Matthew v. Laudamiel

EFiled: Sep 28 2015 03:27PM EDT
Transaction ID 57930536
Case No. 5957-VCN
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
STEWART MATTHEW, :
:
Plaintiff, :
:
v. : C.A. No. 5957-VCN
:
CHRISTOPHE LAUDAMIEL, :
FLÄKT WOODS GROUP SA, :
FLÄKT WOODS LIMITED and :
DREAMAIR LLC, :
:
Defendants. :
_________________________________ :
FLÄKT WOODS GROUP SA, :
:
Cross-Claim :
Plaintiff, :
:
v. :
:
CHRISTOPHE LAUDAMIEL, :
ROBERTO CAPUA, ACTION 1 SRL, :
and DREAMAIR LLC, :
:
Cross-Claim :
Defendants. :
MEMORANDUM OPINION
Date Submitted: June 5, 2015
Date Decided: September 28, 2015
Thad J. Bracegirdle, Esquire of Wilks, Lukoff & Bracegirdle, LLC, Wilmington,
Delaware, Attorney for Plaintiff.
Christopher Laudamiel, of New York, New York, Self-Represented Defendant.
Seth J. Reidenberg, Esquire of Tybout, Redfearn & Pell, Wilmington, Delaware
and Mark Thornhill, Esquire, Kersten Holzhueter, Esquire, and Angus Dwyer,
Esquire of Spencer Fane Britt & Browne LLP, Kansas City, Missouri, Attorneys
for Defendants Fläkt Woods Group SA and Fläkt Woods Limited.
NOBLE, Vice Chancellor
Plaintiff, a businessman, aspired to create an innovative scenting business.
He teamed with a perfumer and a financier in a limited liability company (“LLC”),
which collaborated with an established company interested in integrating scenting
technology into its commercial air handling systems. Developing a functioning
product proved difficult, however, and interpersonal conflict further plagued the
LLC. At some point, the perfumer and the financier began to seek support from an
employee of the air handling company. The employee, who believed that the
perfumer’s skills were more valuable to the air handling company, participated in
communication and meetings that excluded the businessman. Shortly after the
perfumer and the financier voted to dissolve the LLC, they formed a new, similar
company and ultimately contemplated working with the employee and the air
handling company in a similar capacity. The businessman responded with this
action asserting direct and indirect claims relating to the failed business. The
Court sets forth its findings of fact and conclusions of law in this post-trial
memorandum opinion. For the reasons below, the Court finds that the perfumer is
liable for his conduct, the air handling company lacked the requisite scienter to
participate in the wrongful conduct or cause independent injury and thus has no
liability, and an award of $491,839.79 from the perfumer and the entity he
controls, subject to resolution of one remaining issue, fairly compensates the
businessman.
1
I. BACKGROUND
A. The Parties
Plaintiff and Counterclaim Defendant Stewart Matthew (“Matthew”) was a
manager of Aeosphere LLC (“Aeosphere” or the “Company”) and held 35% of its
membership units.1 He maintains this action against Defendant and Counterclaim
Plaintiff Christophe Laudamiel (“Laudamiel”), as well as Defendants DreamAir
LLC (“DreamAir”),2 Fläkt Woods Group SA (“FWGSA”), and Fläkt Woods
Limited (“FWL”) to vindicate his rights following Aeosphere’s dissolution. The
liability of Roberto Capua (“Capua”), Capua’s investment vehicle Action 1 SRL
(“Action 1”), and SEMCO LLC (“SEMCO”), named in Matthew’s original
complaint, is no longer at issue.
Matthew, Laudamiel and Action 1 were Aeosphere’s members, and
Matthew, Laudamiel and Capua were Aeosphere’s managers.3 Laudamiel, like
Matthew, held 350 common units of Aeosphere (35% of the fully diluted total),
and Capua held 300 preferred units of Aeosphere (30% of the fully diluted total).4
Laudamiel and Capua formed DreamAir on May 7, 2010, shortly before Matthew
1
Joint Pre-Trial Stipulation and [Proposed] Order (“Stip.”) § II ¶¶ 2-3; JX 230
(“LLC Agreement”) at A-1 (showing the members’ interests).
2
Default judgment has been entered against DreamAir; only the amount of
damages remains, and that question is resolved in this memorandum opinion
because the liability of Laudamiel and the liability of DreamAir are the same.
3
Stip. § II ¶¶ 2-3.
4
LLC Agreement A-1.
2
filed Aeosphere’s certificate of cancellation.5 FWGSA “provides management
services and contracts for management services for the Fläkt Woods family of
companies,”6 including FWL, a United Kingdom entity. For convenience, the
Court does not distinguish between FWGSA and FWL. A critical part of
FWGSA’s business is the manufacture and sale of air handling units.7
B. The Creation of Aeosphere
Aeosphere originated as an entertainment company founded by Matthew to
develop a project called the Scent Opera.8 The Scent Opera involved presenting a
story through scents and sounds and would eventually yield performances at
prominent museums.9 Although Laudamiel initially was not interested in forming
a business with Matthew, he agreed to create the fragrances for the Scent Opera.10
To obtain funding for his project, Matthew made a number of “cold call[s],” one of
which was to FWGSA.11 As the discussions progressed, Matthew worked
primarily with Neil Yule (“Yule”), then responsible for various business
5
JX 240 (details of DreamAir LLC); JX 405 (Aeosphere’s certificate of
cancellation); Trial Tr. vol. III, at 737 (Laudamiel).
6
Stip. § II ¶¶ 5-6.
7
Trial Tr. vol. II, 388 (Yule).
8
Trial Tr. vol. I, 20-23 (Matthew).
9
Id. at 16-18 (Matthew). Scent Opera performances were given at the
Guggenheim Museums in New York and Bilbao, Spain.
10
Id. at 20-21 (Matthew).
11
Id. at 21-22 (Matthew).
3
development projects at FWGSA.12 Yule saw an opportunity for FWGSA to use
scenting technology with its air handling units to offer an “aroma-control and
fragrancing” system.13 This Scent Project intrigued Yule because it would allow
FWGSA to differentiate its business in a “mature industry with a lot of
competition.”14
The discussions culminated in the formation of Aeosphere, with Matthew
and Laudamiel as co-CEOs, and the execution of the Operating Agreement of
Aeosphere LLC dated June 20, 2008.15 Aeosphere entered into a Collaboration
Agreement with FWGSA on July 2, 2008.16 The Collaboration Agreement broadly
anticipated Aeosphere developing proprietary scent formulas, another company
providing the scented oils, and FWGSA marketing and supplying the “integrated
package . . . for incorporation into new or existing air handling equipment designed
to ensure the controlled diffusion of the selected scent into selected areas of
space.”17
12
Id. at 22-23 (Matthew); Trial Tr. vol. II, 390-91 (Yule).
13
JX 1 at FWGSA_000020 (describing the scope of the Collaboration Agreement).
14
Trial Tr. vol. II, 388-89 (Yule).
15
See JX 435 (original operating agreement).
16
JX 1 (Collaboration Agreement). The original collaboration agreement was
amended in March and April 2009. Stip. § II ¶ 8; JX 6 (April amendment).
17
JX 1 at FWGSA_000020-21.
4
The parties disagree about whether they based their agreement on the use of
electric field effect technology (“EFET”), developed by Battelle Memorial Institute
(“Battelle”), to transform scent oils into particles that could be dispersed by the air
handling units. It is clear, however, that the parties saw EFET as the best option in
terms of both function and profitability.18 While a device developed by Prolitec,
Inc. (“Prolitec”) existed as a prospective alternative to EFET, the Prolitec device
did not perform as well as claimed19 and use of such device would mean
collaborating with an FWGSA competitor.20
Yule presented the Scent Project to FWGSA, but FWGSA did not adopt the
project because of the costs associated with developing the technology, among
other reasons.21 Aeosphere eventually found a source of funding in Capua, who
provided €1.55 million through Action 1.22 In return, Action 1 received a 30%
membership interest in Aeosphere23 and Capua became a manager.24 Part of the
effort to attract Capua’s investment involved Matthew’s preparation of pro forma
18
E.g., JX 4 (email from Matthew to Yule discussing scenting technologies);
JX 154 (comparing EFET technology to Prolitec technology); Trial Tr. vol. II, 428-
29 (Yule).
19
JX 115 at FWGSA 016470; Trial Tr. vol. II, 395-96 (Yule).
20
Trial Tr. vol. II, 392 (Yule).
21
Id. at 391 (Yule); Trial Tr. vol. III, 776 (Margrita) (discussing sundry financing
issues).
22
Dep. Trs. of Roberto Capua, vols. I and II (“Capua Dep.”) 148; LLC Agreement
B-1. Matthew suggested that the actual investment was less. Trial Tr. vol. I, 58-
59, 74 (Matthew) (“[A]s I recall, it was 1.4 million euros.”).
23
LLC Agreement A-1.
24
Stip. § II ¶ 3; LLC Agreement A-1.
5
financials projecting that FWGSA would sell 15,100 scenting devices by the end of
2013 (and 2,200 by the end of 2010).25
Under Aeosphere’s LLC Agreement, certain actions, such as terminating
Matthew and winding up Aeosphere, required a unanimous vote of the co-CEOs,
though Capua negotiated other meaningful voting rights.26 Generally speaking,
Capua’s investment came with a “preferred return” of 7% (compounded annually)
on “outstanding and unreturned . . . Capital Contributions” and priority in
distributions of available cash and liquidation proceeds.27 The new arrangement
was reflected in the LLC Agreement, dated as of May 11, 2009. Matthew and
Laudamiel’s employment agreements appeared as attachments to the LLC
Agreement.28 Each had a term of five years, with a base salary equivalent to
$300,000 in the first year and $350,000 per year thereafter.
Around March 2009, with news of Capua’s investment, Yule updated
projections and pitched the Scent Project once more.29 At about the same time,
FWGSA contracted with Battelle for an option to license the Battelle technology,30
and the Collaboration Agreement was amended to increase royalties on sales “[i]n
25
JX 239 at LCA 002597; Trial Tr. vol. I, 124-25 (Matthew).
26
See Matthew v. Laudamiel, 2012 WL 2580572, at *8 (Del. Ch. June 29, 2012)
(interpreting § 5.2.6 of the LLC Agreement).
27
LLC Agreement §§ 1.1, 4.1, 6.1, 9.4.
28
Id. at E-1-2.
29
Trial Tr. vol. II, 393, 397 (Yule); see also JX 115 (updated PowerPoint).
30
JX 5 (agreement between Battelle and FWGSA).
6
return for [Aeosphere’s] co-investment with FWG[SA]” in the technology
contemplated by the License and Development Agreement with Battelle.31 The
assumption of using EFET was “significan[t]” to Yule’s projections that 2010 sales
would reach around €2.6 million.32 Yule claims that his projection would have
been at best one-fifth to one-tenth of that had the Prolitec technology been used.33
Jean Philippe Margrita, who became FWGSA’s senior vice president of marketing
and product development in late 2008,34 was somewhat skeptical of Yule’s
numbers; he believed that it would take over a year to begin selling units using
EFET.35 FWGSA adopted the Scent Project as one of its initiatives but used a
more conservative projection of €500,000 in 2010 sales (later updated to €200,000
in forecasted sales) in seeking shareholder approval of the November 2009
31
JX 6 at FWGSA_000014. Matthew, however, protests that “payment of
royalties to Aeosphere was never tied specifically to sales of equipment using
EFET.” Pl.’s Post-Trial Reply Br. 7. The amendment also provided that
Aeosphere would “remain exclusive designer and supplier of scented media to all
FWG[SA] equipment and systems for a period of 10 years” if FWGSA did not
execute the agreement with Battelle. JX 6 at FWGSA_000014.
