. Tsang Mun Ting, 134 A.3d 274, 277 (Del. 2016) (quoting 10 Del. C. § 3114(b)).
60
Id. at 278.
13
due process.61 This is done by establishing that the nonresident officer had minimum contacts
with the forum state.62
Turf Nation argues under prong one only—that Mr. Vrankin is a “necessary and proper
party.” Specifically, Turf Nation argues that Mr. Vrankin has a separate legal interest in this
civil action stemming from his individual liability as CFO for the Trust Fund Statute violations.
Mr. Vrankin argues that his legal interest is not separate from UBU’s for purposes of establishing
that he is a “necessary and proper party.” The Delaware Supreme Court’s ruling in Hazout v.
Tsang Mung Ting63 helps resolve this dispute.
In Hazout, plaintiff, Tsang Mun Ting (“Ting”), sued defendant, Marc Hazout (“Hazout”),
a nonresident CEO and CFO of a Delaware corporation based in Canada, Silver Dragon
Resources, Inc. (“Silver Dragon”), for fraud and fraudulent transfer in violation of Delaware
Uniform Fraudulent Transfer Act.64 As CEO and CFO of Silver Dragon, Hazout negotiated a
capital infusion into Silver Dragon by Ting and other investors.65 The capital infusion mandated
a change of control of Silver Dragon from Hazout to Ting and his fellow investors, who would
then achieve the right to control Silver Dragon’s board.66 The capital infusion would be
consummated through a series of agreements (the “Agreements”), four of which specified that
Delaware law was to govern their terms.67
After the parties negotiated the terms of the Agreements, but before the parties signed the
Agreements, Ting provided the first $1 million of the $3.4 million capital infusion.68 Ting
61
Id. at 278–79.
62
See In re USACafes, 600 A.2d 43, 47 (Del. Ch. 1991) (citing World-Wide Volkswagen Corp. v. Woodson, 444
U.S. 286, 292 (1980)). See also Martinez v. E.I. DuPont de Nemours & Co., Inc., 86 A.3d 1102 (Del. 2014).
63
134 A.3d 274 (Del. 2016).
64
Hazout, 134 A.3d at 277.
65
Id.
66
Id.
67
Id.
68
Id.
14
received assurances from Hazout and the other directors of Silver Dragon that they would soon
execute the Agreements.69 Hazout and two other directors of Silver Dragon signed the
Agreements, but a fourth refused.70 Rather than return the $1 million to Ting, however, Hazout,
via Silver Dragon, sent $750,000 of the $1 million to a corporation that Hazout controlled.71
Based on this, Ting initiated fraud proceedings in this Court.72 Hazout moved to dismiss
for lack of personal jurisdiction over him in Delaware.73 Hazout argued that Section 3114
applied to claims of a fiduciary nature only, and that because Ting was not suing for breach of
fiduciary duty or alike, this Court lacked personal jurisdiction over Hazout.74 This Court
disagreed and found that it had personal jurisdiction over Hazout.75 Hazout appealed.76
The Delaware Supreme Court affirmed this Court’s ruling.77 It clarified that the plain
language of Section 3114 provides two ways to obtain personal jurisdiction—either by
establishing the nonresident officer is a “necessary and proper party,” or by establishing that the
nonresident officer breached his fiduciary duty or alike.78 The Court found personal jurisdiction
under the “necessary and proper prong” of Section 3114 because: (i) the civil action involved a
Delaware corporation of which Hazout was a director, (ii) Hazout was a “proper party” to the
action because he had a legal interest in the dispute that was separate from Silver Dragon’s
interest; and (iii) the claims arose out of the same facts and occurrences as the claims against
Silver Dragon and it served judicial economy to consider those claims together.79
69
Id.
70
Id.
71
Id.
72
Id.
73
Id.
74
Id.
75
Id.
76
Id.
77
Id. at 278.
78
Id.
79
Id.
