Virtus Capital L.P. v. Eastman Chemical Company

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
VIRTUS CAPITAL L.P., individually and on behalf
)
of all others similarly situated, )
)
Plaintiff, )
)
v. ) C.A. No. 9808-VCL
)
EASTMAN CHEMICAL COMPANY, JOHN L. )
TEEGER, JOHN V. GENOVA, RICHARD K. )
CRUMP, JOHN W. GILDEA, PHILIP M. SIVIN, )
KARL W. SCHWARZFELD, DANIEL M. )
FISHBANE, WALTER TREYBIG, MARTIN D. )
SASS, M.D. SASS INVESTORS SERVICES, INC., )
RESURGENCE ASSET MANAGEMENT, L.L.C., )
RE/ENTERPRISE ASSET MANAGEMENT )
L.L.C., RESURGENCE ASSET MANAGEMENT )
INTERNATIONAL, L.L.C., CORPORATE )
RESURGENCE PARTNERS, L.L.C., )
CORPORATE RESURGENCE PARTNERS II, )
L.L.C., M.D. SASS CORPORATE RESURGENCE )
PARTNERS III, L.P., RESURGENCE ASSET )
MANAGEMENT, L.L.C. EMPLOYEE )
RETIREMENT PLAN, TRUST ―O‖ FOR A )
PORTION OF THE ASSETS OF THE KODAK )
RETIREMENT INCOME PLAN, KODAK )
PENSION PLAN, M.D. SASS ASSOCIATES, INC. )
EMPLOYEE PROFIT SHARING PLAN, M.D. )
SASS RE/ENTERPRISE PORTFOLIO )
COMPANY, L.P., M.D. SASS RE/ENTERPRISE II, )
L.P., RESURGENCE PARALLEL FUND, L.L.C., )
RESURGENCE PARALLEL FUND II, L.L.C., )
RESURGENCE PARALLEL FUND III, L.L.C., )
EASTMAN TC, INC., AND MOELIS & )
COMPANY LLC, )
)
Defendants. )
MEMORANDUM OPINION
Date Submitted: December 9, 2014
Date Decided: February 11, 2015
Joel Friedlander, Jeffrey M. Gorris, Benjamin P. Chapple, FRIEDLANDER & GORRIS,
P.A., Wilmington, Delaware; Attorneys for Plaintiff.
T. Brad Davey, J. Matthew Belger, POTTER ANDERSON & CORROON LLP,
Wilmington, Delaware; Barry S. Pollack, POLLACK SOLOMON DUFFY LLP, Boston,
Massachusetts; Attorneys for Defendants Martin D. Sass, M.D. Sass Associates, Inc.
Employee Profit Sharing Plan, M.D. Sass Investor Services, Inc., Resurgence Asset
Management, L.L.C., and RE/Enterprise Asset Management L.L.C.
A. Thompson Bayliss, Adam K. Schulman, ABRAMS & BAYLISS LLP, Wilmington,
Delaware; Attorneys for Defendant John V. Genova.
Thomas W. Briggs, Jr., Kevin M. Coen, Frank R. Martin, Brendan W. Sullivan,
MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Attorneys for
Defendants Eastman Chemical Company, and Eastman TC, Inc.
Lewis H. Lazarus, Brett M. McCartney, Patricia A. Winston, MORRIS JAMES LLP,
Wilmington, Delaware; Attorneys for Defendants John L. Teeger, Richard K. Crump, and
John W. Gildea.
Rolin P. Bissell, Paul J. Loughman, YOUNG CONAWAY STARGATT & TAYLOR,
LLP, Wilmington, Delaware; Paul D. Flack, Reagan D. Pratt, PRATT & FLACK LLP,
Houston, Texas; Attorneys for Defendant Walter B. Treybig.
Gregory P. Williams, Susan M. Hannigan, J. Scott Pritchard, RICHARDS LAYTON &
FINGER, P.A. Wilmington, Delaware; Yosef J. Reimer, Matthew Solum, KIRKLAND &
ELLIS LLP, New York, New York; Attorneys for Defendants Philip M. Sivin, Karl W.
Schwarzfeld, and Daniel M. Fishbane.
David E. Ross, S. Michael Sirkin, SEITZ ROSS ARONSTAM & MORITZ LLP,
Wilmington, Delaware; William Savitt, Benjamin D. Klein, WACHTELL, LIPTON,
ROSEN & KATZ, New York, New York; Attorneys for Defendant Moelis & Company
LLC.
LASTER, Vice Chancellor.
Defendant Martin D. Sass controlled Sterling Chemicals, Inc. (―Sterling‖ or the
―Company‖), a publicly traded Delaware corporation. The complaint contains detailed
allegations sufficient to state a claim that Sass breached his duty of loyalty by causing
Sterling to be sold at a fire-sale price to alleviate a liquidity crisis that Sass was facing at
his investment funds. The complaint also contains detailed allegations sufficient to state a
claim that Eastman Chemical Company (―Eastman‖), the acquirer, aided and abetted
Sass‘ breaches of fiduciary duty by exploiting the conflicts of interest that Sass faced.
None of the defendants have moved to dismiss the complaint for failing to state a claim
on which relief could be granted.
Instead, Sass has moved to dismiss the complaint pursuant to Rule 12(b)(2),
arguing that this court lacks personal jurisdiction over him. So has one of the entities
through which he controlled Sterling: the M.D. Sass Associates, Inc. Employee Profit
Sharing Plan (the ―Sass Plan‖). Because the defendants engaged in acts within the State
of Delaware and purposefully availed themselves of the benefits of Delaware law, this
court has jurisdiction over Sass and the Sass Plan.
I. FACTUAL BACKGROUND
The facts are drawn principally from the Verified Class Action Complaint (the
―Complaint‖) and the documents it incorporates by reference. At this procedural stage,
the Complaint‘s allegations are assumed to be true, and the plaintiff receives the benefit
of all reasonable inferences. For purposes of evaluating whether a defendant is subject to
the court‘s jurisdiction, ―the court may go beyond the pleadings and look to affidavits and
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other discovery of record.‖ Chandler v. Ciccoricco, 2003 WL 21040185, at *8 (Del. Ch.
May 5, 2003) (Strine, V.C.). The factual recitation therefore also incorporates matters
drawn from the parties‘ submissions in connection with the motions to dismiss.
A. Resurgence and Sterling
Sass controlled a financial complex comprising various investment funds and
related entities that operated under the ―Resurgence‖ trade name. The investment funds
included defendants Resurgence Parallel Fund, L.L.C.; Resurgence Parallel Fund II,
L.L.C.; Resurgence Parallel Fund III, L.L.C.; Corporate Resurgence Partners, L.L.C.;
Corporate Resurgence Partners II, L.L.C.; M.D. Sass Corporate Resurgence Partners III,
L.P.; M.D. Sass RE/Enterprise Portfolio Company, L.P.; and M.D. Sass RE/Enterprise II,
L.P. Other funds that Sass controlled included the Sass Plan; the Resurgence Asset
Management, L.L.C. Employee Retirement Plan; the Kodak Pension Plan; and Trust ―O‖
For a Portion of the Assets Of The Kodak Retirement Income Plan. This decision refers
to these funds collectively as the ―Resurgence Funds.‖ The Resurgence financial complex
also included fund-management entities such as defendants Resurgence Asset
Management, L.L.C.; Resurgence Asset Management International, L.L.C.; and
RE/Enterprise Asset Management, L.L.C. This decision refers to the asset management
entities as the ―RAM Entities.‖ The pinnacle entity through which Sass controlled the
Resurgence financial complex was defendant M.D. Sass Investors Services (―Sass
Services‖), which controlled the RAM Entities. This decision refers to the Resurgence
Funds, the RAM Entities, and Sass Services collectively as ―Resurgence.‖
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In 2002, Resurgence made a substantial investment in Sterling. Headquartered in
Houston, Sterling owned a 290-acre petrochemical manufacturing facility in Texas City
on Galveston Bay. The facility had two primary manufacturing plants: an acetic acid
plant and a temporarily idled plasticizer plant. The facility also had other underutilized
assets, including storage tanks, deep injection wells for hazardous waste disposal, two
deep water docks, three barge docks, and direct access to two railways. Additionally,
Sterling owned 160 acres of excess land, NOx credits worth millions of dollars, and more
than $90 million in federal net operating losses that could be used as a tax shield.
Through its 2002 investment, Resurgence acquired beneficial ownership of
approximately 56% of Sterling‘s common stock and 100% of Sterling‘s preferred stock.
Sass allocated these holdings across the Resurgence Funds, the RAM Entities, and Sass
Services. Through their aggregate ownership stake, the entities controlled over 88% of
Sterling‘s voting power. Through Resurgence, Sass controlled Sterling.
B. The Fund Expirations
In 2008, the largest Resurgence Fund, defendant M.D. Sass Corporate Resurgence
Partners, L.P. (―Fund I‖) reached the end of its ten-year term. Fund I owned over 25% of
Sterling‘s equity. Resurgence negotiated with Fund I‘s biggest investor to extend Fund
I‘s term for another year. In return, Sass agreed to fund personally a cash escrow that
would cover his portion of the returns owed to Fund I‘s investors. After obtaining the
biggest investor‘s support, Resurgence sought and obtained consents to the extension
from other Fund I investors.