32
JX 141; Trial Tr. vol. II, 427-28 (Yule). The parties debate whether Yule’s
projections were “cautious” (as Yule wrote in a contemporaneous email to
Matthew), JX 141, or if they were the product of a salesman trying to pitch a
project. See Trial Tr. vol. II, 413-14 (Yule). The Court addresses the reliability of
the various projections in its discussion of damages, infra.
33
Trial Tr. vol. II, 428 (Yule). The figures would have been even less if FWGSA
did not acquire exclusive rights to the Prolitec technology. Id.
34
Trial Tr. vol. III, 767 (Margrita).
35
Id. at 792-94 (Margrita) (elaborating, for example, that “it will have been at least
three month[s] for the prototype, another probably six, seven months to realize the
product, then another probably three month[s] to test it”).
7
budget.36 The presentation noted that the FWGSA “device [was] not yet
completed” but anticipated using Prolitec technology in the meantime.37
Unfortunately, even the updated numbers proved too optimistic.
C. The Conflict and Yule’s Involvement
As Aeosphere struggled, conflict arose within the Company’s management,
including Laudamiel’s desire to bring his husband, perfumer Christophe Hornetz
(“Hornetz”), into the business as an employee,38 and certain conduct during the
Scent Opera engagements.39 As to be expected with disagreements and secret
negotiations, the record does not paint a clear picture of who was planning to do
what, and when. A few records and acts, however, are particularly noteworthy and
illustrate the timeline of the managers’ negotiations and the ultimate dissolution.
36
JX 270 at FWGSA 098985; JX 271 at FWGSA 029973; Trial Tr. vol. IV, 874-
75, 885, 887-89 (Margrita). During post-trial oral argument, counsel for the Fläkt
Woods parties stated that the €200,000 number was the only number presented to
shareholders. Post-Trial Oral Arg. Tr. (“Oral Arg. Tr.”) 95. See Trial Tr. vol. IV,
880 (Margrita) (explaining that most orders result in sales).
37
JX 271 at FWGSA 029973.
38
E.g., Trial Tr. vol. I, 80-82, 93 (Matthew).
39
See Trial Tr. vol. IV, 815-16, 836 (Laudamiel). For example, Laudamiel felt
hurt when Matthew yelled at him, publicly, at one venue. Trial Tr. vol. IV, 815-16
(Laudamiel). The Court does not know the full extent of these tensions and only
raises them for context. The Court will not speculate on matters for which it does
not have a factual basis.
8
Around September 2009, Matthew, Laudamiel, and Capua began to discuss
restructuring their roles within Aeosphere.40 Records from October confirm pre-
existing strife and a desire to exclude certain members from communication. In
one email chain, Laudamiel expressed concern about Matthew holding up a
project, and Yule suggested fabricating a scheduling conflict as a ruse to keep
Matthew out of a meeting they felt unnecessary.41 In a follow-up email, Yule
asked Laudamiel about the “possibility that [Matthew] could gain access to
[Laudamiel’s] mails through the Aeosphere server.”42 Laudamiel and Yule
discussed business opportunities without informing Matthew into November.43
Matthew, too, solicited Capua’s help to prevent Laudamiel from “hav[ing] his own
way all the time.”44
40
Trial Tr. vol. I, 92-94, 162-63 (Matthew). One option placed Matthew “as the
sole CEO,” a suggestion that Matthew declined as unacceptable to Laudamiel. Id.
at 94 (Matthew).
41
JX 120 at FWGSA 008502-03 (October 22-23 emails).
42
Id. at FWGSA 008502 (October 23 email from Yule to Laudamiel). Yule’s
concern about security is also reflected in a later instruction to another FWGSA
employee to email Laudamiel at his personal address. JX 155 at FWGSA 009300
(March 2010 email).
43
E.g., JX 120 at FWGSA 008503 (“[I]f I show [Matthew] all the details, the
project will be stopped every second week.”); JX 143 (Yule mediating
communication between a client and Laudamiel); Trial Tr. vol. III, 573-74 (Yule)
(discussing a proposal sent by Yule “on behalf of Christophe Laudamiel of
Aeosphere and of Flakt Woods Group.”).
44
JX 227 at LCA000001 (October 21 email from Matthew to Capua).
9
Laudamiel and Capua then held a secret meeting with Yule in Paris. During
that January 2010 meeting, the three discussed the conflict within Aeosphere and
Capua’s desire “to place the business into . . . different business streams to . . .
allow [Matthew] and [Laudamiel] to operate in their preferred areas and . . . avoid
some of the conflict.”45 Yule claims that he did not know that Laudamiel and
Capua wanted to discuss a potential division; he had believed the meeting was to
visit a site for a Scent Opera performance and a center for perfumery.46 He admits,
however, that he had known as early as fall 2009 that the managers were
considering “some sort of reorganization.”47 Yule agreed to keep the meeting
confidential.48 Laudamiel and Capua likely did not inform Matthew of the
meeting,49 although Capua did inform Matthew that he had discussed the
45
Trial Tr. vol. II, 451 (Yule); accord Trial Tr. vol. III, 579 (Yule).
46
Trial Tr. vol. II, 450-51 (Yule); see also JX 144 at FWGSA 008872 (explaining
a wish to take Yule to two places in Paris).
47
Trial Tr. vol. III, 563 (Yule).
48
See JX 145 at LCA 024939 (“If and when you decide to tell [Matthew] that we
have met, then please let me know straight away so that I am aware.”). In the same
email, Yule forwarded a marketing plan that he thought was an effort by Matthew
“to establish his position in the relationship and to be seen to be the person driving
the agenda forward.” Id. While Matthew highlights Yule’s conduct in this
instance, the communication also implies one-sided contact by Matthew. Id. at
LCA 024939-40 (Jan. 7, 2010 email from Matthew to Yule).
49
See Capua Dep. 120; JX 146; Trial Tr. vol. III, 698-99 (Laudamiel) (stating that
he has “no idea” whether Matthew was ever told of the Paris meeting).
10
management problems with Yule at some point.50 The evidence suggests that
Matthew did not authorize his co-members to discuss the internal separation
discussions with Yule and attempted to keep them confidential himself.51
Adding to the tension was a string of disappointing test results. Matthew
highlights a failed round of testing, of which Yule notified Laudamiel and Capua
on January 21, 2010.52 In his email, Yule suggested,
One option is for you guys to use the EF[E]T option as a bargaining
chip in your negotiations with [Matthew]. If we agree that it is not a
suitable technology for HVAC applications, then perhaps you should
offer the license to [Matthew] as his share of Aeosphere, allowing him
to leave without the need for an additional financial pay-off?53
The next day, in response to emails from Capua about conflict with Matthew, Yule
expressed his “100% commit[ment]” to Laudamiel and Capua. 54 He not only
agreed to conceal his knowledge of “how serious matters had become” 55 but also
50
See JX 7 at SM046307 (email from Matthew to Capua stating that “your . . .
disclosure to [Yule] of a rift in Aeosphere destabilised his trust in the Flakt Woods
Aeosphere arrangement”).
51
See, e.g., id. at SM046307-08; JX 41; JX 42 at SM031527; JX 150 at FWGSA
009058.
52
JX 147 at LCA 025266.
53
Id. Matthew observes, however, that residential and consumer applications were
not part of the license agreement and therefore could not be used as a “bargaining
chip.” Pl.’s Post-Trial Reply Br. 18 (citing, for example, JX 5).
54
See JX 148 at FWGSA 008960.
55
Id. at FWGSA 008963. In feigning ignorance of Capua’s “divorce
arrangement,” Yule “instead spoke as if the Aeosphere team were simply
evaluating [a] different business structure for the future which might involve
[Matthew] leaving Aeosphere to form a new venture[], which would still work
closely with Aeosphere and FW[GSA].” Id.
11
represented that “[a]ny contact [he may] have with [Matthew] during this time will
purely be on the basis that it may help [Laudamiel and Capua].”56 Yule admits that
he favored Laudamiel (and Capua), as Laudamiel’s skills were more valuable to
the business arrangement (at least going forward).57 At the same time, he intended
to “remain[] entirely impartial with regard to Aeosphere’s internal structural
review.”58 In Yule’s words, “the ideal scenario” for FWGSA would have been for
Aeosphere to have two divisions, one with Matthew developing new media
projects and one with Laudamiel working on ambient scenting.59
By February 2010, if not earlier, the managers had retained counsel and
were discussing a separation of business activities.60 On February 3, Capua asked
Matthew to “discuss our members[’] current situation during our meeting,” adding
that “[b]asically we are in agreement almost in everything[, though] we must deal
with your proposal of split job and exclusivity.”61 In that email chain, Capua refers
56
Id. at FWGSA 008960.
57
Trial Tr. vol. III, 592-93 (Yule).
58
JX 150 at FWGSA 009057 (Jan. 28 email from Yule to Matthew); see also Trial
Tr. vol. II, 474-75 (Yule).
59
Trial Tr. vol. II, 476 (Yule); see also id. at 452-53 (Yule) (“I said if [Capua] can
find a way to allow [Matthew] and [Laudamiel] to work in their different areas and
Flakt Woods to continue to have . . . a good and hopefully a better working
relationship, then I’ve got no concerns about that.”).
60
Capua Dep. 37-38; Trial Tr. vol. I, 160 (Matthew).
61
JX 28 at SM046427. Just one day earlier, Yule wrote Laudamiel and Capua
about working with a chef—an opportunity that would not exist as long as
Matthew remained their business partner. JX 113 at FWGSA 009094 (“As soon as
[Matthew’s] exit from Aeosphere has been confirmed, we should very quickly re-
12
to “the split of the company we are evaluating,” explaining that he “do[es] not trust
[Matthew] anymore,” and ends that he will “see if [he] can r[e]cover some money
from this terrible investment.”62 Thereafter, the managers had a board meeting,
which ended in frustration,“bang[]ing doors” and a hasty exit by Matthew.63 They
were unable to agree on a budget.64 A follow-up email from Matthew to Capua
states, “I cannot agree to a discussion of budget limited to a two to three months
time horizon. Our company could face financial ruin in the meantime unless we
set a responsible budget.”65
In contrast, discussions among Laudamiel, Capua, and Yule continued.
Matthew focuses on a number of exchanges over the next few months. For
example, Yule, Laudamiel, and Capua held a February 24 conference call to
discuss EFET and Prolitec.66 At that point, Laudamiel believed that EFET was still
a viable option.67 Emails from March 8 through 9 discuss pursuit of EFET and
working without interference from Matthew.68 Capua explained that they “finally
establish the connection with [the chef].”). Yule knew that Matthew had
interpersonal conflicts with the chef. Trial Tr. vol. III, 605-06 (Yule).
62
JX 28 at SM046427.
63
JX 236 at LCA 027110.
64
Id.
65
Id. at LCA 027111.
66
See JX 153; JX 154.
67
Trial Tr. vol. III, 700 (Laudamiel).
68
JX 156. One email from Yule to Laudamiel suggested a call to discuss test
results and options with Capua and Laudamiel, to be followed by a separate call
involving Matthew. Id. at FWGSA 009369-70.