15
Most relevant to the present dispute is the analysis of the “necessary and proper party”
standard. The Supreme Court held that Hazout was a “proper party” because Ting asserted
personal liability against Hazout for actions taken by Hazout in his official capacity as CEO and
CFO of Silver Dragon.80 This personal liability was separate and distinct from the liability of
Silver Dragon.81 The Supreme Court further held that judicial economy would be served by
allowing Ting to seek redress against Silver Dragon and Hazout for injuries in one, rather than
multiple forums, because the claims arose out of the same facts and occurrences.82 As a final
point, the Supreme Court noted that asserting jurisdiction over a “necessary and proper party”
would not, as argued by Hazout, subject all nonresident officers to personal jurisdiction in
Delaware.83 Instead, the “necessary and proper party” standard requires a close nexus between
the corporation and the conduct of the nonresident fiduciary such that an unrelated nonresident
fiduciary could not be hailed into Delaware courts.84
In addition to declaring Hazout a “necessary and proper party,” the Supreme Court also
ruled that personal jurisdiction was constitutionally permissible.85 The Supreme Court relied on
the fact that the transaction involved a change of control of a Delaware corporation and that the
Agreements provided for Delaware law to govern any disputes.86 The Supreme Court also relied
on the fact that all of Hazout’s actions relevant to the lawsuit could not have been accomplished
without the power of his offices in a Delaware corporation.87 In this respect, by becoming a
director and an officer of a Delaware corporation, Hazout purposefully availed himself of certain
80
Id.
81
Id.
82
Id. at 290.
83
Id.
84
Id.
85
Id. at 279.
86
Id.
87
Id.
16
duties and protections under Delaware law, as well as the chance that he could be sued in a
Delaware court.
Hazout provides a basis for this Court to assert personal jurisdiction over Mr. Vrankin as
a “necessary and proper party” to this litigation. First, this is a civil action against a Delaware
corporation, UBU, and Mr. Vrankin was the CFO and President of UBU from 2014-2016.
Second, Hazout is a “proper party” to this action because he has a legal interest in this dispute
that is separate from Silver Dragon’s interest. Mr. Vrankin is personally liable for the Trust
Fund Statute violations purportedly committed in his capacity as CFO of UBU. This liability is
separate and apart from UBU’s liability.
Mr. Vrankin argues that he does not have a separate legal interest in the dispute because
he owns only a small amount of equity in UBU. In contrast, according to Mr. Vrankin, Marc
Hazout had a separate legal interest from Silver Dragon’s legal interest in the civil proceeding
because Mr. Hazout had “potentially diminished control over Silver Dragon, as well as a
controlling interest in the allegedly improper transfer.”88 The Hazout court, however, never
asserted this reasoning in finding that Mr. Hazout had a separate legal interest. Instead, the
Delaware Supreme Court relied on the fact that Mr. Hazout could be personally liable as CFO
for his purportedly fraudulent actions.89 Because Turf Nation similarly sues Mr. Vrankin in his
individual capacity as CFO, the same basis exists for finding he has a separate legal interest in
this case.
88
Def.’s Rep. Br. p. 12.
89
See Hazout, 134 A.3d at 290. In fact, in rendering its decision, the Delaware Supreme Court cited to American
Jurisprudence, which defines “proper party” as follows: “One whose interest may be affected by a judgment but
whose presence is not essential for the adjudication of an action. Only those persons who are legally affected are
proper parties to a lawsuit. A party is ‘legally affected’ by a cause of action, so as to be a proper party to the action,
if the party has a legal interest in rights that are the subject matter of the cause of action.” See 59 AM. JUR. Parties §
8 (2012).
17
Third, the claims against Mr. Vrankin arise out of the same facts and circumstances as the
claims against UBU. All of the claims arise out of purported misconduct performed in Mr.
Vrankin’s official capacity as UBU’s CFO and President, specifically, failure to maintain certain
funds in a trust to compensate its subcontractors and suppliers. Finally, because the claims arise
out of the same circumstances, it serves judicial economy for this Court to hear the claims
together. Should the Court dismiss the claims against Mr. Vrankin for lack of personal
jurisdiction, Turf Nation would simply re-file the Trust Fund Statute violation claims in separate
courts across the United States where the violations occurred. It is a better exercise of judicial
resources to hear Turf Nation’s claims against Mr. Vrankin in this Court since this Court will
already adjudicate similar claims against UBU.