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When soliciting and obtaining the consents, Resurgence represented that the
additional time was critical to maximizing the value of Sterling, which was Fund I‘s most
significant remaining investment:
Sterling will have approximately $150 million in cash, leaving it with no
net debt, a strong acetic acid business and an attractive footprint at its Texas
City site for future development. We believe that there is significant value
to the underutilized assets (including the real estate, deepwater port, rail and
access to the electrical grid and gas pipelines, chemical permits next to
large refineries and valuable NOX credits)
...
In summary, we believe the best way to maximize this value, which we
believe could be materially more than recent valuation levels, is to continue
to work on attracting a significant development opportunity to replace
businesses that we have closed at Sterling‘s valuable deep water dock and
adjoining gulf coast facility.
Compl. ¶ 24.
At its annual investor conference on September 10, 2008, Resurgence again
represented to its investors that Sterling had significant upside. Resurgence stated that
Sterling could be worth between $437.7 million and $1.037 billion with a projected 10-
20% ownership of a potential $2-4 billion project at the Texas City site. Resurgence also
stated that Sterling was negotiating with potential partners to develop the 160 acres of
excess land for a production process project.
In February 2009, Resurgence sought consents from Fund I‘s investors to extend
its life for another year, until March 16, 2010. Once again Resurgence emphasized
Sterling‘s potential to deliver value. Resurgence told investors that the ―development
potential of Sterling‘s assets remains substantial‖ and ―selling the Partnership‘s interests
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[in Sterling] in the current extremely depressed financial and economic environment
would result in a very unattractive price.‖ Compl. ¶ 26. Resurgence received the
necessary consents, but Fund I‘s partnership agreement forbade any further extensions.
With the second extension, the expiration of Fund I in March 2010 corresponded
with the expiration of two other Resurgence Funds: M.D. Sass Corporate Resurgence
Partners II, L.P. (―Fund II‖) and M.D. Sass Corporate International (the ―International
Fund‖). Fund II held approximately 9.4% of Sterling‘s equity; the International Fund held
approximately 5% of Sterling‘s equity. In total, Resurgence funds holding approximately
40% of Sterling‘s equity would dissolve in March 2010 and be forced to wind up.
C. Mid-2009: Resurgence Decides To Sell Sterling.
Until mid-2009, Resurgence focused on operating Sterling and developing the
Texas City site. Within Resurgence, the champion of this strategy was Byron Haney, the
portfolio manager with primary responsibility for the Sterling investment. Haney
believed sufficiently in Sterling‘s value that he turned down premium offers for Sterling.
In 2007, Gulf Hydrogen and Energy, LLC (―Gulf Hydrogen‖) offered approximately
$392 million to acquire Sterling. In February 2008, D.E. Shaw proposed a range of $300
to $350 million on behalf of an investor group that included Gulf Hydrogen. The
principal behind Gulf Hydrogen, Ken Berry, believed that Sterling rejected both offers
because Haney thought Resurgence could execute the acquirer‘s plans for Sterling and
capture the bulk of the resulting $1 billion in value for Resurgence.
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Then, in mid-2009, the hedge funds managed by Resurgence suffered significant
losses. Redemption requests poured in. Haney, who was the chief investment officer for
the hedge funds, abruptly left Resurgence.
Faced with a need for liquidity, Resurgence changed its plans. Despite having told
its investors in February 2009 that selling Sterling ―in the current extremely depressed
financial and economic environment would result in a very unattractive price,‖
Resurgence decided to sell. Sterling‘s CEO, defendant John V. Genova, understood that
the redemption demands and concomitant need for liquidity drove the decision.
Defendant Moelis & Company, LLC (―Moelis‖) pitched Sterling for the sell-side
work. Moelis understood the liquidity concerns driving the sale and was skeptical about
the timing for purposes of maximizing value. The Moelis pitchbook noted that
―resolution‖ of Resurgence‘s liquidity issues was ―the primary factor driving the timing
of a potential transaction involving Sterling‖ and that ―the current economic, financial
and chemical industry environment [was] not ideal for realizing the highest value.‖
Compl. ¶ 29. Moelis managing director David Faris expressed surprise that Resurgence
would explore a sale in 2009. He advised that it ―was not the ideal time [to sell] given
what was going on in the overall economy and what was going on in the chemical
industry specifically.‖ Id.
Sterling did not retain Moelis in 2009. Instead, Sterling hired Jefferies LLC
(―Jefferies‖). Jefferies contacted sixty-four potential buyers and made it clear that
Resurgence was looked for prices north of $250 million. Jefferies could not generate any
interest at that price.
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Despite Jefferies‘ failure to find a buyer for the Company at a price above $250
million, Resurgence still needed to sell. In pursuit of that goal, Sass recommended that
Sterling add defendant John L. Teeger to its board of directors (the ―Board‖). Teeger was
a close personal friend of Sass who played golf and tennis with him regularly. Teeger
joined the Board, increasing its size from six to seven. The other six directors, all of
whom are defendants, were:
● Philip M. Sivin, an employee of Resurgence and Sass‘ son-in-law;
● Karl W. Schwarzfeld, an employee of Resurgence;
● Daniel M. Fishbane, an employee of Resurgence;
● Genova, Sterling‘s CEO;
● Richard K. Crump, who appears at this stage to be an independent, outside
director; and
● John W. Gildea, who appears at this stage to be an independent, outside
director.
From the outset, Sass envisioned that Teeger would work to monetize
Resurgence‘s investment in Sterling. On July 10, 2010, Sass emailed Teeger, Siven,
Schwarzfeld, and Sterling‘s CFO about the need to sell the Company. He wrote: ―John
Teeger & I discussed the need for a strong focus on finding an acquirer to monetize
RAM‘s investment. John made the suggestion, which I support, of forming a Special
Committee for that purpose comprised of the 3 of you & John Genova and our new CFO .
. . .‖ Compl. ¶ 33. Teeger responded privately to Sass: ―Wow—you sure don‘t mess
around!‖ Id.
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Prompted by Sass‘ email, Sterling formed an informal M&A committee. On July
28, 2010, Schwarzfeld emailed Sass with an update after the committee‘s first meeting:
Phil [Sivin] and/or I are going to have a call with Genova tomorrow
(without his team who was on the phone today) to reiterate our priority
(cash today being priority #1, building in a meaningful way towards cash
tomorrow being priority #2) and refocus his demeanor in interacting with
this or future potential buyers (ie. ―I know you are at $100 to $150m, but
come out for a plant tour and we will show you why were are worth
substantially more‖ as opposed to ―You can come for a plant tour, but it is a
waste of time if the number is $100m‖).
Id. ¶ 35. Sass responded: ―I‘m glad you will continue to focus on priority #1.‖ Id.
On August 19, 2010, Schwarzfeld emailed Sass and Sivin, copying Teeger, with
an update on a subsequent committee meeting. Although the email discussed potential
alternatives Genova had identified to unlock the value of Sterling‘s underutilized assets,
none contemplated a sale of Sterling. Sass responded that Genova ―still isn‘t focused on
our top priority – selling Sterling Chemicals. Please send us a summary of his financial
incentives on a sale – did we not [provide] sufficient motivation for him?‖ Id. Teeger
reassured Sass that a sale was his first priority: ―The first choice is selling the company
and getting an exit—tough to do.‖ Id. Sass then reiterated his bottom line: ―Our largest
Resurgence PE fund has reached the end of its term and needs to monetize Sterling asap.‖
Compl. ¶ 36.
On September 7, 2010, Genova emailed Sivin and Schwarzfeld a letter of intent
from a potential acquirer, which Sivin forwarded to Sass. Sass asked him to ―share [it]
confidentially w/ John Teeger and provide his feedback prior to our meeting today[.]‖
Dkt. 66, Ex. 9. Sivin indicated that he and Schwarzfeld ―would like to discuss [the letter
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of intent] with [Sass] before sharing it with John.‖ Id. When Sass asked why, Sivin
replied, ―better to explain in our in person meeting but relates to different
constituencies/duties.‖ Id. Sass then made Teeger‘s role clear:
John [Teeger] is on our side and knows RAM‘s #1 priority is to sell the
company. he [sic] can help us in that process. i [sic] believe that blocking
him out or delaying information flow to him is wasting his expertise = he
know [sic] that I asked [him] to join the Board to help us make the best deal
we can for our Funds.
Id.
D. Eastman Expresses Interest.
In August 2010, Eastman approached Sterling about a supply agreement for
plasticizer, referred to in the industry as a tolling agreement. Eastman is a global specialty
chemical company and the world‘s largest manufacturer of non-phthalate plasticizer.
Eastman wanted access to Sterling‘s plasticizer manufacturing capacity to
capitalize on a shift in plasticizer demand. Due to regulatory issues and health concerns,
demand for phthalate plasticizers was declining. Eastman had developed a non-phthalate
plasticizer known as ―Eastman 168,‖ and Eastman saw an opportunity to capture market
share if it could bring a significant volume to market quickly. But Eastman had limited
production capacity, especially in North America, and Eastman needed additional
capacity to achieve its goals.
Eastman regarded Sterling‘s plasticizer manufacturing capacity at the Texas City
plant as a key asset. Eastman wanted either to get a tolling agreement in place or acquire
Sterling. In August 2010, the head of Eastman‘s plasticizer business explained Eastman‘s
position in an internal email to members of Eastman‘s M&A team:
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[W]e will need an additional North American plasticizer asset in order to
make an orderly transition over the next few years – in particular to deal
with the [Eastman 168] transition . . . . Our preferred position is Sterling
and [we have] been in discussions with Sterling to get a CDA in place to
allow tolling discussions to occur, but we believe we need to go ahead and
simultaneously begin an effort to acquire Sterling . . . . [A] number of
market issues are putting some urgency on our finding a 3rd plant option in
the near term if possible.