13
reached a preliminary agreement [to] have [Matthew] out of the company at least
for management and decision making” but retaining a “20% share.”69 At the end
of March, Yule told a third party (then in negotiations with FWGSA and
Aeosphere) about the management dispute and that Laudamiel and Capua “are
close to concluding a deal that will result in [Matthew] leaving the firm in the next
few weeks.”70 Though his testimony was not completely consistent, Yule stated in
his deposition that he understood the negotiations to be confidential.71 He told the
third party contact, “[Matthew] is not aware that you and I have already spoken
and I would prefer to maintain that impression during our call.”72
Regardless whether the conflict was a result of mutual negotiation (as
alleged by Defendants) or a conspiracy to oust him (as alleged by Plaintiff), April
emails reflect growing pressure on Matthew to resolve the conflict. On one hand,
the correspondence appears to show some movement toward an arrangement
where the co-CEOs could avoid deadlock, such as by making Capua the new CEO
and allowing Matthew and Laudamiel to pursue their respective fields.73 In one
69
Id. at FWGSA 009371.
70
JX 157 at FWGSA 009532.
71
See Trial Tr. vol. III, 613-14 (Yule); Dep. Trs. of Neil Yule, vol. II 455.
72
JX 157 at FWGSA 009532.
73
See JX 29 at SM035389 (April 7 email from Capua to Matthew stating that
“[counsel] informed me about your decision [to] quit any negotiation for our new
agreement. Of course I was very disappointed especially considering all that we
have achieved . . . in order to fix our current management situation and start
working to make [A]eosphere start in a good way.”); JX 31 at SM052299 (April 9
14
chain dated April 13, Capua explained that he was “done on financing [A]eosphere
unless thing[s] change[d]” but that he was “trying the impossible to fix th[e]
company.”74 Around one week later, Capua told Matthew that “[i]f everything is
ok we can meet to finalize and sign [documents]” after discussing a “few little
points.”75
On the other hand, there is ample evidence that Matthew saw only part of the
picture. Notably, Laudamiel suggested on April 22 that Yule send an email, during
the period of negotiations, to help his ability to work free from Matthew’s
“manipulations and . . . arrogance.”76 Laudamiel’s suggestion resulted in an email
(also dated April 22) in which Yule stated, “I am fearful that unless matters are
quickly resolved, then I will be told to wind up [FWGSA’s] involvement in the
scent project.”77 Matthew promptly followed up with a private phone call to
email from Capua to Matthew suggesting that Capua become CEO and that they
“continue [their] negotiation, or [Capua will] have to direct [his] legal advisor for
another type of strategy and war.”).
74
JX 33 at SM052263-64.
75
JX 34.
76
JX 122 at FWGSA 009915.
77
JX 37 at SM052245. Yule’s email incorporates a significant portion of
Laudamiel’s draft. For example, Yule wrote,
Without wishing to interfere in internal Aeosphere matters, you will
understand I am sure that . . . it is important for me to have some
clarity. The clock is ticking and I am fearful that unless matters are
quickly resolved, then I will be told to wind up our involvement in the
scent project. So if you could provide me with a little information, I
would be grateful.
15
Yule78 and an email request that Yule “consider sending a follow up message” that
properly reflects his value to Aeosphere.79 The next day, Matthew emailed Capua
to “terminate discussions of an alternative arrangement, unless it were to buy you
and Christophe out of the company.”80 At this point (or shortly thereafter),
Defendants say, the communication broke down.81
It is also clear that the internal issues are becoming increasingly
apparent to our other partners. The guys at Battelle have made several
informal comments to me, such as “the guys at Aeosphere seem to
have lost interest” and “Christophe’s lost his fire[.]”[] Christophe –
they have always placed great store on your reputation and expertise
....
Id. Laudamiel’s suggestion was,
Without of course interfering in internal Aeosphere matters[], you will
understand that the special position of [FWGSA] makes me nervous
not to hear a new plan when the clock is ticking, so if you could
provide me with a little information, I would be very grateful.
Know also no matter how hard you try to conceal it, people such as
Battelle did feel something was not going round in the past phone
conferences, for instance that Christophe is losing his usual passion
and flame, and that worries people because this is key for Aeosphere.
JX 122 at FWGSA 009916.
Matthew points out that the Collaboration Agreement did not allow FWGSA
to terminate for ten years—although winding up Aeosphere presented another way
out. Pl.’s Opening Post-Trial Br. 14 n.7.
78
Trial Tr. vol. II, 488-89 (Yule).
79
JX 38.
80
JX 42 at SM031529.
81
Capua Dep. 154-55 (“[A]fter [Matthew] . . . closed down the negotiations with
no reason to me. . . . I decided this was the only solution.”); see also Trial Tr.
vol. IV, 836-37 (Laudamiel) (describing the period around April 22 and explaining
that he and Capua “were running out of solutions, suggestions, to Mr. Matthew”);
Oral Arg. Tr. 67-69, 76-77.
16
Capua and Matthew exchanged a few emails after April 23, in which
Matthew reminded Capua that they “have responsibility to act according to [their]
company’s amended operating agreement.”82 Laudamiel forwarded Yule certain
April 23 emails sent by Matthew rejecting Capua’s suggestion to become CEO—
apparently at Yule’s request83 and against Matthew’s instructions about
confidentiality.84 On April 27, Yule sent an email to Matthew making clear that
FWGSA considered Laudamiel the critical business partner and that he needed to
inform his board of the conflict.85 That email expressed a hope that “peace” would
be achieved but also “implore[d] [Matthew] to quickly identify a way in which the
business can be divisionalised or if necessary separated, in order for all parties to
move forward.”86 Yule hoped the email would be helpful to Laudamiel and
Capua,87 but did not discuss his concerns with Margrita.88 In an April 29 reply,
Matthew explained to Yule that Aeosphere, as a team, was committed to working
with FWGSA.89
82
JX 42 at SM031528.
83
JX 123 at FWGSA 009985. Yule did not “recall having any concern about
confidentiality at the time.” Trial Tr. vol. III, 619-20 (Yule).
84
JX 123 at FWGSA 009986.
85
JX 44 at FWGSA 066884.
86
JX 124 at FWGSA 010053.
87
Id.
88
Trial Tr. vol. IV, 932-33 (Margrita).
89
JX 125.
17
Capua claims that he consulted counsel and decided, around May 3, to hold
an emergency meeting on May 4 to wind up the company.90 Yet on April 28 and
29, Laudamiel wrote emails to Yule discussing a “Commando Operation” and
“DDay.”91 It is equally clear that Laudamiel was anticipating an important event
(at a minimum, withdrawing money from Aeosphere’s bank accounts92) and that
Yule had no idea what Laudamiel meant.93 On April 29 and 30, Laudamiel took
over $145,000 from Aeosphere’s account, of which $70,000 was distributed to
Action 1.94 Matthew was only given a day’s notice of the emergency meeting.95
Attached to the email notice was an agenda setting forth dissolution and winding-
up as the top item on the list.96
Matthew did not attend the May 4 meeting.97 Regardless, Laudamiel and
Capua took a vote “to cease operations, wind up the affairs of the Company and
90
See Capua Dep. 150-51 (explaining that he spoke with counsel before making
his “decision to call th[e] meeting” and that he “probably” did not know about
calling the meeting until May 3).
91
JX 158 at FWGSA 010215.
92
Laudamiel admitted that he knew of the emergency meeting and dissolution vote
by (at least) late April or early May. See Trial Tr. vol. III, 721-24 (Laudamiel).
The Court notes that Laudamiel and Capua could, in theory, vote on the matter
without violating the LLC Agreement; it was the subsequent action in accordance
with the non-unanimous vote that breached the LLC Agreement.
93
See Trial Tr. vol. II, 505-06 (Yule); Trial Tr. vol. III, 707, 756-57 (Laudamiel).
94
JX 111; Trial Tr. vol. III, 707, 709-11, 715-20 (Laudamiel).
95
JX 109 (email about the emergency meeting); JX 110 (noting that Matthew had
“acknowledged receipt of” the information).
96
JX 109.
97
JX 110 at LCA 001576.
18
dissolve as soon as is practical in order to preserve important Company rights and
avoid further Company liabilities.”98 Votes were taken to terminate Matthew’s
employment, and Laudamiel was placed in charge of overseeing Aeosphere’s
winding up and liquidation.99 Capua understood that he was putting himself at risk
of a lawsuit for breach of the LLC Agreement.100 Laudamiel also understood that
Matthew had some rights under the LLC Agreement.101 In letters of that same
date, Laudamiel assigned himself equipment in the Berlin office and “scents, scent
formulas, scent conventions and annotations and test designs” and assigned
Matthew equipment in the London office and “rights to the libretto of the
ScentOpera ‘Green Aria.’”102
Laudamiel emailed Yule that same day, informing him that it was “GAME
OVER” and that he and Capua would soon “be back up and running, AND
FREE.”103 The next day, Yule emailed Battelle to assure it of FWGSA’s continued
“commitment to the development of scenting solutions for HVAC applications.”104
By that time, FWGSA and other entities with business ties had received notice that
98
Id.
99
Id. at LCA 001576-77.
100
Capua Dep. 166-68.
101
See Trial Tr. vol. III, 704-05 (Laudamiel).
102
JX 110 at LCA 001580-81.
103
JX 126.
104
JX 159 at FWGSA 010272 (“Please be aware that this has no impact on Fläkt
Woods’ commitment to the development of scenting solutions . . . . I do not expect
it will be long before Christophe is once again in a position to lend his technical
and creative support to this process.”).
19
Aeosphere was in the process of winding up.105 Yule explained at trial that he sent
this email because he was interested in “a license that [he] may be able to sell to
somebody else.”106 However, Matthew observes that there were contractual
barriers, including Battelle’s consent and potential rights of Aeosphere.107
Laudamiel formed DreamAir on May 7, but must have planned for this entity in
advance, judging from the documents filed that day.108 On May 10, Matthew
emailed Yule to inform him that “[Matthew’s] partners in Aeosphere LLC[] have
taken steps to dissolve the company” unlawfully and that he intended “to protect
[his] rights and interest.”109 Laudamiel caused the filing of Aeosphere’s certificate
of cancellation on May 12, 2010110 and forwarded a copy to Yule.111 At the time of
dissolution and winding up, Aeosphere had $21,000 in its bank account.112
D. Post-Winding Up Events
One day after receiving the certificate, Yule informed Battelle that he invited
Laudamiel (who “remain[ed] a passionate supporter of EF[E]T”) and Capua to join
105
See id. at FWGSA 010272-73.
106
Trial Tr. vol. III, 626 (Yule).
107
Pl.’s Opening Post-Trial Br. 22 (citing JX 5 at FWGSA_000007,
FWGSA_000009; JX 6 § 4).
108
JX 240; Trial Tr. vol. III, 737-45 (Laudamiel) (questioning Laudamiel about the
events surrounding the filing).
109
JX 48 at FWGSA 096730.
110
JX 405.
111
JX 129 (informing Yule that “[t]he Dissolution documents were signed
yesterday and filed today with the State of Delaware”).
112
See JX 434 at Schedule 7 (closing balance sheet).
20
their conference call regarding EFET.113 The email expressed a willingness of
Capua and Laudamiel to fund further testing efforts, including by sending a
Battelle engineer to FWGSA’s testing facility in Sweden.114
The next set of communication Matthew highlights involves a July 28 email
from Capua seeking clarification on the business relationship between DreamAir
and FWGSA: “[W]e really need to understand how our relationship is going to
start.”115 He continued, “I know that you are very busy in more important issue[s]
that involve your company but please do not forget about us.”116 Yule replied that
his “assumption has been that DreamAir will simply inherit the terms of the
agreement previously in place with Aeosphere” but that “[a]s [they] will initially
be primarily working with the Prolitec equipment, [FWGSA’s] margins will be far
smaller.”117 Yule sent DreamAir a draft Collaboration Agreement in October
2010118 and encouraged Laudamiel to sign.119 Changes included provisions
allowing them “to revisit all of the substantive clauses at a later date.”120 They
113
JX 161 at FWGSA 010391.