While Mr. Vrankin may qualify as a “necessary and proper party,” the Court finds that
there is not a proper basis to subject Mr. Vrankin to the jurisdiction of this Court. In Hazout, the
Supreme Court noted that qualification as a “necessary and proper party” is not sufficient to
confer jurisdiction. The Supreme Court went on to re-emphasize that the Court must examine
whether the exercise of personal jurisdiction is consistent with the person’s constitutional
expectations of due process.90 The Supreme Court then provides a useful example of a situation
where application of Section 3114 would be inconsistent with Constitutional expectations of due
process:
For example, if plaintiffs attempted to drag corporate officers and directors into
Delaware by naming them as defendants in a products liability case where the
products had been designed and distributed from a state other than Delaware to
diverse consumers, most of whom were in states other than Delaware, the minimum
contacts test would provide substantial protection. It would be constitutionally
questionable, to say the least, for Delaware to exercise personal jurisdiction when
Delaware’s status as the state of incorporation had no rational connection to the
90
See Hazout, 134 A.3d at 291 (“…the way to police that concern is to apply the method we do when implementing
our state’s long-arm statute, which is to give effect to its terms, and to use the minimum contacts analysis required
by International Shoe to ensure that the statute is not used in a situationally inappropriate manner.”).
18
cause of action, where the conduct is governed by the laws of others states, and
where there is no reason why a corporate fiduciary should expect to be named as a
party at all, much less in a suit where the underlying conduct and claims have no
rational connection to Delaware and provide no rational basis for Delaware to apply
its own law. Not only that, the traditional protections of the corporate shield are
unaffected by this decision, and there are serious limits on the ability of plaintiffs
to use veil-piercing to hold corporate fiduciaries or stockholders financially
responsible for actions of the corporation itself.91
Here, Turf Nation brings claims against Mr. Vrankin under the laws of the States of
Pennsylvania, Texas, New York, Colorado and Wisconsin. The purported actions of Mr.
Vrankin giving rise to these claims occurred in Downer’s Grove, Illinois, Pennsylvania, Texas,
New York, Colorado and/or Wisconsin. Turf Nation is a Delaware corporation but its principal
place of business is in Dalton, Georgia. UBU is a Delaware corporation with its principal place
of business in Downer’s Grove, Illinois. The Agreement calls for the application of Georgia
law.92
Under these circumstances, the Court sees no rational connection to Delaware other than
the place of incorporation of UBU and Turf Nation. Delaware’s status as the state of
incorporation has no rational connection to the causes of action. The Court will not be applying
Delaware law. The purported conduct giving rise to the harm occurred in states other than
Delaware. Turf Nation makes no claims that Mr. Vrankin misused his position at UBU or that
he breached fiduciary duties owed to UBU let alone Turf Nation. The Court sees no reason why
a corporate fiduciary, like Mr. Vrankin, would have expected to be hauled into a Delaware court
to answer claims regarding the violation of trust fund statutes in Pennsylvania, Texas, New York,
Colorado or Wisconsin. The wrongs alleged here are either tort claims or breach of contract
claims unconnected with the internal affairs or corporate governance of a Delaware corporation.
91
Id. at 291, n.60.
92
See Agreement ¶ 27.
19
Turf Nation makes an efficiency argument for the exercise of personal jurisdiction over
Mr. Vrankin, contending that if the Court does not let Turf Nation proceed against Mr. Vrankin
in Delaware then Turf Nation will need to file another action in Illinois or alike. The Court does
not find this argument persuasive. An equitable argument regarding the efficiencies of litigation
weakens when Turf and not Mr. Vrankin or UBU initiates the civil action in Delaware.
The Court also does not have jurisdiction over Mr. Vrankin under 10 Del. C. § 3104
(“Section 3104”). Other than being an officer of UBU, Mr. Vrankin has no other contacts with
Delaware. Turf Nation fails to plead sufficient grounds for the exercise of specific or general
jurisdiction. Mr. Vrankin has not engaged in the type of persistent course of conduct that would
support the exercise of general jurisdiction.93 Moreover, Turf Nation’s complained of injury in
Delaware—harm occurring in Delaware because UBU and Turf Nation are Delaware
corporations—did not occur in Delaware such as would support the exercise of specific
jurisdiction.94
For the reasons set forth above, the Court finds that Turf Nation has failed to
demonstrate that the Court can exercise personal jurisdiction over Mr. Vrankin under either
Section 3114 or Section 3104. Accordingly, the Vrankin Motion to Dismiss is GRANTED.