Compl. ¶ 39. A twenty-two page internal Eastman presentation from the same month
identified a tolling agreement or an acquisition as the options giving Eastman the highest
returns. The presentation singled out Sterling as a candidate.
On September 13, 2010, Gary McDermott, the head of Eastman‘s M&A team,
spoke with Schwarzfeld, one of the Resurgence employees on the Board, about whether
Resurgence would consider selling Sterling. Schwarzfeld reported on the conversation in
an email to Sass and Sivin.
Eastman is working with Sterling on a commercial opportunity around the
plasticizers business (upon the BASF termination). Gary [McDermott] was
interested in exploring if there was potentially more to do with Sterling then
[sic] just the commercial opportunity, but before doing his ―homework‖
wanted to get a sense of MDSass‘s receptiveness to such a situation. I told
Gary … ―it is a public company and we have a majority of the board of
directors …, but it is public information that we funded this company … in
2002. Obviously now that it is almost 2011, speaking generally, that is a
long time for a private equity owner to hold an investment.‖
Id. ¶ 41. At the pleading stage, the plaintiff is entitled to the reasonable inference that
when Schwarzfeld contrasted the investment funding year of 2002 with the then-current
year of 2011 and observed that ―speaking generally, that is a long time for a private
equity owner to hold an investment,‖ he was signaling specifically that Resurgence was
receptive to selling Sterling.
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On October 26, 2010, Eastman expressed interest in purchasing Sterling for $95-
$105 million. Genova described the offer to Schwarzfeld, who reported on the
conversation in an email to Sass, Sivin, and Teeger.
Genova believes Eastman is looking to expand its plasticizers business. We
have been in talks with them about Sterling tolling Plasticezers [sic] for
Eastman. There was a bit of a break through [sic] on that process last week,
and it turns out all are now very comfortable that the engineering for what
Eastman wants can be done, Sterling thinks they can get Eastman to sign a
long term agreement that gets Sterling $5m to $6m a year (covering fixed
costs that would otherwise get allocated to Acetic, with slight profit).
Genova suspects Eastman is looking at Sterling as opportunity to get that
Plasticezers [sic] deal cheap, plus ability to expand Plasticezers [sic], plus
location to serve as terminal for rest of Eastman North America business.
We need to discuss who and how we should respond.
Id. ¶ 47 (emphasis added). Despite Genova‘s belief that Eastman was looking to buy
Sterling ―cheap‖ as a way to obtain plasticizer capacity, Sass was more than intrigued. He
responded: ―We should definitely pursue discussion for sale to Eastman. I suggest John
[Teeger] work closely with one or more of you to move this along.‖ Id. Sivin agreed and
added, ―[W]e should try to get them up as much as possible and close it!‖ Id.
On October 29, 2010, Sass, Schwarzfeld, Sivin, and Teeger discussed potential
negotiating strategies. Sivin believed that because Eastman ―originally reached out to
RAM [] it should be us that negotiates it.‖ Dkt. 66, Ex. 10. Teeger observed that ―we will
definitely need a fairness opinion for protection, particularly as the Sterling common will
get very little compared with a public trading price of $7.‖ Id. Later that day, Sass asked
Genova to ―provide a call-in # & Draft Agenda to help us all coordinate, communicate &
cooperate in getting a deal done.‖ Id. Ex. 11.
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E. The Special Committee
On November 1, 2010, Eastman submitted a formal non-binding expression of
interest in acquiring Sterling. On November 5, the Board formed a special committee to
represent the interests of Sterling‘s minority stockholders (the ―Special Committee‖). The
Special Committee initially consisted of Teeger and Gildea. The minutes do not reflect
any discussion of Teeger‘s relationship with Sass.
On November 15, 2010, the Special Committee held its first meeting. The Special
Committee members retained counsel and discussed Teeger‘s relationship with Sass. On
November 17, the Special Committee met again and engaged in further discussion about
Teeger‘s relationship with Sass. They decided to recommend that the Board add a third
member to the Special Committee. On January 4, 2011, Crump joined the Special
Committee.
Meanwhile, Sass made sure that Resurgence would maintain its control over
Sterling until a sale could be completed. As noted, Fund I, Fund II, and the International
Fund dissolved when their terms expired in March 2010. In the resulting winding up
process, Sass could have caused the funds to distribute their Sterling shares in kind to
their investors. Had Resurgence done so, then Sass no longer would have controlled a
majority of Sterling‘s outstanding voting power.
Sass chose not to cause the funds to make an in-kind distribution. Instead, in
November 2010, the funds transferred their Sterling equity into newly formed Delaware
entities that would serve as liquidating vehicles. Sass continued to control the liquidating
vehicles, allowing him to maintain control over a supermajority of Sterling‘s voting
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power. The liquidating vehicles did not pay any management fees or incentive fees that
might have offset Sass‘ desire to sell Sterling quickly.
F. A Compromised Negotiation Process
The Complaint alleges that the Special Committee‘s negotiation process was
compromised at many levels. First, despite his close relationship with Sass, Teeger took
on an outsized role in the Special Committee‘s process. He served as Chair of the Special
Committee, acted as the lead negotiator with Eastman, and was the principal interface
with Resurgence. Although Crump and Gildea nominally served as members of the
Special Committee, they deferred to Teeger on all significant decisions and actions. The
Complaint provides detailed examples to support this characterization.
Second, the Complaint alleges that the Special Committee retained a financial
advisor whom Eastman promptly compromised with overtures about future work. On
January 7, 2011, Teeger asked Faris of Moelis to advise the Special Committee. Monit
Bhalla, a member of Eastman‘s M&A team and Eastman‘s lead negotiator on the Sterling
Transaction, learned from Eastman‘s investment banker that Sterling was reaching out to
Faris. On January 10, Bhalla contacted Faris and invited him to meet with Eastman to
discuss future work. Faris had not worked previously for Eastman. Faris accepted the
invitation, and on February 23, he met with the Eastman M&A team and discussed
potential opportunities. That same day, Faris and the Special Committee were finalizing
Moelis‘ fee arrangement for its representation of the Special Committee. On February 24,
the Special Committee formally retained Moelis. On February 28, after being officially
hired, Faris sent Bhalla an email reiterating his desire to work with Eastman in the future.
13
On March 3, Bhalla emailed an update to Eastman executives letting them know that
Faris had been hired and noting that he had met with Faris the week before. He reported
that he had just spoken to Faris, who understood that ―one of the things he needs to do is
bring some urgency to the situation.‖ Compl. ¶ 76.
Third, the Complaint alleges that Teeger and other sell-side fiduciaries
undermined Sterling‘s negotiating position by making clear to Eastman that Resurgence
wanted to sell. For example, On January 13, 2010, Teeger spoke with Eastman‘s lead
negotiators, Bhalla and McDermott. He told them that ―Sass was highly motivated to do a
deal‖ because ―[t]his investment is the last remaining in their 12 year old fund and that
they want to close it.‖ Id. ¶ 68.
Weeks later, defendant Walter Treybig, a Sterling employee, leaked detailed
information to Eastman about Resurgence‘s motivations to sell Sterling, the sale process,
Genova‘s desire to work for Eastman, and the likely sale price. An Eastman employee
reported the information to McDermott in an email dated February 15, 2011:
1. Walt Treybig is interested in working for Eastman. He can‘t retire and go
home and he likes the plant. I don‘t know that we have a place for him, but
his long term concern for his job may be a positive influence on the way he
is working for us.
2. Walt has little or no respect for Genova. He feels Genova is a control
freak and is only out for himself.
3. Walt isn‘t sure the exit package for Genova is sufficient for him to work
cooperatively with us.
4. At least one on the board recently chastised Genova for ―not working on
anything in the last two years except his own compensation.‖
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5. Walt said the investment owners of the company entered the project in
~2000 with a 10 year window, intending to exit the investment after that
time. They recently approved two one-year extensions to allow the
economy to recover so the sale price would be better. If Eastman doesn‘t
buy [Sterling], Walt feels someone will in the next couple of years due to
the investor‘s [sic] desire to get out of this investment. The current owners
didn‘t buy [Sterling] to own a chemical company long term.
6. If Genova becomes unwilling to negotiate, there are probably those in
ownership roles (beyond the board) that would like to discuss the purchase.
7. Walt mentioned there were 3 or 4 companies interested in running the
plasticizer unit . . . . There is no indication any of these are serious or
viable. Walt also indicated most of what they see interested in the property
are low cost bankers looking for quick money and very little idea of
running a chemical company long term.
8. Genova did not want us on-site on Wednesday. What I gather from Walt
is that there is a company coming in for a visit to look at some portion of
the plant (perhaps the plasticizer unit, but not sure) . . . . Walt also indicated
the other company was making an initial visit and had not proposed
anything yet. [Sterling] doesn‘t know if this visit will result in anything.
9. Walt indicated the preferred stock owners would receive payout before
common stock or stock option owners. Walt said the preferred stock owners
get the first $110M and he did not think the business would bring more than
that amount, so he (through stock options) would not see any of the sale
profits. This is just an insight into what Walt believed the value of the
company is currently.
These aren‘t discussion items for the entire group, but were shared at
various times during the day. I thought these might be of interest to you.
Id. ¶ 80.