114
Id.; Trial Tr. vol. III, 747 (Laudamiel).
115
JX 162 at FWGSA 010618.
116
Id.
117
Id. at FWGSA 010617.
118
See JX 163 (draft agreement).
119
JX 168 at FWGSA 007007; Trial Tr. vol. III, 642 (Yule).
120
Trial Tr. vol. III, 679-81 (Yule); see also JX 163 at FWGSA 003692-93.
21
never formalized the contract.121 Ultimately, DreamAir sold Prolitec units and
Prolitec scents.122
E. Procedural Posture
This litigation has a long history. Matthew filed his original claim in
November 2010 against Laudamiel, Capua, Action 1, FWGSA, and SEMCO.123 In
February 2012, the Court dismissed claims against SEMCO and FWGSA for lack
of personal jurisdiction and certain counterclaims filed by Laudamiel, Capua, and
Action 1.124 The Supreme Court later reversed that decision in part, finding that
the Court had personal jurisdiction over FWGSA based on the conspiracy theory of
personal jurisdiction.125 Matthew added DreamAir and FWL in later amended
complaints. He moved for partial summary judgment on claims for breach of the
LLC Agreement and conversion, which led to a June 2012 opinion generally
denying the motion.126 However, the Court explained that, “unless the Manager
Defendants prevail on one of their affirmative defenses or Matthew is unable to
prove that he suffered any damages, [Laudamiel and Capua] will be liable for a
121
Trial Tr. vol. II, at 529-31 (Yule).
122
See JX 199 (sales summary); Trial Tr. vol. III, 758 (Laudamiel) (“We were
nowhere near, and I want to say one or two years away from actually having a
[custom] scent sold in a Prolitec device.”).
123
Verified Compl. ¶¶ 7-11.
124
Matthew v. Laudamiel, 2012 WL 605589 (Del. Ch. Feb. 21, 2012); see also
Matthew v. Laudamiel, 2012 WL 983142 (Del. Ch. Mar. 20, 2012), rev’d sub nom.
Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023 (Del. 2012).
125
Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023 (Del. 2012).
126
Matthew v. Laudamiel, 2012 WL 2580572 (Del. Ch. June 29, 2012).
22
breach of § 5.2.6(b)(iii) of the LLC Agreement” by winding up Aeosphere without
Matthew’s approval.127
Capua and Action 1 reached a settlement with Matthew, and all relevant
claims against them were dismissed with prejudice in April 2014.128 One condition
of the settlement was Capua’s agreement to cease funding Laudamiel and
DreamAir’s legal representation.129 Counsel for Laudamiel withdrew as of
April 10, 2014,130 and Laudamiel proceeded as a self-represented litigant. One
month later, the Court granted default judgment against DreamAir.131 Before trial,
the Court granted summary judgment on one of Laudamiel’s counterclaims,
finding that Matthew had not materially breached the LLC Agreement.132 The
Court granted FWGSA’s motion for summary judgment on Matthew’s unjust
enrichment claims but denied the attempt to dismiss the other claims against
FWGSA.133
127
Id. at *8.
128
Stipulation and [Proposed] Order of Partial Dismissal, Apr. 10, 2014.
129
See Mot. of Defs. Christophe Laudamiel, Roberto Capua, Action 1 SRL, and
DreamAir LLC to Withdraw Appearances of Their Att’ys of Record and for Stay
of Case Management Schedule ¶ 3, Mar. 21, 2014.
130
Order Granting Mot. to Withdraw Appearances of Gregory V. Varallo and
Kevin M. Gallagher of Richards, Layton & Finger, and Roger E. Barton and
Randall L. Rasey of Barton LLP, Apr. 10, 2014.
131
Matthew v. Laudamiel, 2014 WL 2152353 (Del. Ch. May 22, 2014).
132
Matthew v. Laudamiel, 2014 WL 5499989 (Del. Ch. Oct. 30, 2014).
133
Matthew v. Laudamiel, 2014 WL 5904716, at *4 (Del. Ch. Nov. 12, 2014).
23
II. CONTENTIONS
By the time of trial, Matthew maintained breach of contract, breach of
fiduciary duty, conversion, and unjust enrichment claims against Laudamiel; aiding
and abetting and tortious interference with contract claims against FWGSA; and
civil conspiracy claims against Laudamiel, FWGSA, and DreamAir.134
Laudamiel’s counterclaims for non-material breach of contract135 and for breach of
fiduciary duty remained as well. Laudamiel did not participate in post-trial
briefing, but he did appear for trial and post-trial argument. Waiver generally
operates to bar issues not briefed. Nonetheless, the Court is aware of the
difficulties of proceeding as a self-represented litigant and will consider FWGSA’s
arguments in determining whether Matthew has met his burdens to establish his
claims and right to recovery.
Matthew’s claims against Laudamiel, while differing in technical elements,
largely seek to hold Laudamiel accountable for winding up Aeosphere and
pursuing its business without him. Matthew points to earlier opinions effectively
finding Laudamiel liable for breach of contract with respect to winding up and
134
Pl.’s Opening Post-Trial Br. 2.
135
While the Court in Matthew v. Laudamiel, 2014 WL 5499989 (Del. Ch. Oct. 30,
2014) dismissed Laudamiel’s material breach counterclaims, id. at *2, it “[did] not
dismiss claims for non-material breach which, perhaps, could justify minimal or
nominal damages.” Id. at *2 n.11. Laudamiel only sought to allege claims of
material breach, but those claims fell short of material breach, arguably remaining
after summary judgment as claims for non-material breach.
24
employment termination. Matthew also alleges that Laudamiel contravened the
LLC Agreement’s confidentiality provision. The conversion claim, too, is based
on violation of the LLC Agreement (in winding up), although this contractual
violation is argued to have breached Delaware’s LLC Act. The fiduciary duty
claims point to a self-interested effort to misappropriate the benefits of Aeosphere
resulting in violations and injury broader than that addressed by the LLC
Agreement. Matthew’s unjust enrichment claim is similarly based on a scheme to
“usurp[] Aeosphere’s assets and opportunities for [Laudamiel’s] personal
benefit.”136 The conspiracy claims against Laudamiel (and DreamAir and
FWGSA) are said to have foundation in the above theories.137 Matthew attacks
Laudamiel’s counterclaims by claiming a lack of breach, simple disagreement, and
lack of demonstrable, material harm.
FWGSA attempts to frame the dispute such that the LLC Agreement
governs all potential recovery. Laudamiel’s argument perhaps is best described as
an effort to clarify and explain his conduct. He did not analyze the legal elements
of Matthew’s claims or his own counterclaims. Matthew’s arguments in reply
emphasize waiver.
136
Pl.’s Opening Post-Trial Br. 35.
137
Pl.’s Post-Trial Reply Br. 27 (identifying breach of fiduciary duty, conversion,
and unjust enrichment in support of the conspiracy claims).
25
The theories of liability remaining against FWGSA are aiding and abetting,
tortious interference, and civil conspiracy. With respect to the aiding and abetting
claims, Matthew argues that Laudamiel breached his duty of loyalty by favoring
personal interests, failing to deal candidly with Matthew, sharing confidential
information with business partners, improperly winding up Aeosphere, terminating
Matthew, and generally engaging in a scheme to remove Matthew and take
Aeosphere’s “most valuable assets” for his own business.138 According to
Matthew, there is enough evidence (direct and circumstantial) to find that FWGSA
(through Yule) “knowingly facilitated Mr. Laudamiel’s breach of trust,”139 or
engaged in a scheme to push Matthew out of Aeosphere and misappropriate the
Company’s assets. Matthew further draws on a number of emails to illustrate the
breadth of Defendants’ actions and the harm he suffered. FWGSA attacks the
aiding and abetting claims by arguing that Laudamiel acted in the best interests of
Aeosphere,140 that contract claims supersede the fiduciary duty claims, that
FWGSA did not knowingly act to facilitate a breach by Laudamiel, and that no
damages resulted from any breach. While directly attacking the elements of the
claims, FWGSA also explains Yule’s actions in the overall business context.
138
Pl.’s Opening Post-Trial Br. 31-32.
139
Id. at 37.
140
At oral argument, FWGSA offered that Laudamiel’s conduct before winding up
Aeosphere (such as engaging in communications without Matthew) should not be
evaluated as interested transactions because there was no associated financial
benefit. Oral Arg. Tr. 82-83.
26
Matthew’s tortious interference claims similarly draw on direct and
circumstantial evidence. The focus here, though, is on Yule’s knowledge of
Matthew’s employment agreement and the LLC Agreement and his actions
encouraging violation of those contracts. Matthew alleges that FWGSA is liable in
tort because Yule encouraged Capua and Laudamiel’s breaches, knowing that
Matthew was a co-CEO of Aeosphere and having notice of the LLC Agreement
(the latter, two days before the certificate of cancellation was filed). On the other
hand, FWGSA asserts that Matthew’s claims must fail because FWGSA did not
know of “both the [LLC Agreement and the employment] contract[s] and the
specific provision[s] allegedly interfered with,”141 no act of FWGSA caused a
breach, the Collaboration Agreement justified FWGSA’s acts, and Matthew
suffered no damages.
Finally, on the civil conspiracy claims, Matthew describes a conspiracy “for
the ultimate purpose of misappropriating Aeosphere’s assets to Mr. Matthew’s
exclusion, actions which were not limited to (but pre-dated and post-dated) the
Company’s winding up.”142 He bases the claims on Laudamiel’s breach of
fiduciary duty, conversion (as a statutory violation), and unjust enrichment and
adds that the direct and circumstantial evidence presented at trial is sufficient to
establish the conspiracy. FWGSA responds that the claims against it must fail
141
Defs.’ Post-Trial Answering Br. 39.
142
Pl.’s Opening Post-Trial Br. 43.
27
because, similar to the aiding and abetting claims, it did not knowingly participate.
It disputes the showing of any tort and explains that the members of Aeosphere
made the consequential decisions, including the one to wind up Aeosphere.
Matthew’s claims for damages rest on the value of his interest in Aeosphere
and the value of his employment agreement. With respect to Aeosphere, the
parties primarily debate whether a discounted cash flow or liquidation143 approach
better accounts for its value and, if using the former, whether Aeosphere was a
start-up or early development stage company. Matthew highlights factors such as
Capua’s financing commitment and Aeosphere’s low capital requirements,
valuable contracts with established companies like FWGSA, and ability to proceed
whether or not EFET materialized. In response, FWGSA emphasizes Aeosphere’s
cash shortage, Capua’s refusal to contribute additional funds, the management
conflict, and EFET’s poor prospects. Related debates include the reliability of the
valuation inputs, the effect of Capua’s preferred units on the calculations, and the
extent to which the Court may consider facts that post-date Aeosphere’s
dissolution. These issues account for the difference between Matthew’s measure
($3,184,000) and FWGSA’s measure ($0) of Matthew’s ownership interest.