B. THE AMENDED COUNTERCLAIM PLEADS FRAUD WITH SUFFICIENT PARTICULARITY
Delaware Superior Court Civil Rule 9(b) requires all allegations of fraud to be pleaded
with particularity.95 In order to meet the particularity requirement, a complaint “must state the
93
See, e.g., Hirshman v. Vendamerica, Inc., C.A. No. 90C-AP-40-1CV, 1992 WL 52141, at *2 (Del. Super. Mar. 9,
1992) (holding that the status as an officer or director of a Delaware corporation without more is not enough to
confer jurisdiction).
94
See, e.g., Eureka Res., LLC v. Range Res.-Appalachia, LLC, 62 A.3d 1233, 1238 (Del. Super. 2012) (holding that
pecuniary loss most likely occurs at the corporation’s headquarters or principal place of business); see also Pittway
Corp. v. Lockheed Aircraft Corp., 641 F.2d 524, 528 (7th Cir. 1981) (purely economic harm is normally sustained at
a corporation’s principal place of business).
95
Del. Super. Civ. R. 9(b).
20
time, place, and contents of the alleged fraud, as well as the individual accused of committing the
fraud.”96 On the content requirement, the following elements must be pleaded to state a claim
for fraud:
(1) a false representation, usually of fact, made by the defendant; (2) the defendant’s
knowledge or belief that the representation was false, or was made with reckless
indifference to the truth; (3) an intent to induce the plaintiff to act or to refrain from
acting; (4) the plaintiff’s action or inaction was taken in justifiable reliance upon
the representation; and (5) damage to the plaintiff as a result of such reliance.97
The Amended Counterclaim sufficiently alleges the time, place, and source of the fraud.
UBU alleges that Turf Nation, specifically the Nicholls, engaged in a scheme to defraud UBU
and UBU investors for the financial benefit of Turf Nation.98 The Amended Counterclaim states
that the Nicholls initiated this scheme on October 4, 2014 and continued it until November 22,
2016 when UBU discovered the fraud.99 The Amended Counterclaim references several e-mails
between the Nicholls which discussed the Nicholls’ intent to create and backdate a contract
between Turf Nation and UBU.100
The Amended Counterclaim also sufficiently alleges the content of the fraud. Turf
Nation claims that UBU’s allegations do not allege a false representation or alike by Turf Nation
because the alleged fraud was perpetrated by UBU’s own Mark Nicholls. Moreover, Turf Nation
argues that any harm caused by the purported fraud was to UBU’s investors, not UBU. Turf
Nation’s argument ignores a large portion of the allegations in the Amended Counterclaim.
The Amended Counterclaim details specific misrepresentations related to the fraud
scheme between the Nicholls, including that: (i) the Nicholls fabricated the Agreement to
96
Universal Capital Mgmt., Inc. v. Micco World, Inc., C.A. No. N10C-07-039, 2012 WL 1413598, at *2 (Del.
Super. Feb. 1, 2012).
97
Desert Equities, Inc., 624 A.2d at 1208.
98
Am. Countercl. ¶ 3.
99
Id. ¶¶ 14–19.
100
Id. ¶¶ 3, 14.