From this leaked information, Eastman learned key facts that it used in its
negotiations with Sterling, including that Resurgence‘s investors wanted liquidity, that
Resurgence needed to sell, and that if Genova was not cooperative, others ―in ownership
roles (beyond the board)‖ would see the transaction through. Eastman also learned it had
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little competition because the other bidders were not strategic acquirers. Eastman even
understood that Resurgence did not expect to sell Sterling for more than the liquidation
preference on its preferred stock, or $110 million.
G. The Deal
On April 4, 2011, Teeger, Sivin, Faris, and another Moelis employee met with
Bhalla and Damon Warmack of Eastman. They tentatively agreed on a sale price for
Sterling of $100 million.
On May 24, 2011, the Special Committee authorized Moelis to conduct a market
check. Moelis sent a one-page teaser to eighteen potential buyers. The teaser did not
contain any financial information other than two numbers for Sterling‘s acetic acid plant.
Moelis made no meaningful attempt educate potential buyers about the value of the
Texas City site. Moelis also did not explore selling discrete assets to multiple buyers,
even though Moelis knew that many parties were interested in specific Sterling assets.
Despite the minimal information, two of the parties that Moelis contacted
expressed interest. Only nine of the eighteen that Moelis contacted said they had no
interest. Sterling also received expressions of interest from parties that Moelis had not
contacted. The Special Committee and Moelis told the interested parties to act quickly.
H. The Sterling Transaction
On June 17, 2011, Eastman received a call from the financial press about the
Sterling Transaction. Recognizing that word had leaked, Bhalla told Teeger that the deal
had to be signed and announced that weekend.
16
The Special Committee and Moelis were not prepared to meet that deadline.
Among other things, the Special Committee had yet to negotiate—and Moelis had yet to
evaluate—what portion of the merger consideration Sterling‘s minority stockholders
would receive. Just two days earlier, on June 15, 2011, Teeger had emailed Genova
saying, ―So far I have nothing from Moelis so I cannot yet sit down with ram.‖ Compl. ¶
103. At that time, Teeger was in Germany, and Gildea was in Belgium, making it
difficult to organize meetings. On Saturday, June 18, after receiving Bhalla‘s demand to
sign that weekend, Crump emailed Teeger and Gildea: ―Guys—I don‘t know what to
suggest to get this process under control, but we have a mess on our hands.‖ Id. ¶ 102.
Despite lacking any materials from Moelis, Teeger entered into discussions with
Resurgence. On Sunday, June 19, Teeger summarized the discussions for his colleagues
on the Special Committee:
This is to confirm that I held a meeting with Phil Sivin on June 8 and we
discussed the amount per share that the minority shareholders should
receive out of the proceeds of a sale of Sterling. We set out our current
thinking but did not reach a conclusion.
On June 16 I met with Phil Sivin and Karl Shwarztfeld [sic] and we
discussed further the amount per share that the minority shareholders in
Sterling should receive. I await the views of The [sic] spec comm and
Moelis before attempting to finalize the negotiation with RAM . . . As a
prelude to these views it is helpful to know that RAM considers that $1 per
share is the right amount.
Id. ¶104. There is obvious tension between Teeger‘s statement on June 15 that he could
not enter into discussions with Resurgence because he had not yet received materials
from Moelis and Teeger‘s claim on June 19 to have engaged in precisely those types of
discussions on June 8 and 18.
17
Teeger told Bhalla that Sterling would not be able to meet the Monday deadline.
Id. ¶105. Teeger finally received presentation materials from Moelis after 6 pm Eastern
time Monday, June 20, 2011, which was after midnight in Germany where Teeger was.
On Tuesday, June 21, 2011, Teeger sent the following email to the full Board,
including the directors affiliated with Resurgence:
Met last evening and went thru the Moelis presentation ending up with an
instreuction [sic] for me to speak to RAM
I spoke with Phil Sivin and we are negotiating a split of the proceeds of the
eastman [sic] transaction
Id. ¶107. Gildea responded, ―good show.‖ Id.
The negotiations must have concluded quickly. Later that day, Teeger sent the
Special Committee and Moelis a final update: ―Price is $2.50 per share.‖ Id. ¶ 108.
I. The Fairness Opinion
On June 21, 2011, Moelis provided the Special Committee with its opinion that
$2.50 per share was fair from a financial perspective to Sterling‘s minority stockholders.
The Complaint alleges that Moelis manipulated its supporting financial analysis to
undervalue Sterling and make the Sterling Transaction appear fair. Among other things,
Moelis used a discount rate of 18%, nearly double the discount rates used internally by
Sterling (10%) and Eastman (9.75%). Moelis also used an implied terminal multiple of
approximately 3x, even though comparables supported a range of 6.4x to 9.0x. Moelis
attributed no value to Sterling‘s plasticizer facility, which was the key asset Eastman was
buying.
18
The $100 million price that Moelis endorsed contrasted with other indications of
value. In December 2010, Genova prepared materials valuing Sterling between $129 and
$431 million, excluding the plasticizer facility and underutilized assets, and between
$314 and $616 million, including those assets. In March 2011, Genova valued Sterling at
$185 to $195 million, excluding the plasticizer facility and other underutilized assets. The
earlier Gulf Hydrogen bid had been $392 million, and the D.E. Shaw bid proposal was in
the range of $300 to $350 million.
J. The Sterling Transaction Closes
On June 22, 2011, Sterling entered into an agreement and plan of merger (the
―Merger Agreement‖ or ―MA‖) with Eastman and Eastman TC, Inc., a wholly owned
acquisition subsidiary (―Eastman Sub‖). The Merger Agreement called for Sterling to
merge with Eastman Sub and become a wholly owned subsidiary of Eastman (the
―Merger‖). Resurgence provided the necessary stockholder approval in the form of a
Written Consent and Voting Agreement, dated as of June 22, 2011 (the ―Written
Consent‖), that Sass executed. The minority stockholders did not vote on the Merger.
On July 19, 2011, Sterling sent an information statement to its stockholders
containing information about the Merger and notifying them of their statutory appraisal
rights. The Complaint alleges that the information statement contained materially false
and misleading statements and omissions. The Merger closed on August 9.
19
K. Procedural History
On October 19, 2011, plaintiff Virtus Capital L.P. (―Virtus‖) filed an appraisal
proceeding. In the appraisal action, Virtus obtained the discovery that forms the basis for
the Complaint‘s allegations. On June 20, 2014, Virtus filed this plenary action.
The Complaint contains seven counts:
● Count I alleges that Resurgence, as Sterling‘s controlling stockholder, breached its
fiduciary duties by causing Sterling to be sold to satisfy Resurgence‘s
idiosyncratic needs for liquidity, resulting in an unfair transaction at an unfair
price. The defendants comprising Resurgence for purposes of this claim are Sass,
the Resurgence Funds, the RAM Entities, and Sass Services.
● Count II advances the same basic theory against the members of the Board
affiliated with Resurgence.
● Count III alleges that that the members of the Special Committee breached their
fiduciary duties by facilitating and approving the Merger.
● Count IV alleges that Genova breached his fiduciary duties as both an officer and
a director by facilitating and approving the Merger.
● Count V alleges that Treybig breached his fiduciary duties as an officer by leaking
information to Eastman to serve his personal interests.
● Count VI alleges that Eastman and Eastman Sub aided and abetted the members of
the Board, Genova, and Treybig in their breaches of duty.
● Count VII alleges that Moelis aided and abetted Resurgence, the members of the
Board, and Treybig in their breaches of duty.
On August 28, 2014, Sass and the Sass Plan moved to dismiss the Complaint on the
grounds that this court lacked personal jurisdiction over them.
II. LEGAL ANALYSIS
A defendant may move to dismiss a complaint for lack of personal jurisdiction. Ct.
Ch. R. 12(b)(2). ―Generally, a plaintiff does not have the burden to plead in its complaint
facts establishing a court‘s personal jurisdiction over defendant.‖ Benerofe v. Cha, 1996
20
WL 535405, at *3 (Del. Ch. Sept. 12, 1996). However, ―[w]hen a defendant moves to
dismiss a complaint pursuant to Court of Chancery Rule 12(b)(2), the plaintiff bears the
burden of showing a basis for the court‘s exercise of jurisdiction over the defendant.‖
Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007). ―In ruling on a Rule 12(b)(2)
motion, the court may consider the pleadings, affidavits, and any discovery of record.‖ Id.
―If . . . no evidentiary hearing has been held, plaintiffs need only make a prima facie
showing of personal jurisdiction and the record is construed in the light most favorable to
the plaintiff.‖ Id. (footnotes and quotation marks omitted).
To analyze a Rule 12(b)(2) motion, a Delaware trial court applies a two-part test:
First, the court must determine whether Delaware‘s long arm statute, 10
Del. C. § 3104(c), is applicable. If so, the court must decide whether
subjecting the nonresident defendant to jurisdiction would violate due
process. Under settled law, a nonresident defendant must have sufficient
minimum contacts with the forum state such that the maintenance of the
suit does not offend traditional notions of fair play and substantial justice.
Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023, 1027 (Del. 2012) (internal quotation
marks and alterations omitted). See generally Donald J. Wolfe, Jr. & Michael A.
Pittenger, Corporate and Commercial Practice in the Delaware Court of Chancery §
3.02 (2013).
The Delaware Long-Arm Statute provides:
(c) As to a cause of action brought by any person arising from any of the
acts enumerated in this section, a court may exercise personal jurisdiction
over any nonresident, or a personal representative, who in person or
through an agent: (1) Transacts any business or performs any character of
work or service in the State . . . .