143
Counsel for FWGSA suggested some distinction between a traditional
liquidation methodology and its expert’s approach. Oral Arg. Tr. 101 (“I don’t
think [the expert] was really performing a liquidation analysis. What he did was to
say, ‘I don't think this is a going concern.’”). Because the expert’s approach
assumed Aeosphere was not a going concern and for simplicity and convenience,
the Court nonetheless refers to this approach as the liquidation approach.
28
Additionally, Matthew contends that he should recover the expected value of
his (five-year) employment agreement ($1.4 million) because of Defendants’
tortious conduct. FWGSA counters that Matthew has not shown that the alleged
wrongful conduct caused the loss in payment. Rather, Aeosphere had insufficient
funds to continue its operations and neither Laudamiel nor Capua was willing to
act to fund Matthew’s salary. The damages dispute ends with Matthew requesting
pre-judgment interest for his opportunity costs, compounded quarterly, and
FWGSA advocating for simple interest, if any.
III. ANALYSIS
A. Legal Standard
For Matthew to recover, he must prove his case by a preponderance of the
evidence.144 He bears the burden of proving that “certain evidence, when
compared to the evidence opposed to it, has the more convincing force.”145
Laudamiel’s status as a self-represented litigant is afforded some consideration, but
Laudamiel chose not to submit post-trial briefing despite inclusion in the
scheduling process.146 Issues not briefed are “generally” considered waived.147
144
See Estate of Osborn ex rel. Osborn v. Kemp, 2009 WL 2586783, at *4 (Del.
Ch. Aug. 20, 2009) (“Typically, in a post-trial opinion, the court evaluates the
parties’ claims using a preponderance of the evidence standard.”), aff’d, 991 A.2d
1153 (Del. 2010).
145
In re Mobilactive Media, LLC, 2013 WL 297950, at *9 (Del. Ch. Jan. 25, 2013)
(internal quotation marks omitted).
146
See Oral Arg. Tr. 3-5.
29
Thus, the Court deals with the claims against Laudamiel for completeness and
largely to determine FWGSA’s liability. Because Matthew needs to support his
claims for damages, FWGSA’s counter-presentation will be considered broadly.
B. The Direct Claims
1. Contract Claims
Earlier opinions largely dictate the result on Matthew’s contract claims, and
the Court need not belabor the point here. In June 2012, the Court held that
section 5.2.6(b)(iii) of the LLC Agreement required a unanimous vote to wind up
Aeosphere.148 Although not specifically the subject of that opinion,
sections 5.2.6(b)(i) and (ii) fall under the same umbrella: a unanimous vote was
required to terminate Matthew’s employment agreement and dispose Aeosphere’s
assets.149 Matthew did not vote to terminate his employment agreement, wind up
Aeosphere, or divide the assets. There is also an allegation that Laudamiel
breached Section 10.10 of the LLC Agreement, which prohibited use and
disclosure of “financial or business data, . . . contracts or agreements entered into
by or on behalf of [Aeosphere,] or other proprietary information.”150 Laudamiel
147
See Del. Transit Corp. v. Amalgamated Transit Union Local 842, 34 A.3d 1064,
1068 n.4 (Del. 2011).
148
Matthew v. Laudamiel, 2012 WL 2580572, at *8 (Del. Ch. June 29, 2012).
149
Id. (“The only reasonable interpretation of § 5.2.6(b) is that it required the
approval of all three Managers to approve the enumerated actions.”).
150
LLC Agreement § 10.10. In the Pretrial Stipulation and Order, Matthew raised
the question of whether the emergency meeting was properly called. Stip. § III.A
30
undoubtedly shared information about separation discussions with FWGSA. He
sought Yule’s help to push along confidential separation negotiations. The
question then, foreshadowed in the Court’s June 2012 opinion, is whether
Laudamiel “prevail[s] on one of [his] affirmative defenses or Matthew is unable to
prove that he suffered any damages.”151
The Court provided a partial answer in an October 2014 opinion, in which it
found that Matthew had not committed any material breach to excuse
Laudamiel’s.152 Laudamiel maintained two counterclaims leading into trial: non-
material breach of contract and breach of fiduciary duty. 153 These claims generally
involve “(1) acting unilaterally without approval; (2) failing to agree on or approve
various contracts or courses of action for Aeosphere; and (3) failing to attend
important meetings and events.”154 Laudamiel did not participate in post-trial
briefing, but at post-trial oral argument he noted Matthew’s failure to bring in
clients as promised, a neglect of responsibility to prepare a business plan, and a
¶ 4. This issue was not developed in the post-trial briefing, and any violation
would not materially affect Matthew’s recovery.
151
Matthew v. Laudamiel, 2012 WL 2580572, at *8 (Del. Ch. June 29, 2012). The
Court declined to grant Matthew’s motion for summary judgment on his
conversion claim (based on breach of the LLC Agreement) for the same reasons.
Id. at *11.
152
Matthew v. Laudamiel, 2014 WL 5499989 (Del. Ch. Oct. 30, 2014).
153
Def. Christophe Laudamiel’s Verified Answer to Fourth Am. Verified Compl.
and Countercls. ¶¶ 111-18.
154
Matthew v. Laudamiel, 2014 WL 5499989, at *2 (Del. Ch. Oct. 30, 2014).
31
general sentiment that Matthew “killed” projects.155 The Court acknowledges the
difficulty of proceeding as a self-represented litigant (and in a foreign language),
but, as Matthew observes, Laudamiel has neither substantiated that the “harm” was
more than legitimate disagreement between business partners nor proved losses
from Matthew’s conduct.156
The Court discusses damages below. For present purposes, the Court
observes that Matthew has only supported claims for his ownership interest in
Aeosphere and compensation under his employment agreement.157 In his Opening
Post-Trial Brief, Matthew does mention that he “should be granted equitable
restitution for Mr. Laudamiel’s unjust enrichment (or, alternatively, the imposition
of a constructive trust over any future income Mr. Laudamiel and DreamAir will
receive by reason of their wrongful conduct).”158 His focus, however, is on the
value of his units and his employment agreement, and he has not demonstrated
155
Oral Arg. Tr. 108-09. He also briefly mentioned that Matthew would discuss
projects with Yule alone, but he “had no problem with [that].” Id. at 107.
156
See Pl.’s Opening Post-Trial Br. 56-57 (incorporating Pl.’s Opening Pre-Trial
Br. 28-33, 56-59).
157
The Joint Pre-Trial Stipulation and Order asks for an injunction against use of
Aeosphere’s assets, an order for an accounting, a constructive trust, and attorneys’
fees and costs. Matthew does not seriously develop these claims in his post-trial
briefing. Furthermore, Matthew has not convinced the Court to award attorneys’
fees against Laudamiel, a self-represented litigant.
158
Pl.’s Opening Post-Trial Br. 35.
32
enrichment beyond the value captured by his share of Aeosphere.159 This point is
significant because Matthew cannot recover multiple times on his various theories.
The Court is satisfied that Matthew’s showing on the breach of contract claims
supports any damages that he can prove from the unlawful winding up of
Aeosphere and termination of his employment agreement.160
2. Non-Contract Claims
The Court analyzes Matthew’s non-contract claims against Laudamiel
(breach of fiduciary duty, conversion, and unjust enrichment161) because of their
potential impact on FWGSA’s liability. Matthew’s fiduciary duty claims look to
Laudamiel’s conduct over the entirety of the Aeosphere-FWGSA relationship, with
the winding up just one (though a “critical”162) step along the way. In addition,
Matthew alleges a breach of loyalty by the very acts of improperly winding up
Aeosphere163 and failing in his “obligation to deal candidly” with Matthew.164
FWGSA frames the dispute as one about discrete acts associated with violations of
159
Cf. Pl.’s Opening Pre-Trial Br. 52 (“To the extent the Court may find after trial
that Mr. Matthew cannot adequately be compensated by an award of damages,
equitable restitution for unjust enrichment is appropriate.” (emphasis added)). An
award of damages accounting for the value of the intellectual property taken
should adequately compensate Matthew.
160
The argument for different remedies for tort and contract is discussed in the
context of damages, infra.
161
The conspiracy claims are said to rest on these three underlying claims and are
addressed in more detail in connection with the claims against FWGSA.
162
Pl.’s Post-Trial Reply Br. 1.
163
Id. at 25 n.6.
164
Pl.’s Opening Post-Trial Br. 31 (internal quotation marks omitted).
33
Sections 5.2.6(b)(i)-(iii), 9.3, and 10.10 of the LLC Agreement—namely firing
Matthew, distributing Aeosphere’s assets, winding up Aeosphere, and disclosing
confidential information.165
Laudamiel breached his fiduciary duties if he acted for a purpose other than
to promote the best interests of Aeosphere.166 Except for general arguments that
the scent-related intellectual property rights he took were worthless to Matthew167
and that it was impossible to conduct business with Matthew, Laudamiel has not
defended against Matthew’s claim of disloyalty in the winding up process,
distributing Aeosphere’s assets in a way that would facilitate future scenting work,
creating DreamAir, and filing the termination paperwork on May 12. Although the
DreamAir-FWGSA partnership did not prove profitable, the Court cannot find that
Laudamiel did not act in anticipation that it would. Laudamiel shared confidential
information and, though often for the benefit of Aeosphere’s business, some of that
sharing went toward asking for help in manipulating the negotiation process.
Matthew has met the prima facie requirements for fiduciary duty claims. These
165
See, e.g., Defs.’ Post-Trial Answering Br. 35-36 (arguing that the contract
claims bar the fiduciary duty claims); id. at 44 n.7 (noting “the primacy of contract
theory”).
166
“The duty of loyalty mandates that the best interest of the corporation and its
shareholders takes precedence over any interest possessed by a director, officer or
controlling shareholder and not shared by the stockholders generally.” In re
Orchard Enters., Inc. S’holder Litig., 88 A.3d 1, 33 (Del. Ch. 2014) (alterations
and internal quotation marks omitted). Although Laudamiel was a director of an
LLC, no one disputes that he owed fiduciary duties to Aeosphere.
167
Oral Arg. Tr. 111-12.
34
claims remain to the extent that they might facilitate recovery against FWGSA.168
Matthew has not shown injury independent of that subsumed by the contract or the
fiduciary duty claims (and their indirect causes of action discussed below), and the
Court need not address the conversion claims and the unjust enrichment claims in
detail.169
C. The Indirect Claims
1. The Aiding and Abetting Claims
As relevant in light of the above, Matthew argues that the evidence shows
conduct “so suspect” that the Court can find that FWGSA knowingly participated
in Laudamiel’s breach of fiduciary duty.170 The elements of an aiding and abetting
claim are “(1) the existence of a fiduciary relationship, (2) the fiduciary breached
168
The Court is not deciding that every breach of contract that involves some
planning or discussion supports a fiduciary duty claim. The facts here show
months of discussions, combined with potential pecuniary interests. These claims
might have been dismissed if Laudamiel had retained an attorney, but the Court
will not act on such speculation.
169
The conversion claim involves unlawfully depriving Matthew of his units,
covered by damages the Court will award for the violation of LLC Agreement
§ 5.2.6(b)(iii). The Court notes, without deciding, that it seems circular to find an
independent statutory claim for violating a contract, based on the LLC Act’s
facilitation of private ordering. See Pl.’s Opening Post-Trial Br. 34 (invoking 6
Del. C. § 18-801(a)(1)-(2)).
The unjust enrichment claims were based on “the unlawful winding up of
Aeosphere, which represented the culmination of . . . [the] scheme . . . to remove
Mr. Matthew . . . , for the purpose of usurping Aeosphere’s assets and
opportunities for [Laudamiel’s] benefit,” rather than an injury independent of that
already discussed. Id. at 35. See also supra note 159.