21
provide to potential UBU investors101; (ii) the Nicholls backdated the Agreement to cause
investors to believe that UBU and Turf Nation had a longstanding business relationship102; (iii)
the Nicholls terminated the Agreement, but represented to investors in the MIPA that the
Agreement would last until 2023103; and (iv) the Nicholls secretly terminated the Agreement
without providing notice to other directors at UBU.104
The Amended Counterclaim alleges that the Nicholls knew the representations were
false, but that they made the representations anyway in an attempt to induce investment into Turf
Industry, and in turn, Turf Nation.105 Moreover, the knowing misrepresentations sought to
induce UBU to: (i) continue to make purchase orders under the Agreement; and (ii) continue to
make payments at a 30% premium under the Agreement without a designated application to
particular invoices.106 Finally, the Amended Counterclaim alleges that UBU relied on Turf
Nation’s representations concerning the Agreement, and suffered damage as a result.107 The
damage included premium payments, purchase orders submitted in reliance on the $5 million
line of credit, and reputational damage as a result of Turf Nation contacting UBU’s customers
about UBU’s purportedly defaulted payment.108
As an alternative argument, Turf Nation alleges that UBU lacks standing to bring a fraud
claim because, as previously argued, any harm caused by the alleged fraud occurred to UBU’s
investors, not UBU. Again, Turf Nation ignores numerous allegations of harm caused to UBU
through the Nicholls’ purported fraud scheme.
101
Id. ¶¶ 3, 14–16.
102
Id. ¶¶ 4, 16–17.
103
Id.¶¶ 4, 17–18.
104
Id. ¶¶ 19, 20.
105
Id. ¶¶ 13, 17, 20–21.
106
Id. ¶¶ 20, 22.
107
Id.
108
Id.
22
For the reasons set forth above, the Court finds that the Amended Counterclaim properly
states a claim for fraud under Civil Rule 12(b)(6) and Civil Rule 9(b). Accordingly, the Turf
Nation Dismissal Motion is DENIED.
C. THE BREACH OF CONTRACT AND TORTIOUS INTERFERENCE WITH CONTRACTUAL
RELATIONS CLAIMS ARE NOT RIPE FOR RELIEF UNDER RULE 12(C)
i. The Court does not have enough information about the fraud claim to grant relief
on the breach of contract claim under Rule 12(c)109
In the Amended Counterclaim, UBU alleges that Turf Nation breached the Agreement
by: (i) improperly and secretly terminating the Agreement in violation of Sections 13 and 14; (ii)
charging a 30% premium in violation of Section 5(b); (iii) failing to provide a $5 million line of
credit as provided for in Section 5(e); and (iv) improperly contacting UBU’s customers and
clients to collect on amounts due in violation of Section 5(g).110 As it relates to the 30%
premium, UBU explained in its Affirmative Defenses that: “for every dollar of new turf product
provided by Turf Nation to UBU, Turf Nation overbilled or added a 30% premium surcharge
when it invoiced UBU. The additional 30% was apparently intended to be applied to amounts
past due on still unpaid invoices, in other words as loan repayments.”111
Turf Nation first argues that UBU cannot maintain a breach of contract claim related to
breach of the Agreement because Turf Nation properly terminated the Agreement pursuant to
Section 14(e). Section 14(e) of the Agreement provides that: “Notwithstanding any other
provision in this Section 14 or any other Section contained in this Agreement, [Turf Nation] may
terminate this Agreement upon thirty (30) days written notice to UBU, for any reason.”112 Turf
109
Despite Section 27 of the Agreement, which provides that Georgia law governs disputes arising from the
Agreement, the parties rely on Delaware law in making their arguments. See Agreement ¶ 27.
110
Am. Countercl. ¶¶ 27–28
111
Answer ¶ 19.
112
Agreement § 14(e).
23
Nation argues that because it sent UBU’s CEO Mark Nicholls a notice of termination, Turf
Nation was entitled to terminate the Agreement under the express language of Section 14(e).
UBU acknowledges that Mark Nicholls received the termination letter. However, UBU
challenges Turf Nation’s argument on three bases. First, UBU argues that Turf Nation’s
interpretation of Section 14(e) renders other provisions of the Agreement meaningless,
specifically Section 3 and Section 14. Section 3 provides for the term of the Agreement and its
renewal process. Section 14 conditions Turf Nation’s termination remedies on the existence of
an UBU default—which default UBU alleges never occurred. UBU, in essence, argues that one
provision of the Agreement cannot render the rest of the Agreement’s provisions meaningless.