21
10 Del. C. § 3104(c)(1). ―[A] single transaction is sufficient to confer jurisdiction where
the claim is based on that transaction.‖ Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d
963, 978 (Del. Ch. 2000) (internal quotation marks and footnote omitted); accord
LaNuova D & B SpA v. Bowe Co., Inc., 513 A.2d 764, 768 (Del. 1986). Under the plain
language of the Long-Arm Statute, forum-directed activity can be accomplished ―through
an agent.‖ 10 Del. C. § 3104(c).
Section 3104(c) is to be ―broadly construed to confer jurisdiction to the maximum
extent possible under the Due Process Clause.‖ Hercules Inc. v. Leu Trust & Banking
(Bahamas) Ltd., 611 A.2d 476, 480 (Del. 1992); accord LaNuova, 513 A.2d at 768.
[T]rial courts must give a broad reading to the terms of the long-arm
statute[] in order to effectuate the statute‘s intent to ensure that this state‘s
court may exercise jurisdiction to the full limits permissible under the Due
Process Clause. In other words, the Supreme Court has instructed that trial
courts should permit service under § 3104 if the statutory language
plausibly permits service, and rely upon a Due Process analysis to screen
out uses of the statute that sweep too broadly.
Sample v. Morgan (Sample II), 935 A.2d 1046, 1056 (Del. Ch. 2007) (Strine, V.C.)
(footnotes omitted)
For purposes of the due process analysis, ―[t]he well-established point of departure
is that certain minimum contacts must exist between a State and a nonresident defendant
before that State can exercise personal jurisdiction over him.‖ Moore v. Little Giant
Indus., Inc., 513 F. Supp. 1043, 1048 (D. Del. 1981), aff’d, 681 F.2d 807 (3d Cir. 1982)
(internal quotation marks omitted). The question is whether the defendants had sufficient
minimum contacts with Delaware such that ―compelling [them] to defend [themselves] in
the State would be consistent with the traditional notions of fair play and substantial
22
justice[.]‖ Waters v. Deutz Corp., 479 A.2d 273, 276 (Del. 1984) (internal quotation
marks omitted).
The Delaware Supreme Court has adopted what is known as the conspiracy theory
of jurisdiction. Fläkt Woods, 56 A.3d at 1027. Under this theory,
a conspirator who is absent from the forum state is subject to the
jurisdiction of the court, assuming he is properly served under state law, if
the plaintiff can make a factual showing that: (1) a conspiracy to defraud
existed; (2) the defendant was a member of that conspiracy; (3) a
substantial act or substantial effect in furtherance of the conspiracy
occurred in the forum state; (4) the defendant knew or had reason to know
of the act in the forum state or that acts outside the forum state would have
an effect in the forum state; and (5) the act in, or effect on, the forum state
was a direct and foreseeable result of the conduct in furtherance of the
conspiracy.
Istituto Bancario Italiano SpA v. Hunter Eng’g Co., 449 A.2d 210, 225 (Del. 1982). The
theory ―is based on the legal principle that one conspirator‘s acts are attributable to the
other conspirators.‖ Fläkt Woods, 56 A.3d at 1027. Thus, ―if the purposeful act or acts of
one conspirator are of a nature and quality that would subject the actor to the jurisdiction
of the court, all of the conspirators are subject to the jurisdiction of the court.‖ Istituto
Bancario, 449 A.2d at 222.
Delaware decisions have not explained consistently how the conspiracy theory
corresponds to the two-prong jurisdictional test. See Wolfe & Pittenger, § 3.04[b], at 3-87
(describing approaches). In my view, the five elements of the Istituto Bancario test
functionally encompass both prongs of the jurisdictional test. The first three Istituto
Bancario elements address the statutory prong of the test. The fourth and fifth Istituto
Bancario elements address the constitutional prong of the test.
23
The first three Istituto Bancario elements encompass the statutory prong by
speaking to the requirements of the Delaware Long-Arm Statute. The third Istituto
Bancario element—whether a ―substantial act or substantial effect in furtherance of the
conspiracy occurred in the forum state‖—corresponds to the statutory requirement that
the defendant have transacted business or performed work in the State. The first and
second Istituto Bancario elements—the existence of a conspiracy and the defendant‘s
membership in it—provide grounds for imputing the jurisdiction-conferring act to the
defendant under agency principles, because ―conspirators are considered agents for
jurisdictional purposes.‖ Hercules, 611 A.2d at 481; accord Carlton Invs. v. TLC
Beatrice Int’l Hldgs., Inc., 1995 WL 694397, at *12 (Del. Ch. Nov. 21, 1995) (Allen, C.).
It remains true that the conspiracy theory itself is not an independent basis for jurisdiction
that alleviates the need to establish a statutory hook in Section 3104. Hercules, 611 A.2d
at 482 n.6. But the first, second, and third Istituto Bancario elements correspond
sufficiently with the requirements of Section 3104 such that satisfying the former
accomplishes the latter.
Analytical overlap is equally present for the constitutional prong. The fourth and
fifth Istituto Bancario elements—whether the defendant ―knew or had reason to know of‖
the forum-directed activity and the degree to which the forum-directed activity was ―a
direct and foreseeable result of the conduct in furtherance of the conspiracy‖—speak to
due process and whether there are sufficient minimum contacts between the defendant
and the forum such that the defendant could reasonably anticipate being sued there. See
Carlton Invs., 1995 WL 694397, at *12. ―[A] defendant who has so voluntarily
24
participated in a conspiracy with knowledge of its acts in or effects in the forum state can
be said to have purposefully availed himself of the privilege of conducting activities in
the forum state, thereby fairly invoking the benefits and burdens of its laws.‖ Istituto
Bancario, 449 A.2d at 225. The ―participation is a substantial contact with the
jurisdiction of a nature and quality that it is reasonable and fair to require the defendant to
come and defend an action there.‖ Id.; accord Hercules, 611 A.2d at 482 n.6 (explaining
that the conspiracy theory ―provides a framework with which to analyze a foreign
defendant‘s contacts with Delaware‖).
In my view, therefore, if a plaintiff can address satisfactorily all five elements of
the conspiracy theory, then the plaintiff will have met both prongs of the jurisdictional
test. This decision therefore uses the conspiracy theory as the framework for analysis.
A. Jurisdiction Over Sass
Under the conspiracy theory, acts taken in the State of Delaware in connection
with the Sterling Transaction can be attributed to Sass for purposes of Section 3104(c)(1),
and it is consistent with due process for the plaintiff to have sued him in Delaware in
connection with the Sterling Transaction. Sass‘ motion to dismiss is denied.
1. Sass’ Role In The Conspiracy
The first and second Istituto Bancario elements ask whether a conspiracy existed
and whether the defendant was a member of the conspiracy. 449 A.2d at 225. Although
Istituto Bancario literally speaks in terms of a ―conspiracy to defraud,‖ the principle is
25
not limited to that particular tort.1 ―[I]n cases involving the internal affairs of
corporations, aiding and abetting claims represent a context-specific application of civil
conspiracy law.‖ Allied Capital Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1038 (Del.
Ch. 2006); accord Weinberger v. Rio Grande Indus., Inc., 519 A.2d 116, 131 (Del. Ch.
1986). Sufficiently pleading a claim for breach of fiduciary duty and a related claim for
aiding and abetting a breach of fiduciary duty satisfies the first and second elements of
the Istituto Bancario test. Benihana of Tokyo, Inc. v. Benihana, Inc., 2005 WL 583828, at
*7 (Del. Ch. Feb. 4, 2005); Crescent/Mach I, 846 A.2d at 977.
The Complaint adequately pleads that Sass and his fellow-fiduciary defendants
breached their duty of loyalty in connection with the Sterling Transaction and that the
non-fiduciary defendants aided and abetted the breach. The Complaint goes beyond
alleging that Sass was a part of the conspiracy; it alleges that he was the top dog and ring
leader. According to the Complaint, Sass used his control over the Resurgence Funds,
RAM Entities, and Sass Services to sell Sterling on the cheap. He caused Sterling to be
sold at a fire-sale price because Resurgence needed liquidity. The Complaint does not
advance these claims in conclusory fashion, nor does it rely on generic statements about
the market pressures that confront fund managers or the consequences of limited-term
1
See id. at 222-25 (describing underlying theory without fraud-based limitation);
Carsanaro v. Bloodhound Techs., Inc., 65 A.3d 618, 635-36 (Del. Ch. 2013) (noting that
theory encompasses claims of breach of fiduciary duty and aiding and abetting);
Hamilton P’rs v. Englard, 11 A.3d 1180, 1197 (Del. Ch. 2010) (same); Crescent/Mach I,
846 A.2d at 977 (rejecting construction of Istituto Bancario that would require a ―specific
allegation that [the defendants] agreed to conspire ‗to defraud‘ minority stockholders‖).
26
funds and short investment horizons. The Complaint describes the losses, redemption
requests, and fund expirations that squeezed Resurgence, and it quotes from myriad
emails between Sass, Teeger, Sivin, and Schwarzfeld in which they discussed, among
other things, the ―need for a strong focus on finding an acquirer to monetize RAM‘s
investment‖ and their desire to ―monetize Sterling asap.‖ Compl. ¶¶ 33, 36; see also id.
¶¶ 35, 47-48. The Complaint also cites actions that Sass took to further his desire for
liquidity, such as causing Teeger to join the Board and take charge of the sale process,
and ensuring that Genova was focused on a near-term sale and incentivized to pursue
one.