170
Pl.’s Opening Post-Trial Br. 37.
35
its duty, (3) a nonfiduciary defendant knowingly participated in a breach, and
(4) damages to the plaintiff resulted from the concerted action of the fiduciary and
nonfiduciary.”171 The Court does not require a figurative smoking gun, and
knowledge can be inferred under circumstances where conduct is particularly
suspect.172 Knowing participation requires a showing “that the nonfiduciary
act[ed] with the knowledge that the conduct advocated or assisted constitutes such
a breach.”173
Matthew characterizes Yule’s wrongdoing as “an executive at . . . a
contractual partner of Aeosphere[] interject[ing] himself into an internal dispute
within the company.”174 Matthew’s analysis of Yule’s knowledge, accordingly,
looks to the “overall course of conduct with the motive and objective of removing
171
Triton Constr. Co. v. E. Shore Elec. Servs., Inc., 2009 WL 1387115, at *16
(Del. Ch. May 18, 2009), aff’d, 988 A.2d 938 (Del. 2010) (TABLE).
172
Id.
173
Id. As the Court explains in a footnote in Hexion Specialty Chemicals, Inc. v.
Huntsman Corp., the requirement to show knowledge in an aiding and abetting
claim is important to “facilitate[] the commercial interaction of corporate entities.”
965 A.2d 715, 747 n.88 (Del. Ch. 2008). The alternative would produce an
undesirable result: “whether a particular act by a board constitutes a breach of
fiduciary duty is highly context specific, such third-parties would have to
undertake extensive due diligence in order to assure themselves that the board had
not breached a duty in authorizing the transaction.” Id.
174
Oral Arg. Tr. 16. Matthew also specifies that Yule went too far by “assisting
one side in that dispute, . . . facilitating their knowledge, [and] creating an
imbalance in the knowledge between Mr. Matthew and the adverse parties.” Id.
at 23.
36
Mr. Matthew from Aeosphere.”175 Although parts of the story remain unclear, the
Court can find with confidence that Yule did not know until after the May 4 vote
that Capua’s and Laudamiel’s actions would be improper and that early May is a
proper focal point for determining FWGSA’s liability. Further discussion of the
facts is warranted, especially to explain why the Court does not find a broad and
longstanding scheme to wind up Aeosphere.
Matthew begins his Opening Post-Trial Brief by discussing the events of
October 2009. By then, Aeosphere’s members were considering separate divisions
of, and roles within, Aeosphere. Over the following months, Matthew was
excluded from meetings and communication. By February, Capua and Matthew
were discussing a split of the company and had retained counsel, signifying the
seriousness of their attempt to resolve the problems. An email from April 7
suggests that Matthew had decided to walk away from negotiations, but the
negotiations continued. Capua has asserted that Matthew’s April 23 email was the
final straw.176 Capua claims to have consulted his counsel at that point and to have
decided to dissolve Aeosphere.
Yule, of course, played some role in the managers’ dispute, as the email
record proves. Matthew did not authorize discussions of internal affairs, but both
sides asked Yule for help to a certain degree. Yule was not opposed to working
175
Id. at 20.
176
Id. at 76-77; JX 39.
37
with Matthew, although Yule stated that Laudamiel provided more value to the
collaboration. Yule also told at least one business partner about Aeosphere’s
management difficulties. On April 28, Laudamiel informed Yule about the
“Commando Operation” through an email asking for more time to review certain
terms with Prolitec and mentioning unexpectedly “find[ing] the jungle in New
York.”177 It was not until May 10, however, only two days before the certificate of
cancellation was filed, that Yule received from Matthew actual notice that Capua
and Laudamiel possibly violated the LLC Agreement.178
One could argue that the negotiations for a mutual agreement on splitting
Aeosphere were pretextual and part of a bigger secret plan, of which Yule knew
early on. Nonetheless, evidence of continued business through months of
negotiations and the eventual involvement of counsel makes Defendants’ position
the more probable.179 A longstanding scheme to push someone out and steal assets
is not consistent with spending months in negotiations with that person and
177
JX 158 at FWGSA 010215. Laudamiel contends that the dissolution decision
came in May, Oral Arg. Tr. 106, but a privilege log entry discussed at trial suggests
that Laudamiel was aware of a preliminary agenda for the emergency meeting by
April 29. Trial Tr. vol. III, 712-14 (Laudamiel).
178
Oral Arg. Tr. 87-88; JX 48 at FWGSA 096730.
179
Matthew argues that the Court can infer knowledge or rely on circumstantial
evidence in support of his various claims. Circumstantial evidence can prove a
fact if the fact “follows as a natural or very probable conclusion from the facts
actually proven.” In re Purported Last Will & Testament of Langmeier, 466 A.2d
386, 402 (Del. Ch. 1983). The Court reaches its factual conclusions with this
authority in mind.
38
notifying him of a meeting at which he could vote in opposition.180 The July 28
email from Capua pleading that Yule “not forget about [DreamAir]” and the
Collaboration Agreement markup offer further support. If Capua, Laudamiel, and
Yule contrived to take the Scent Project for themselves, Capua should not have had
to implore Yule to move forward with the DreamAir-FWGSA relationship. The
agreement Yule proposed would likely not have avoided concrete terms.
At most, the Court can find that Laudamiel and Capua formed a plan, by late
April, to engage in a “Commando Operation” of withdrawing cash181 and calling
an emergency meeting to pursue, among other items, dissolution.182 Yule’s
(literally fitting) response to the “Commando Operation” email, imagining
Laudamiel “crawling through the undergrowth in . . . camo-paint,”183 suggests that
he was clueless about Laudamiel’s intentions (but was trying to be socially
responsive).184 That Yule was involved in confidential communications and
clearly favored Laudamiel does not lead to a natural or probable conclusion that he
180
Matthew had notice but chose not to participate in the May 4, 2010, meeting.
JX 110 at LCA 001576 (emergency meeting minutes).
181
JX 158.
182
JX 109.
183
JX 158 at FWGSA 010215.
184
Yule’s email said, “Good luck with the raid!” Id. Yet it does not make sense
that Yule would send Laudamiel a “rush” request to read and comment on
“Flaktwoods – Prolitec business terms” if he knew that Laudamiel was occupied
with a crucial part of their alleged scheme. See id. at FWGSA 010215-16.
39
knew about the emergency meeting and that Capua and Laudamiel would engage
in wrongful conduct.
By May 10, Yule knew that Matthew thought the winding up had been
conducted unlawfully. That said, there is no direct evidence that Yule knew he
was advocating wrongdoing by pushing the parties to resolve their differences,185
and his actions between May 4 and 12186 are not so suspect that the Court can infer
knowing participation in the illicit winding up effort.187 At most, Yule emailed
business partners (who had previously received notice of the winding up on
May 5), asked for documentation that Aeosphere was no longer in business,188 and
invited Laudamiel to join a conference call (sometime between May 12 and 13).189
Yule walked the line by expressing his opinions throughout the entire Aeosphere-
185
Yule testified that he had never received a copy of the LLC Agreement. Trial
Tr. vol. II, 479, 501 (Yule). On cross examination, he was questioned about the
extent of his knowledge of Laudamiel’s employment rights, but not his lack of
receipt. See Trial Tr. vol. III, 653-56 (Yule). The Court does not seek to create an
insurmountable burden of due diligence in commercial transactions with third
parties by requiring in depth knowledge of all governing documents to avoid
contributing to a potential breach.
186
Once the certificate of cancellation was filed on May 12, Capua and Laudamiel
no longer owed fiduciary duties to Aeosphere. See Comerica Bank v. Global
Payments Direct, Inc., 2014 WL 3779025, at *14 n.120 (Del. Ch. Aug. 1, 2014)
(citing cases to distinguish between duties owed before and after termination of a
joint venture).
187
See Pl.’s Opening Post-Trial Br. 16-23 (reciting facts).
188
Trial Tr. vol. II, 510-11 (Yule); see also JX 129 (May 12 email from Laudamiel
attaching minutes from May 4).
189
See JX 161 at FWGSA 010391. In a May 13 email, Yule indicates that he has
invited Capua and Laudamiel to join the call. That email followed an email from
May 12 in which Yule mentioned looking forward to the call.
40
FWGSA relationship, but the evidence does not show that he knowingly
participated in a breach of fiduciary duties relating to the winding up effort.
Admittedly, there is ample evidence that Yule conveyed information about
management conflict to a third party and participated in discussions about
management issues to an extent unknown by (and actively concealed from)
Matthew. However, Aeosphere and its members suffered no harm from these acts.
It is likely that Yule had a sense of the disagreement from Matthew and
Laudamiel’s attempts to communicate with him on an individual basis. Despite
Matthew’s attempts to keep negotiations confidential, Matthew’s yelling at
Laudamiel at a Scent Opera venue was no secret. Yule’s statement to a potential
third-party partner that Matthew was soon to leave did not cause that partner to
terminate relations with either FWGSA or Aeosphere.190 If anything, the
negotiations with business partners enhanced Aeosphere’s profitability. Yule
explained that Laudamiel was the more valuable co-CEO to FWGSA—a scenting
project needs a skilled perfumer—and that appears to have been true despite
Matthew’s contrary personal beliefs. The Court fails to see how Yule’s repeating
true information is actionable misconduct. The emails do not say that Matthew
must quit or be fired. Yule stated that he was willing to work with both co-CEOs.
Reminding the managers that their squabbles were hurting business is generally not
190
See JX 157 at FWGSA 009532.
41
objectionable. Instructing the managers to end their relationship lawfully, in the
right context, is not necessarily wrongful.
Matthew’s argument that Capua and Laudamiel would not have dissolved
Aeosphere without assurance of Yule’s support, raised in the context of the tortious
interference claims, is also relevant on the point of resulting damages.191 Capua
and Laudamiel clearly valued FWGSA’s support, but the inferences that can be
drawn from Yule’s “poor set of words”192 do not outweigh the testimony and
emails showing independent disagreement among Aeosphere’s members and the
escalation of the negotiations. Yule had expressed support for Laudamiel since at
least October and sent his 100% commitment email in January.193 The managers
subsequently engaged in months of negotiations. Yule’s belated involvement at
most accelerated the already inevitable deterioration in Aeosphere’s management
relationships—it did not cause independent harm.194 In sum, the aiding and
abetting claims fail for lack of knowing participation and harm.
191
E.g., Pl.’s Post-Trial Reply Br. 27.
192
Trial Tr. vol. II, 469 (Yule).
193
See Pl.’s Opening Post-Trial Br. 4-5 (citing the October 23 email to create a
scheduling conflict).
194
The Court finds that while Yule was aware that Laudamiel and Capua were
taking a hard line with Mathew, there is no indication that Yule knew prior to the
dissolution meeting that unanimous approval was required to oust Matthew or that
doing so without unanimous approval would violate the LLC agreement. Yule was
on notice of the dissolution’s impropriety only after Matthew so informed him in a
post-meeting email, JX 48 at FWGSA 096730, which Yule may or may not have
believed.