Second, UBU argues that Section 14(e) is void as unconscionable. UBU alleges that the
Nicholls added Section 14(e) at the last minute knowing they would later terminate the
Agreement without cause in furtherance of their fraud scheme. As an exhibit to the Amended
Counterclaim, UBU provides a copy of an undated draft agreement referenced by the Nicholls in
an e-mail conversation.113 This draft agreement is identical to the Agreement signed by the
Nicholls, save Section 14(e) which the Nicholls added to the Agreement before executing it.114
Based on this and the other allegations of fraud, UBU argues that Section 14(e) of the Agreement
is unenforceable and cannot form the basis for Turf Nation’s decision to terminate the
Agreement.115
Third, even if the Court rejects the first two arguments, UBU argues that the termination
notice itself was deficient due to Mark Nicholls’ fraud against UBU. UBU argues that notice to
Mark Nicholls, who was defrauding UBU together with Turf Nation, cannot serve as notice to
113
Am. Countercl. Ex. 6.
114
Compare Am. Countercl. Ex. 1 with Ex. 6.
115
See e.g., Worldwide Ins. Grp. v. Klopp, 603 A.2d 788, 792 (Del. 1992) (holding that “[t]he Chancery Court was
correct in striking [the] unconscionable clause while enforcing the remainder of the contract.”).
24
UBU for purposes of satisfying the notice requirements.116 UBU explains that notice was sent
only to Mark Nicholls at his Canadian home, and not to UBU’s business address. UBU contends
that no one at UBU other than Mark Nicholls knew about the termination, and that Turf Nation
kept the termination a secret from UBU for more than two years. Based on this, UBU argues
that the notice sent by Turf Nation was deficient for purposes of terminating the Agreement.
In the alternative, Turf Nation argues that even if it did not properly terminate the
Agreement, Turf Nation’s actions did not breach Sections 5(b), 5(e), or 5(g) of the Agreement as
argued by UBU in support of its claim. First, Turf Nation contends it did not violate Section 5(b)
of the Agreement by charging UBU a 30% premium. Section 5(b) provides that Turf Nation,
warrants that the prices charged to UBU during the term of this Agreement . . . for the
manufacture and sale of the Products in accordance with a Purchase Order does not and
shall not exceed the selling price [Turf Nation] charges to its most valued customer.117
Turf Nation contends the “30% premium” was not a “price charged to UBU” under the meaning
of Section 5(g) because it was charged in satisfaction of UBU’s outstanding debts.
Second, Turf Nation contends it did not violate Section 5(e) because it provided the $5
million line of credit to UBU. However, Turf Nation contends this line of credit was subject to
other provisions of the Agreement, such as Section 5(d) which specified UBU’s payment terms
as “net sixty (60) days.”118 Therefore, while UBU could have up to $5 million outstanding at
any one time, Turf Nation contends it still had to pay Turf Nation on invoices within sixty days,
which UBU failed to do.
116
See In re HealthSouth Corp. S’holders Litig., 845 A.2d 1096, 1108 n.22 (Del. Ch. 2003) (“When corporate
fiduciaries . . . have a self-interest in concealing information—such as the falsity of the financial statements that they
had helped prepare—their knowledge cannot be imputed to the corporation.”).
117
Agreement § 5(b).
118
See id. § 5(d).
25
Third, Turf Nation contends it did not violate Section 5(g) because Section 5(g) permitted
Turf Nation to file liens and alike in order to ensure payment of invoices. Because UBU was in
default on its payments, Turf Nation contends its actions in contacting UBU’s customers were
permissible under the Agreement.
Based on the foregoing, it is premature to dismiss the breach of contract claim against
Turf Nation under Civil Rule 12(c). The Court must look to the pleadings, view the facts as
pleaded and draw any inferences in a light most favorable to the non-moving parties.119 If no
material issues of fact exist and a party is entitled to judgment as a matter of law, the Court could
grant the Turf Nation Judgment on the Pleadings Motion.120 At this stage in the litigation, the
Court finds that too many material issues of fact exist to grant judgment on pleadings as a matter
of law.