For his part, Sass argues that ―[t]he emails attributed to [him] are not directed to
anyone in Delaware.‖ Sass Br. at 15. True, but irrelevant. The emails themselves do not
have to be the Delaware-directed acts. The emails support the existence of the conspiracy
and Sass‘ role in it, satisfying the first and second elements of the Istituto Bancario test.
2. The Forum-Related Acts
The third Istituto Bancario element asks whether ―a substantial act or substantial
effect in furtherance of the conspiracy occurred in the forum state.‖ 449 A.2d at 225.
Forming a Delaware entity to facilitate a challenged transaction satisfies this element.2 So
2
E.g., Papendick v. Robert Bosch GmbH, 410 A.2d 148, 152 (Del. 1979); Reid v.
Siniscalchi, 2014 WL 6589342, at *10 (Del. Ch. Nov. 20, 2014); Microsoft Corp. v.
Amphus, Inc., 2013 WL 5899003, at *9 (Del. Ch. Oct. 31, 2013); Conn. Gen. Life Ins.
Co. v. Pinkas, 2011 WL 5222796, at *2 (Del. Ch. Oct. 28, 2011); Cairns v. Gelmon, 1998
WL 276226, at *3 (Del. Ch. May 21, 1998). See generally Wolfe & Pittenger, supra, §
3.04[c][3], at 3-103 (―in suits in which the incorporation of a Delaware subsidiary is an
integral component of the conduct giving rise to the cause of action, the Delaware courts
27
does filing a corporate instrument in Delaware in connection with the challenged
transaction.3
The Complaint identifies two instances of Delaware-related activities, each
independently sufficient to satisfy the third Istituto Bancario element and provide the
statutory prerequisite for jurisdiction under Section 3104(c)(1). The first instance of
Delaware-related activity was the formation of the Delaware entities to serve as
liquidating vehicles. ―When done as an integral part of a wrongful scheme, the formation
of a Delaware entity confers personal jurisdiction under the long-arm statute.‖ Reid, 2014
WL 6589342, at *10. The Complaint alleges that Sass caused the liquidating vehicles to
be formed in November 2010, after Resurgence had suffered significant losses and
redemption requests, after Sass had discussed with Teeger the importance of monetizing
Sterling to meet Resurgence‘s liquidity needs, after Teeger joined the Board, and after a
monetization strategy was put in motion.
have consistently recognized that a nonresident defendant‘s incorporation of such
subsidiary constitutes constitutionally sufficient ‗minimum contacts‘ with Delaware.‖ ).
3
E.g., Fläkt Woods, 56 A.3d at 1027 (certificate of cancellation); Carsanaro, 65
A.3d at 635 (various certificates required by DGCL for challenged transactions, including
certificates of amendment, certificates of designation, certificates of correction, and
certificate of cancellation); Benihana, 2005 WL 583828, at *8 (certificate of
designations); Gibralt Capital Corp. v. Smith, 2001 WL 647837, at *6 (Del. Ch. May 9,
2001) (certificate of designations); Crescent/Mach I, 846 A.2d at 977 (certificate of
merger). See generally R. Franklin Balotti & Jesse A. Finkelstein, The Delaware Law of
Corporations and Business Organizations § 13.4[B], at 13-13 (3 ed. 2014) (―[t]he filing
of corporate instruments with the Delaware Secretary of State may also constitute an
action in Delaware sufficient to support jurisdiction‖).
28
Sass has argued that any connection between the formation of the liquidating
vehicles and the Sterling Transaction is too attenuated to support jurisdiction. At the
pleadings stage, the plaintiff receives the benefit of the reasonable inference that Sass
used the liquidating vehicles to maintain control of Sterling as part of his efforts to obtain
liquidity for Resurgence. Sass did not have to create the liquidating vehicles; Fund I,
Fund II, and the International Fund could have distributed their Sterling holdings to their
investors. But if Sass had chosen that route, then he would have given up his control over
a majority of Sterling‘s outstanding voting power and could not have caused the various
Resurgence entities to approve the Sterling Transaction through action by written
consent. The Complaint sufficiently alleges that forming the liquidating vehicles was an
integral part of the process that led to the Sterling Transaction.
The second instance of Delaware-related activity was the filing of the certificate of
merger for the Sterling Transaction with the Delaware Secretary of State. Eastman
formed Eastman Sub as a Delaware-sitused acquisition vehicle. The parties took
advantage of Delaware law by agreeing to merge Sterling with Eastman Sub, with
Sterling emerging as a wholly owned subsidiary of Eastman. The filing of the certificate
of merger in Delaware consummated the transaction.
As to the certificate, Sass argues that because Eastman actually filed it, and
because Eastman was the acquirer on the opposite side of the deal from Sass, the filing
cannot be attributed to Sass for jurisdictional purposes. The Delaware Supreme Court has
held on at least three occasions that ―one conspirator‘s acts are attributable to the other
conspirators.‖ Fläkt Woods, 56 A.3d at 1027; accord Hercules, 611 A.2d at 481; Istituto
29
Bancario, 449 A.2d at 222. The filing of the certificate of merger is therefore attributable
to Sass.
3. Knowledge Of The Forum-Related Acts
The fourth and fifth Istituto Bancario elements evaluate whether ―the defendant
knew or had reason to know of the act in the forum state‖ and the degree to which ―the
act in . . . the forum state was a direct and foreseeable result of the conduct in furtherance
of the conspiracy.‖ 449 A.2d at 225. In substance, these elements require allegations
―from which one can infer that a foreign defendant knew or should have known that the
conspiracy would have a Delaware nexus.‖ Fläkt Woods, 56 A.3d at 1024. Actual
knowledge is not required; ―the applicable standard is whether the foreign [defendant]
knew or should have known [about the] activity in Delaware.‖ Id.
At the current procedural stage, it is readily inferable that Sass knew or should
have known that the Sterling Transaction had a Delaware nexus. Sterling was a Delaware
corporation, and the Merger Agreement called for Sterling would merge with another
Delaware corporation. Sass signed the Written Consent to satisfy the stockholder
approval requirement for the Sterling Transaction. Sass thus personally provided the
stockholder approval that was necessary for the Sterling Transaction to close and for the
certificate of merger to be filed with the Delaware Secretary of State.
This court‘s exercise of personal jurisdiction over Sass comports with due process.
See Istituto Bancario, 449 A.2d at 225. Sass is no neophyte. Since 1972, he has formed
over seventy entities in Delaware, fifty-six of which bear his name. As the financially
sophisticated principal of an investment fund complex, he certainly should have
30
anticipated that his orchestration of a merger involving a Delaware entity that he
controlled, including the formation of Delaware liquidating vehicles to preserve his
control, could render him subject to the jurisdiction of the Delaware courts for purposes
of challenges to the transaction. Having engaged in conduct that involved the formation
of Delaware entities, the use of Delaware law, and the filing of a certificate of merger
with the Delaware Secretary of State to accomplish his purposes, Sass should have
―reasonably anticipated . . . that his . . . actions might result in the forum state asserting
personal jurisdiction over him in order to adjudicate disputes arising from those actions.‖
In re USACafes, L.P. Litig., 600 A.2d 43, 50-51 (Del. Ch. 1991) (Allen, C.).
―Sophisticated investors should reasonably expect to face suit in Delaware when they
place their employees or principals on the board of directors of a Delaware corporation,
then allegedly use those representatives to channel benefits to themselves through . . .
transactions that require acts in Delaware for their implementation.‖ Carsanaro, 65 A.3d
at 636.
4. The Corporate Veil As A Jurisdictional Defense
Sass alternatively argues that because he only acted through other entities, such as
Sass Services, he cannot be subject to personal jurisdiction in Delaware for a breach of
fiduciary duty claim, because to do so would disregard the separate existence of his
entities. Sass equates this result to piercing the corporate veil, and he contends that the
Complaint does not contain allegations sufficient for piercing. This contention is really an
argument that the Complaint fails to state a claim against Sass personally, but it is dressed
in jurisdictional garb. The argument fails because it tries to deploy principles of corporate
31
separateness that govern claims brought by third parties as a shield against fiduciary
accountability.
The doctrine of piercing the corporate veil enables contract creditors to reach the
assets of the owners of an entity if they can meet a multi-factor test. The doctrine is also
available to tort claimants.4 The doctrine traditionally has not been applied to claims for
breach of fiduciary duty brought by stockholders against the human actors who control
their corporation. To the contrary, a cause of action against the actual humans is a
centerpiece of corporate law. Delaware law endows the board of directors with the
authority and concomitant duty to manage a Delaware corporation. See 8 Del. C. §
141(a). The directors of a Delaware corporation must be natural persons. See 8 Del. C. §
141(d). Those individuals owe fiduciary duties of loyalty and care to the corporation,
which require that the directors exercise their managerial authority on an informed basis
in the good faith pursuit of maximizing the value of the corporation for the benefit of its
residual claimants, viz., the stockholders.5 When stockholders contend that the directors
4
See Feeley v. NHAOCG, LLC, 62 A.3d 649, 667 (Del. Ch. 2012); Robert B.
Thompson, The Limits of Liability in the New Limited Liability Entities, 32 Wake Forest
L. Rev. 1, 9-12 (1997); see also Robert B. Thompson, Piercing the Corporate Veil: An
Empirical Study, 76 Cornell L. Rev. 1036, 1058 (1991) (reviewing statistical occurrence
of piercing cases based on an underlying tort).