42
2. The Tortious Interference Claims
FWGSA’s opposition to the tortious interference claims centers around
whether Yule had the requisite knowledge of the LLC Agreement (and its
particular provisions), the causal chain, and justification. A claim for tortious
interference requires that “(1) there was a contract, (2) about which the particular
defendant knew, (3) an intentional act that was a significant factor in causing the
breach of contract, (4) the act was without justification, and (5) it caused injury.”195
Tortious interference involves not only knowledge that a contract exists but also
intent to interfere with that contract.196 The justification element depends on
factors such as:
(a) the nature of the actor’s conduct,
(b) the actor’s motive,
(c) the interests of the other with which the actor’s conduct interferes,
(d) the interests sought to be advanced by the actor,
(e) the social interests in protecting the freedom of action of the actor
and the contractual interests of the other,
(f) the proximity or remoteness of the actor’s conduct to the
interference and
(g) the relations between the parties.197
195
WaveDivision Hldgs., LLC v. Highland Capital Mgmt., L.P.
(“WaveDivision II”), 49 A.3d 1168, 1174 (Del. 2012) (internal quotation marks
omitted).
196
NAMA Hldgs., LLC v. Related WMC LLC, 2014 WL 6436647, at *28 (Del. Ch.
Nov. 17, 2014).
197
WaveDivision II, 49 A.3d at 1174 (citing Restatement (Second) of Torts § 767
(1979)).
43
The Court evaluates tortious interference claims, including possible justification,
mindful that “some types of intentional interference with contractual relations are a
legitimate part of doing business.”198
Again, the Court starts with the premise that the potential violations are
disclosure of confidential information and unlawful acts associated with winding-
up, not a broad scheme. The tortious interference analysis focuses on Yule’s
knowledge of the LLC Agreement and attached employment contract, but the
relevant facts are similar to those above. Yule had not known about the LLC
Agreement (much less that Capua and Laudamiel were violating any provision of
it) until May 10. As between the time of notice and the time that Laudamiel filed
the certificate of cancellation (two days later), Matthew points to no act that
significantly affected the filing of the certificate of cancellation or resulted in loss
to Aeosphere, as discussed above.
As previously mentioned, Matthew argues that Capua would not have
wound up Aeosphere if he did not have Yule’s commitment to work with a new
business.199 For support, Matthew quotes a deposition passage in which Capua
addressed the topic of asking Yule whether he would be willing to work with
successors to Aeosphere, where Aeosphere would be divided into two companies
198
NAMA Hldgs., LLC, 2014 WL 6436647, at *26.
199
Pl.’s Opening Post-Trial Br. 42 (citing Capua Dep. 115); Pl.’s Post-Trial Reply
Br. 26-27.
44
led by Matthew and Laudamiel separately. Capua also recalled a concern that
“without Flakt Woods Aeosphere would collapse.”200 At most, such facts could
support an inference that Yule’s support was significant in Capua’s decision to
wind up Aeosphere. However, Capua’s conduct is not at issue, and expressing a
willingness to work with two different businesses does not show that Yule knew
about the LLC Agreement, intended a breach of that agreement, or acted between
May 10 and 12 to effectuate such a breach. If Yule’s support caused the harm of
winding up Aeosphere, it would mean that Capua and Laudamiel wasted months of
their time and legal fees in negotiations and in operating Aeosphere—the more
likely scenario is that Capua and Laudamiel grew tired of dealing with Matthew.
With respect to the employment agreement (which was part of the LLC
Agreement), Matthew alleges that there is enough evidence to find that Yule knew
about it early on and intentionally interfered. He cites Yule’s testimony and the
Collaboration Agreement (with its amendments) that Matthew signed as co-CEO.
On the other hand, Yule testified that he did not “know if [Matthew and
Laudamiel] were working for Aeosphere with a salary or if they were simply
shareholders and drawing dividends.”201 As FWGSA observes, the mere existence
of an employment agreement does not permit a finding that an employee has a
right to a term of continued employment—a number of cases addressing the
200
Capua Dep. 115.
201
Trial Tr. vol. II, 502 (Yule).
45
implied covenant of good faith and fair dealing recognize a presumption under
Delaware law that employment contracts are “at-will in nature with duration
indefinite.”202 That one can interfere without understanding the legal effect of a
contract does not negate the requirement of intending to interfere with something
in the first place. There is also no reason to doubt Yule’s position that FWGSA
would have been amenable to working with Aeosphere as two separate companies
or that he hoped that “peace” would ensue. Even if there were some knowledge of
a contract, Matthew has failed to establish the critical element of intent to interfere
with Matthew’s employment.
Additionally, FWGSA prevails on the justification element. Yule expressed
that Laudamiel’s skill was more valuable to FWGSA, a true statement, and did not
make overt threats.203 He did, however, exert pressure (at times prompted by
Laudamiel), and there was some disingenuousness in his representation that
FWGSA’s board would get involved. More importantly, though, FWGSA was
invested in a Collaboration Agreement that it hoped would differentiate itself from
202
Defs.’ Post-Trial Answering Br. 40-41 (quoting Bailey v. City of Wilm., 766
A.2d 477, 480 (Del. 2001)).
203
See generally Def. Fläkt Woods Group SA’s Mem. of Law in Supp. of Its Mot.
for Summ. J. 25-32. Matthew also incorporates earlier filings on the justification
issue. See Pl.’s Opening Pre-Trial Br. 45-49.
46
the competition in the air-handling market, and therefore had a proper motive204
(and interest205) in urging its business partner206 to resolve its management
disputes. FWGSA concedes that Yule’s conduct interfered with valid contracts,
but justification does not require all factors to be met. Finally, as noted above, the
weight of the evidence is that Yule was not the deciding factor in the winding up
(although Yule did cause some disclosure of confidential information for which the
Court has found no independent injury). The Court cannot ignore the progression
of the separation negotiations and the value of the Scent Project to FWGSA and
Aeosphere. Therefore, for reasons of justification and lack of knowledge, intent,
and injury, the tortious interference claims fail.
3. The Conspiracy Claims
FWGSA argues that the conspiracy claim must fail for the reasons the aiding
and abetting claims do: namely the lack of a wrongful act, knowing participation,
204
See WaveDivision II, 49 A.3d at 1174 (“Only if the defendant’s sole motive was
to interfere with the contract will this factor support a finding of improper
interference.”).
205
See WaveDivision Hldgs., LLC v. Highland Capital Mgmt. L.P.
(“WaveDivision I”), 2012 WL 3224310, at *12 (Del. Super. Aug. 7, 2012) (“It was
not improper for the defendants to interfere with the Wave Agreements in order to
protect their own financial interest in Millennium.”). However, both FWGSA’s
interest in protecting its investment in the Scent Project and Matthew’s interest in
his contract rights without interference by third parties were important. See id. at
*13 (discussing “[t]he societal interests in protecting the freedom of action of the
actor and the contractual interests of the other.” (emphasis removed)).
206
The parties’ economic relationship weighs in favor of justifying FWGSA’s
involvement. Id.
47
and harm.207 A claim for conspiracy requires “(1) [a] confederation or combination
of two or more persons; (2) [a]n unlawful act done in furtherance of the
conspiracy; and (3) [a]ctual damage.”208 Because “a plaintiff often cannot produce
direct evidence of a conspiracy,” circumstantial evidence can be offered as “‘proof
that it occurred.’”209 Without rehashing the arguments above, the claims of
FWGSA’s involvement in a “conspiracy” of breaching confidentiality or excluding
Matthew fail as against FWGSA because either (1) no act of Yule was in
furtherance of winding up Aeosphere or (2) no actual losses resulted. There was
no “confederation” involving FWGSA regarding dissolution, winding up, and
terminating Matthew’s employment agreement—Yule did not know about Capua
and Laudamiel’s plans until after their acts had occurred (and he did not cause any
harm once he had notice of potential wrongdoing). The exchange of confidential
information did not produce any quantifiable harm to Aeosphere or Matthew. In
contrast, Matthew succeeds on his claim against DreamAir. Laudamiel acted to
form DreamAir before Aeosphere’s certificate of cancellation was filed, and
(anyway) default judgment has been entered against DreamAir. The breaches of
fiduciary duty by Laudamiel (at a minimum) support holding DreamAir
responsible for the damages, discussed below, on equal footing with Laudamiel.
207
Defs.’ Post-Trial Answering Br. 43.
208
Nicolet, Inc. v. Nutt, 525 A.2d 146, 149-50 (Del. 1987).
209
Reid v. Siniscalchi, 2014 WL 6589342, at *6 (Del. Ch. Nov. 20, 2014).
48
Thus, Matthew’s conspiracy claims succeed to the extent that he can recover
(once) for his injury.
D. Damages
Based on the above, Matthew maintains claims for damages against
Laudamiel and DreamAir but not FWGSA. Matthew seeks compensation for the
value of his ownership interest in Aeosphere (the “remedy for conversion of . . .
Matthew’s Aeosphere membership units”210) and his employment agreement (the
remedy for “a breach that was tortiously encouraged . . . by FWGSA”211).
According to Matthew, these damages total $4,584,000 plus interest. Matthew
must prove that he is entitled to this amount to attain his full recovery, although the
Court views its task as analogous to an appraisal and will exercise discretion in
determining the appropriate valuation.212
A few preliminary issues should be addressed. First, the Court declines to
balance the qualifications of the expert witnesses, Kevin Vannucci (“Vannucci”)
210
Pl.’s Opening Post-Trial Br. 44.
211
Id. at 55. In the reply brief, Matthew frames the issue as a remedy for tortious
interference, which the Court has already rejected. The Court will, however,
consider the value of the employment contract for thoroughness and to address any
lingering concern about Laudamiel’s liability.
212
See Montgomery Cellular Hldg. Co. v. Dobler, 880 A.2d 206, 221 (Del. 2005)
(“In a statutory appraisal proceeding, each side has the burden of proving its
respective valuation positions by a preponderance of the evidence. Even if one
side fails to satisfy its burden, the Court . . . must use its own independent
judgment to determine fair value.” (footnote omitted)). Again, the Court will
consider FWGSA’s damages arguments broadly.
49
for Matthew and G. Matt Barberich, Jr. (“Barberich”) for FWGSA, other than to
note that they were sufficient to present opinions at trial. Second, the parties do
not argue that the LLC Agreement offers a standard for determining damages for a
breach, although Section 9.3 governs how payments are to be made after
dissolution. Third, consistent with an appraisal, the Court does not factor in events
or facts unknowable as of the relevant date for valuation purposes, here May 12,
2010.213 Finally, the Court has not sought out the details of Matthew’s settlement
with Capua, but Matthew cannot recover twice for the same harm.
Amidst the debate over whether Aeosphere should be considered a going
concern or should be treated as if it had been liquidated,214 the Court is convinced
that neither side’s account presents the entire story. If Aeosphere were worthless,
it does not make sense that Laudamiel would specifically assign himself
213
See, e.g., Gearreald v. Just Care, Inc., 2012 WL 1569818, at *5 (Del. Ch.
Apr. 30, 2012) (“The Court should consider all factors known or knowable as of
the Merger Date that relate to the future prospects of the Companies, but should
avoid including speculative costs or revenues.” (internal quotation marks omitted)).
214
FWGSA argues that a discounted cash flow method does not produce a useable
result in Aeosphere’s case because it is not a going concern, it lacks a history of
revenues, and lacks reliable inputs. See, e.g., Defs. Fläkt Woods Group SA and
Fläkt Woods Limited’s Mem. in Further Supp. of Their Mot. In Limine to Preclude
Testimony of Kevin Vannucci 4-6. Another problem is that it is difficult to place a
value on specific Aeosphere assets, such as the Scent Opera, but that does not
appear to have inflated Vannucci’s calculations. Matthew contends that “this
Court has not applied a liquidation-based valuation . . . to appraise equity shares.”