UBU’s breach of contract claim is intertwined with UBU’s fraud claim, as both allege
that Turf Nation committed fraud in executing, terminating, and accepting payments pursuant to
the Agreement. However, the Court does not have enough information at this stage in the
litigation to judge the merits of UBU’s fraud claim. Therefore, the parties need to develop the
fraud allegations through discovery before the Court can make a determination as to the strength
of the fraud claim and its effect on UBU’s other claims in this case. Specifically, the Court
needs more information about: (i) the extent of the purported fraud between the Nicholls; (ii) the
facts surrounding UBU’s discovery that Turf Nation terminated the Agreement (e.g., who at
UBU knew, and when); and (iii) the facts surrounding the payments made by UBU to Turf
119
See Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A.2d 1199, 1205 (Del. 1993);
see also Warner Commc’ns, Inc. v. Chris–Craft Indus., Inc., 583 A.2d 962, 965 (Del. Super.), aff’d without opinion,
567 A.2d 419 (Del. 1989).
120
See Desert Equities, Inc., 624 A.2d at 1205; Warner Commc’ns, Inc., 583 A.2d at 965.
26
Nation and Turf Nation’s conduct in calculating, accepting and applying payments to invoices or
credit.
ii. The Court does not have enough information about the fraud and breach of
contract claims to grant relief on the tortious interference with contractual
relations claim under Rule 12(c)
To make out a claim for tortious interference with contractual relations under Delaware
law, the plaintiff must prove: (i) the existence of a valid contract; (ii) knowledge of such contract
on the part of the defendant; (iii) an intentional act on the part of the defendant that is a
significant factor in causing the breach of contract; (iv) lack of justification for such act; and (v)
damages.121
UBU argues that Turf Nation tortuously interfered with contracts UBU had with its
customers. Specifically, UBU cites to the fact that Turf Nation sent notice letters to UBU’s
clients falsely stating that UBU was delinquent on its obligations and demanding the issuance of
joint checks for the outstanding debts purportedly owed.122 UBU contends Turf Nation did this,
despite knowing that UBU was operating under the terms of the Agreement and was making
payments on the revolving $5 million line of credit.123 Based on the information provided by
Turf Nation, UBU’s clients and contractors terminated their contracts with UBU, resulting in
UBU’s loss of cash flow and inability to pay its debts.124
Turf Nation argues that it was justified in contacting UBU’s clients. Turf Nation
contends it provided notice of UBU’s default to UBU on November 15, 2016, and that only after
UBU failed to cure its default did Turf Nation contact UBU’s customers, inform them of UBU’s
121
Beard Research Inc. v. Kates, 8 A.3d 573, 605 (Del. Ch. 2010).
122
Am. Countercl. ¶ 36.
123
Id. ¶ 37.
124
Id. ¶¶ 41–42.
27
default, and exercise its rights under the applicable mechanic’s lien and payment bond statutory
schemes.
Again, it is premature to dismiss the tortious interference with contractual relations claim
against Turf Nation under Civil Rule 12(c). Here, the parties do not agree on the facts and ask
the Court to apply those facts to the law. Discovery and the adversary process will properly
frame this issue as one for summary judgment or trial. At this point in the civil action, this claim
is intertwined with UBU’s breach of contract claim such that the Court cannot make the legal
determination as to whether Turf Nation was justified in contacting UBU’s clients. Later, the
Court may be able to determine whether UBU defaulted on its payments in the first instance and
that Turf Nation was justified in its subsequent conduct. This latter determination, however, is
necessarily dependent on the outcome of UBU’s fraud and breach of contract claims.
For the reasons set forth in Section V.C.i and V.C.ii, the Turf Nation Judgment on the
Pleadings Motion is DENIED.
VI. CONCLUSION
For the reasons discussed herein, Defendant Joseph Michael Vrankin’s Motion to
Dismiss for Lack of Personal Jurisdiction is GRANTED; Counter-Defendant Turf Nation Inc.’s
Motion to Dismiss Count I of Counter-Plaintiff UBU Sports, Inc., n/k/a Artificial Turf Sports
Field, Inc.’s Counterclaims is DENIED; and Counter-Defendant Turf Nation Inc.’s Motion for
Judgment on the Pleadings on Counts II and III of Counter-Plaintiff UBU Sports Inc., n/k/a
Artificial Turf Sports Field, Inc.’s Counterclaims is DENIED.
IT IS SO ORDERED.
Dated: October 11, 2017
Wilmington, Delaware
/s/ Eric M. Davis
Eric M. Davis, Judge
28