5
See N. Am. Catholic Educ. Programming Found., Inc. v. Gheewalla, 930 A.2d
92, 101 (Del. 2007) (―The directors of Delaware corporations have ‗the legal
responsibility to manage the business of a corporation for the benefit of its shareholder[]
owners.‘‖ (quoting Malone v. Brincat, 722 A.2d 5, 9 (Del. 1998))); Unocal Corp. v. Mesa
Petroleum Co., 493 A.2d 946, 955 (Del. 1985) (citing ―the basic principle that corporate
directors have a fiduciary duty to act in the best interests of the corporation‘s
stockholders‖); eBay Domestic Hldgs., Inc. v. Newmark, 16 A.3d 1, 34 (Del. Ch. 2010)
32
breached their fiduciary duties, they can assert a cause of action (directly or derivatively)
against natural persons without having to seek to pierce the corporate veil.
Breach of fiduciary duty is an equitable claim, and it is a maxim of equity that
―equity regards substance rather than form.‖ Monroe Park v. Metro. Life Ins. Co., 457
A.2d 734, 737 (Del. 1983); accord Gatz v. Ponsoldt, 925 A.2d 1265, 1280 (Del. 2007)
(explaining that directors have a fiduciary duty ―to promote the value of the corporation
for the benefit of its stockholders‖); see also Leo E. Strine, Jr., Our Continuing Struggle
with the Idea that For-Profit Corporations Seek Profit, 47 Wake Forest L. Rev. 135, 147
n.34 (2012) (―[S]tockholders‘ best interest must always, within legal limits, be the end.
Other [corporate] constituencies may be considered only instrumentally to advance that
end.‖); Leo E. Strine, Jr. et al., Loyalty’s Core Demand: The Defining Role of Good Faith
in Corporation Law, 98 Geo. L.J. 629, 634 (2010) (―[I]t is essential that directors take
their responsibilities seriously by actually trying to manage the corporation in a manner
advantageous to the stockholders.‖).
The fiduciary obligation to maximize the value of the corporation for the benefit
of its stockholders does not mean that directors must sacrifice greater value that can be
achieved over the long term in pursuit of short-term strategies, and it certainly does not
mean that directors must attempt to maximize the a public company‘s stock price on a
daily or quarterly basis. The fiduciary relationship requires that directors act prudently,
loyally, and in good faith to maximize the corporation‘s value over the long-term for its
stockholders‘ benefit. See, e.g., Gantler v. Stephens, 965 A.2d 695, 706 (Del. 2009)
(holding that ―enhancing the corporation‘s long term share value‖ is a ―distinctively
corporate concern[]‖); TW Servs., Inc. v. SWT Acq. Corp., 1989 WL 20290, at *7 (Del.
Ch. Mar. 2, 1989) (Allen, C.) (describing as ―non-controversial‖ the proposition that ―the
interests of the shareholders as a class are seen as congruent with those of the corporation
in the long run‖ and explaining that ―[t]hus, broadly, directors may be said to owe a duty
to shareholders as a class to manage the corporation within the law, with due care and in
a way intended to maximize the long run interests of shareholders‖); see also Andrew A.
Schwartz, The Perpetual Corporation, 80 Geo. Wash. L. Rev. 764, 777-83 (2012)
(arguing that the corporate attribute of perpetual existence calls for a fiduciary mandate
of long-term value maximization for the stockholders‘ benefit); William T. Allen,
Ambiguity in Corporation Law, 22 Del. J. Corp. L. 894, 896-97 (1997) (―[I]t can be seen
that the proper orientation of corporation law is the protection of long-term value of
capital committed indefinitely to the firm.‖).
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(―It is the very nature of equity to look beyond form to the substance of an
arrangement.‖). Courts applying equitable principles therefore have had little difficulty
extending liability for breach of fiduciary duty beyond the natural persons who served as
directors to outsiders like majority stockholders who effectively controlled the
corporation. See, e.g., S. Pac. Co. v. Bogert, 250 U.S. 483, 488 (1919); Sterling v.
Mayflower Hotel Corp., 93 A.2d 107, 298 (Del. 1952). Delaware corporate decisions
consistently have looked to who wields control in substance and have imposed the risk of
fiduciary liability on the actual controllers.6
6
See Kahn v. Lynch Commc’n Sys. Inc., 638 A.2d 1110, 1114 (Del. 1994)
(holding that 43% stockholder that exercised actual control over subsidiary could be
liable for breach of fiduciary duty); Sterling, 93 A.2d at 109-10 (citing ―the settled rule of
law that Hilton as majority stockholder of Mayflower and the Hilton directors as its
nominees occupy, in relation to the minority, a fiduciary position in dealing with
Mayflower‘s property‖); Keenan v. Eshleman, 2 A.2d 904, 908 (Del. 1938) (affirming
imposition of liability on directors for management fees paid by corporation to second
corporation that was its controlling stockholder, where directors also controlled the
controlling stockholder: ―The conception of corporate entity is not a thing so opaque that
it cannot be seen through; and, viewing the transaction as one between corporations,
casual scrutiny reveals that the appellants, in fact, dealt with themselves to their own
advantage and enrichment. The employment of Consolidated by Sanitary was merely the
employment by the appellants of themselves to do what it was their plain duty to do as
officers of Sanitary.‖); Shandler v. DLJ Merch. Banking, Inc., 2010 WL 2929654, at *15
(Del. Ch. July 26, 2010) (Strine, V.C.) (―Fairly read, the complaint alleges that DLJ, Inc.
presided over a family of entities that it dominated and controlled, including the entities
that together owned 74% of Insilco‘s equity. Using their unified power in a concerted
way, DLJ controlled Insilco and directed its business strategy, including causing it to
employ the DLJ Advisors . . . . I believe that Shandler has pled sufficient facts from
which it can be inferred that the DLJ Funds were instrumentalities operated for the
benefit of DLJ, Inc. and DLJMB.‖); In re Primedia, Inc. Deriv. Litig., 910 A.2d 248, 258
n.26 (Del. Ch. 2006) (holding that private equity firm could owe fiduciary duties to non-
controlling stockholders when firm controlled corporation through intervening entities);
Allied Chem. & Dye Corp. v. Steel & Tube Co., 120 A. 486, 491 (Del. Ch. 1923) (―When,
in the conduct of the corporate business, a majority of the voting power . . . join hands in
34
Sass wields control in substance, and Sterling‘s stockholders can sue him
personally for breach of fiduciary duty because he was the controller and ultimate
fiduciary of Sterling. The Complaint states a claim for breach of fiduciary duty against
Sass; the question raised by his Rule 12(b)(2) motion is whether he could be sued in
Delaware, or whether he only could be sued in California, where he resides. As discussed
in the preceding section, jurisdiction-conferring acts in the State of Delaware are
attributable to Sass, and it is fair as a matter of due process to hale him into this court.
In arguing that the entities he controls should screen him from being subject to
personal jurisdiction in this court, Sass relies on Ruggiero v. FuturaGene, plc, 948 A.2d
1124 (Del. Ch. 2008). In that decision, an English corporation (FuturaGene) used a
Delaware acquisition vehicle to acquire an Indiana corporation through a reverse-
triangular merger. The separate existence of the Delaware acquisition vehicle ceased as a
result of the merger, leaving the Indiana target as a wholly owned subsidiary of
FuturaGene. Id. at 1129. As merger consideration, the former stockholders of the Indiana
target received shares representing approximately 30% of FutureGene‘s voting power, as
well as the right to additional shares in the form of earn-out payments. Id. at 1129-30.
imposing its policy upon all, it is beyond all reason . . . to take any view other than that
they are to be regarded as having placed upon themselves the same sort of fiduciary
character which the law impresses upon the directors in their relation to all the
stockholders.‖); Martin v. D.B. Martin Co., 88 A. 612, 615 (Del. Ch. 1913) (―For the
protection of the rights of stockholders of the dominant, or parent company, and for
righting of wrongs done them by means of the control of the dominant, or parent,
company . . . the latter are to be treated as agents of the former, or even as identical with
each other.‖).
35
Litigation ensued over the earn-out, and the former stockholders of the Indiana target,
now stockholders of FuturaGene, asserted claims for breach of contract and breach of
fiduciary duty against FuturaGene and its directors.
FuturaGene had consented in the merger agreement to jurisdiction in the Court of
Chancery. The directors of FuturaGene were not parties to that agreement, and the
decision held that they were not bound by the forum selection provision. Id. at 1132. The
court also held that as directors of an English corporation, the individual defendants were
not subject to jurisdiction under Delaware‘s director-consent statute, 10 Del. C. § 3114.
Nor had they taken any action during their transitory tenure as directors of the Delaware
acquisition subsidiary that would support jurisdiction under Section 3114. Ruggiero, 948
A.2d at 1134.
This left Section 3104(c)(1) and the creation of the Delaware acquisition
subsidiary as the only potential jurisdictional hook. That theory failed for two reasons.
For one, the creation of the Delaware acquisition subsidiary did not provide the basis for
the plaintiffs‘ claims, which alleged post-closing breaches of contractual and fiduciary
duty that led to the failure to issue earn-out shares. For another, the plaintiffs had not
alleged any facts suggesting that the individual defendants took action other than as
directors of a foreign corporation. As the court explained,
a corporate director or officer of a foreign corporation cannot be haled into
a Delaware court for an act of the corporation simply because the officer or
director has directed the corporation to take that act . . . . Rather, the
corporate officer or director must be shown to have substantial contacts in
Delaware or with a nexus to Delaware having a clear relationship to the
cause of action.