Pl.’s Post-Trial Reply Br. 31. He also raises concerns that using liquidation value
“incentivize[s] fiduciaries to simply pursue dissolution of an entity and transfer its
liquidated assets to a new business rather than through a merger that might trigger
appraisal rights.” Oral Arg. Tr. 44-45.
50
intellectual property and continue to work on a modified version of the Scent
Project. On the other hand, the EFET system was not marketable by May 2010,
reducing Aeosphere’s potential for profitability.
The entirety of the financial and other evidence demonstrates that Aeosphere
was in dire financial straits. The Company could not even afford to pay Matthew
and Laudamiel, its own co-CEOs, given its inadequate cash flow. The business
continued to suffer as the co-CEOs failed to cooperate. Further, Aeosphere had
considerable debt and at best a suboptimal product to sell. No evidence existed of
any potential investor other than Capua, and by all accounts Capua refused to
commit additional capital.215 Finally, if one makes the generous assumption that
Aeosphere’s cash burn rate was $30,000 per month (based in part on the co-CEOs
foregoing salaries),216 its bank account would have sustained operations for only
another five to six months. There was some subjective optimism about EFET,
though successful adaption of the technology to the commercial context was far
from certain and never in fact materialized. As mentioned, Vannucci’s cash flow
projections assumed a viable EFET product, and were prepared by individuals
215
Aeosphere might have had a breach of contract claim, but that would not be a
source of immediate and reliable funding to continue its operations.
216
The Court adopts this number for hypothetical purposes only. This figure is
part of what Vannucci considered when determining that Aeosphere could be
valued as a going concern. See Trial Tr. vol. IV, 990-91, 994-96 (Vannucci).
51
motivated to promote Aeosphere. For these reasons, the Court cannot adopt
Vannucci’s valuation wholesale.
The liquidation approach is also imperfect because it does not address the
Court’s concerns about the distribution of Aeosphere’s assets—particularly its
intangible assets. Barberich’s analysis worked off of the closing balance sheet in
Vannucci’s report,217 and the value of the Scent Project was not included in the
balance sheet.218
As noted above, Aeosphere was running on fumes, and hindsight proves that
the Scent Project (never able to use EFET) was not profitable. At the time of the
winding up, however, Aeosphere, despite its troubles, was a going concern with
value in its intellectual property and potentially lucrative contracts with well-
established entities such as FWGSA. Recognizing that Aeosphere had some value
as a going concern, but mindful of the speculative nature of Aeosphere’s product
and future cash flows, the Court adopts Vannucci’s discounted cash flow model
with a reduced enterprise value and allocates a 35% interest to Matthew.
217
JX 287 at 4 (explaining that Barberich would temper Vannucci’s “aggressive”
calculations but emphasizing that even Vannucci’s balance sheet shows that
Aeosphere “had no value”).
218
See JX 434 at Schedule 1 & n.4.
52
Vannucci, in his valuation, utilized venture capital rates of return for
purposes of selecting a discount rate.219 In making this selection, Vannucci’s first
task was to classify Aeosphere into one of five stages of development, each of
which is designated a distinct range of potential discount rates.220 The first stage, a
start-up stage investment, is one in which “[t]he venture funding is to be used
substantially for product development, prototype testing, and test marketing.”221
The second stage, an early development stage investment, is one “made in
companies that have developed prototypes that appear viable and for which further
technical risk is deemed minimal.”222
In classifying Aeosphere, the Court considers the following facts: First,
Aeosphere had been in business for over a year, had contracts of value, and held
some expectation that the Prolitec technology would suffice until EFET became
marketable. Second, the parties were clearly interested in EFET, and Laudamiel
and Capua did not just walk away from Aeosphere. Third, while Vannucci’s
valuation utilized projected cash flows assuming a viable EFET technology, the
Court’s calculation considers EFET a mere expectancy and assumes use of the
219
Trial Tr. vol. IV, 1003 (Vannucci) (reasoning that Aeosphere’s youth renders
the CAPM less reliable than the established “VC rates of return”); JX 434 at
Schedule 4.
220
Trial Tr. vol. IV, 1005-06 (Vannucci).
221
JX 287 at 32. Potentially acceptable discount rates for a start-up stage
investment range from 50% to 125%. JX 434 at Schedule 4.
222
JX 287 at 33. Potentially acceptable discount rates for an early development
stage investment range from 40% to 70%. JX 434 at Schedule 4.
53
then-viable Prolitec technology.223 Given these facts, Aeosphere can reasonably be
considered an early development stage company. The Court, therefore, adopts
Vannucci’s discount rates—40% for the FWGSA projections and 50% for the
Aeosphere projections—both of which fall within the range of acceptable rates for
an early development stage company.224
Vannucci’s free cash flow inputs, however, assumed a viable EFET
technology, and were therefore inflated.225 To compensate, the Court, in its
independent valuation, reduced the free cash flows to one-fifth of their projected
value.226 This reduction is consistent with Yule’s testimony regarding the value of
the scenting project absent viable EFET technology. 227 Yule, however, further
stated that if the Prolitec relationship was not exclusive (which it was not228), the
223
This fact is relevant because Prolitec was an existing technology that
“appear[ed] viable”—even though its use would presumably reduce margins
relative to the yet unperfected EFET technology—further justifying Aeosphere’s
“early development” classification.
224
JX 434 at Schedule 4.
225
While the Court adopts Vannucci’s valuation model and discount rates, the
Court finds credible Yule’s testimony regarding the appropriate cash flow
reduction to compensate for the uncertainty surrounding EFET.
226
By simply reducing Aeosphere’s free cash flows, as opposed to adjusting its
revenue and expenses independently, the Court assumes that Aeosphere’s cost of
goods sold and operating expenses vary proportionately to sales. Such an
assumption is not unreasonable in light of the fact that “Aeosphere, on its own, was
not a capital-intensive company,” and therefore incurred relatively few fixed costs,
resulting in an unlevered cost structure. Trial Tr. vol. IV, 995 (Vannucci).
227
Trial Tr. vol. II, 428 (Yule) (stating that projections assuming Prolitec
technology would be one-fifth to one-tenth of those assuming EFET).
228
Id. at 428, 524 (Yule).
54
projections “would drop again by a factor of about ten.”229 In hindsight, therefore,
the adjusted projections could reasonably be reduced to as little as two percent of
the originals.230
The Court’s decision to reduce the projected free cash flows to one-fifth, as
opposed to some lesser value between one-fifth and one-fiftieth, is deliberate. At
the time of the valuation, the EFET technology lingered as a possibility.
Therefore, the projected free cash flow, while assuming the use of Prolitec
technology, must also incorporate the expected value of the EFET technology as of
the time of the valuation. The Court incorporates such value by reducing the
projected free cash flows by the minimum factor suggested by Yule, as opposed to
reducing them further given the lack of an exclusive agreement with Prolitec.231
The possibility that EFET-based products could be ready to sell within a year of a
successful test is further counterbalanced by the improbability that the co-
managers would have outlasted the testing.
229
Id. at 428 (Yule).
230
The Court reaches this figure by reducing the above one-fifth by the additional
ninety percent suggested by Yule given the lack of an exclusive agreement with
Prolitec. The Court notes, however, that a reasonable interpretation of Yule’s
testimony could result in a finding of one percent of the original projections. Id.
(Yule stating that projections assuming Prolitec could be as low as ten percent of
those assuming EFET; reducing that amount by a “factor of . . . ten” results in
projections at one percent of the originals).
231
The Court notes, however, that without additional data, equating the expected
value of the EFET technology at the time of the valuation to the value added by
reducing cash flows by a mere 80% is somewhat of a rough estimate.
55
Applying the 40% and 50% discount rates respectively to FWGSA’s and
Aeosphere’s adjusted free cash flow projections results in a weighted232 value of
$1,908,066.56 for the Scent Project.233 Accounting for cash and cash equivalents,
working capital, and non-operating assets234 brings Aeosphere’s enterprise value to
$1,405,256.56. The total value of Matthew’s 35% share, treating all units equally,
is therefore $491,839.79. Capua’s preferred units had a liquidation preference and
a preferred return, but the Court cannot find with confidence that those rights
should be afforded any material value: the winding up was wrongful and the
prospect of repayment in the face of Aeosphere’s many struggles is too
speculative. Matthew had a 35% interest in Aeosphere and the right not to have it
wound up without his approval. Although it is difficult to discern the value of an
idea, and reasonable minds could disagree, the Court reaches this result with some
level of comfort.
232
The Court adopts Vannucci’s weights of 60% for the FWGSA projections and
40% for the Aeosphere projections. JX 434 at Schedule 1 n.1 (Valuation Synthesis
and Conclusion).
233
While Vannucci’s calculations primarily consider the Scent Project, Dep. Trs. of
Kevin Vannucci (“Vannucci Dep.”) 66-68, Aeosphere’s portfolio of business
opportunities contained sundry additional projects. JX 285 at 3. Vannucci,
however, stated that any projected cash flows for such additional projects would be
“too speculative” to include in the valuation model. Vannucci Dep. 67. Thus, the
value of Aeosphere represented by Vannucci’s and the Court’s calculations stems
primarily from the Scent Project.
234
JX 434 at Schedule 1.
56
Matthew appears to base his claim for damages from his employment
contract on tortious interference. He has failed to prove that claim against
FWGSA, but the question of Laudamiel’s and DreamAir’s liability lingers.
Matthew argues that he should receive the remainder of his pay under his five-year
contract because the remedy for a tort is what he expected, not simply what
Aeosphere would have paid. The Court rejects this argument because Matthew’s
compensation was not reduced by any wrongful act; Matthew’s employment
contract had a five-year term, but Matthew and Laudamiel had been deferring
salaries since at least May 2009.235 Capua and Laudamiel likely would not have
authorized additional payments, and Matthew has not provided a basis for the
Court to find that Aeosphere’s cash flow would improve. Importantly, the Court’s
willingness to accept a discounted cash flow valuation in the first place rests in part
on the co-CEOs’ willingness to forgo compensation so that Aeosphere could
remain a going concern.236 Thus, Matthew has not demonstrated that he is
separately entitled to damages for the termination of his employment contract.
235
Trial Tr. vol. I, 88 (Matthew).
236
Matthew supports his expert’s valuation by observing Capua’s commitment to
fund salaries. Pl.’s Opening Post-Trial Br. 48-49. Capua would not have done so.
If the Court accepts that Aeosphere was a going concern despite its inability to
make payroll, it is fair to assume that Matthew would not have continued to work
without compensation.
57
E. Other Matters
If the implementing order establishes that DreamAir owes any amount to
Matthew, it shall respond to the motion to compel. Matthew has not provided a
basis for shifting attorneys’ fees to overcome the American Rule. Pre-judgment
interest and post-judgment interest compounded quarterly at the statutory rate
fairly compensate Matthew.
IV. CONCLUSION
For the reasons discussed above, the Court awards Matthew $491,839.79
from Laudamiel and DreamAir for the unlawful winding up of Aeosphere, subject
to a determination of the effect of the Capua and Action 1 settlement reached by
Matthew.237 The interested parties shall address this issue. Judgment will be
entered in favor of FWGSA and FWL and against Matthew.238
Entry of an implementing order will await, in the absence of a request from
any party, a conclusion regarding the effect of the earlier settlement.
237
The Court has chosen to reach this decision without being aware of the amount
for which Capua and Action 1 settled.
238
The pre-trial order does not squarely address FWGSA’s cross-claims.
Nonetheless, with this conclusion, the cross-claims of FWGSA are moot and, thus,
are dismissed.
58