36
Ruggiero, 948 A.2d at 1134. Alternatively, the plaintiffs would have had to show that
FuturaGene functioned as the directors‘ agent so that Section 3104(c)‘s language about
―action through an agent‖ would apply. Id. at 1134-35. The complaint in Ruggiero did
neither.
Notably, the Ruggiero decision did not involve claims for breach of fiduciary duty
brought by stockholders of a Delaware corporation against its controller. The principal
claims in Ruggiero were breach of contract claims, where piercing doctrine ordinary
applies, and the fiduciary duty claims recast the breach of contract claims in fiduciary
guise. Nor did the decision in Ruggiero suggest a degree of involvement comparable to
Sass‘ role in the Sterling Transaction.
Other Delaware decisions support the existence of personal jurisdiction over an
individual defendant for purposes of breach of fiduciary duty claims involving a
Delaware corporation where the individual was alleged to have been involved actively in
the transactions that resulted in jurisdiction-conferring acts taking place in the State of
Delaware. For example, in Microsoft Corp. v. Amphus, Inc., 2013 WL 5899003 (Del. Ch.
Oct. 31, 2013), this court exercised personal jurisdiction over an individual defendant
based on his involvement in the creation of a Delaware subsidiary, despite the
defendant‘s argument that he acted only as an officer and director of the foreign parent
that technically formed the Delaware subsidiary. Distinguishing Ruggiero and similar
cases, the court explained its reasoning as follows:
Fung did not merely vote, as a director of Vadem BVI [the foreign parent
entity], to approve the formation of Amphus [the Delaware entity]. Fung
proposed the creation of Amphus to the [parent] Board. He further
37
proposed that he would be a founder, director, and the CEO of Amphus and
also would have a twenty percent stake in the new entity, thereby nearly
tripling his personal interest in the Vadem Patents. Furthermore, the
Complaint contains allegations sufficient to make a prima facie showing
that Fung made his proposal to the Vadem Board for the purpose of
securing the future benefits of the Vadem Patents for himself at an unfair
price, and that Fung deliberately misled the Vadem Board to achieve that
goal. In sum, Microsoft has alleged that Fung purposefully harmed Vadem
BVI and purposefully availed himself of the laws of Delaware by choosing
to induce Vadem BVI to create a Delaware entity that Fung could use to
facilitate his wrongdoing. Under the facts alleged in this case, therefore,
Fung‘s conduct went beyond mere approval of the creation of Amphus as a
director of Vadem BVI to his orchestrating that action and subsequently
using Amphus to facilitate his wrongful scheme. Accordingly, I find that
Fung is subject to personal jurisdiction in Delaware under 10 Del. C. §
3104(c)(1) and that the exercise of jurisdiction over him under that statute
comports with Due Process.
Id. at *10. The court declined to exercise personal jurisdiction over a second director who
had not played a similarly meaningful role. As to that director, the complaint ―lack[ed]
any suggestion that [he] had the ability to control the Vadem BVI Board or was aware of
Fung‘s alleged scheme.‖ Id. The complaint therefore did not provide any basis to hold
him accountable in Delaware for his actions as a director of a foreign corporation. Id.
Another example is Sample v. Morgan. That litigation involved a transaction in
which the directors of a Delaware corporation issued shares representing nearly one third
of the corporation‘s equity capitalization to its three top managers, who also composed a
majority of the five-member board. To facilitate the issuance, the board recommended
and sought stockholder approval of an amendment to the corporation‘s certificate of
incorporation that reduced the par value of the shares, enabling the top managers to pay
$200 for the equity instead of $200,000. After the stockholders approved the amendment,
the corporation filed a certificate of amendment with the Delaware Secretary of State. In
38
a decision addressing a motion to dismiss the complaint for failure to state a claim on
which relief could be granted, then-Vice Chancellor, now Chief Justice Strine held that
the complaint pled facts supporting the inference that ―the [Certificate] Amendment and
the Equity Incentive Plan resulted from a conscious scheme of entrenchment and personal
self-enrichment by the [three top managers], facilitated by the advice of [the lawyer],
which was purposely concealed from the [corporation‘s] stockholders when they were
asked to vote on the Amendment and the Plan.‖ Sample v. Morgan (Sample I), 914 A.2d
647, 675 (Del. Ch. 2007).
After the dismissal ruling, the plaintiff sought to amend the complaint to add a
claim for aiding and abetting breaches of fiduciary duty against the lawyer and his firm.
They challenged the court‘s ability to exercise personal jurisdiction over them, resulting
in a second decision from Chief Justice Strine. See Sample II, 935 A.2d at 1055. Like
Sass, they argued that the filing of the certificate of amendment was the act of the
corporation and could not be attributed to them for purposes of Section 3104(c)(1). Chief
Justice Strine framed their contention as follows:
In its broadest form, a form that the moving defendants did not shy from
advancing, the moving defendants posit that the filing of a charter
amendment or other key corporate instrument with the Secretary of State in
Delaware may never form the basis for serving a party sued . . . in
Delaware. Why? Because such documents are formally filed by the
corporation itself and thus respect for the corporation‘s separate legal
identity requires that the individuals who caused the corporation to make
the filings cannot be held personally accountable for those filings for
purposes of § 3104.
Id. at 1058-59.
Chief Justice Strine dismantled this argument:
39
One can sleep soundly at night confident that rejection of this argument is
not at odds with either logic or sound public policy. When a claim for
breach of fiduciary duty is at issue, the underlying conduct almost always
involves formal action of the corporation itself. After all, the very essence
of a breach of corporate law fiduciary duty claim is the misuse of corporate
control. For example, an unfair squeeze out merger by a controlling
stockholder quintessentially involves the corporation entering into a merger
agreement . . . . That is, claims of fiduciary duty ultimately rest on the
proposition that a corporate fiduciary has caused the corporation to do
something at odds with its own best interests, typically so that the fiduciary
could secure an improper personal benefit . . . .
Although there are sound public policy reasons for limiting the ability of
contract and tort claimants to file certain claims against corporate officers
and directors for conduct of the corporation itself, those reasons have little
to do with this case or other cases involving the internal affairs of
corporations. When well-pled facts support the inference that a person
caused a corporation to take jurisdictionally-significant conduct in
Delaware and that conduct is an element in a scheme by corporate
fiduciaries to unfairly advantage themselves at the expense of a Delaware
corporation and its stockholders, our case law has consistently held that the
long-arm statute may be used to serve that person. It would be surprising
were it otherwise, because a contrary ruling would turn the very essence of
faithless conduct—the abuse of corporate power—into an immunity from
accountability, precisely because the disloyal fiduciaries derived their
wrongful gains from actions of the corporation itself, albeit corporate
actions that their own conduct brought about. Such an accountability-
destroying reading of the long-arm statute would itself be entirely disloyal
to the statute‘s purpose, as articulated by our Supreme Court . . . .
Id. at 1059-60 (footnotes omitted).
The Chief Justice‘s reasoning in Sample II applies to Sass. The Complaint
challenges Sass‘ alleged misuse of corporate power in causing Sterling to enter into a
merger agreement that allowed Eastman to acquire the Company at an unfair price. The
Complaint rests on the proposition that Sass caused Sterling to do something at odds with
its own best interests and the best interests of its stockholders so that Sass could secure an
improper personal benefit in the form of the liquidity that Resurgence desperately
40
needed. In contrast to a case involving contractual counterparties or third party tort
claimants, there is no basis to interpose an entity veil in a matter involving the
corporation‘s internal affairs. The well-pled facts of the Complaint support the inference
that jurisdictionally significant conduct occurred in Delaware as part of a scheme by
corporate fiduciaries to advantage themselves at the expense of a Delaware corporation
and its stockholders. Under those circumstances, ―our case law has consistently held that
the long-arm statute may be used to serve that person.‖ Id. at 1060.
As in the Microsoft and Sample II decisions, Sass is subject to personal
jurisdiction in Delaware. His motion to dismiss is denied.
B. Jurisdiction Over The Sass Plan
The Sass Plan‘s motion to dismiss for lack of personal jurisdiction is also denied.
The analysis of the Istituto Bancario elements is the same as for Sass, with the Sass Plan
contesting only the second element, whether the Sass Plan ―was a member of that
conspiracy,‖ and the fourth element, whether the Sass Plan ―knew or had reason to know
of the act in the forum state or that acts outside the forum state would have an effect in
the forum state.‖ 449 A.2d at 225.
As to the second element, the Sass Plan is properly considered a member of the
conspiracy because Sass himself, a co-conspirator, controlled the Sass Plan. Sass signed a
written consent on the Sass Plan‘s behalf as its trustee.
As to the fourth element, Sass‘ knowledge of the Sterling Transaction is fairly
imputed to the Sass Plan. See, e.g., Triton Const. Co. v. E. Shore Elec. Servs., Inc., 2009
WL 1387115, at *16 (Del. Ch. May 18, 2009) (imputing knowledge of individual
41
controlling corporation to entity), aff’d, 988 A.2d 938 (Del. 2010); Teachers’ Ret. Sys. of
La. v. Aidinoff, 900 A.2d 654, 671 (Del. Ch. 2006) (same). The attribution of Sass‘
knowledge to the Sass Plan and Sass‘ use of the Sass Plan to effectuate the Sterling
Transaction gives the Sass Plan a sufficient connection with Delaware to make it
amenable to suit here.
III. CONCLUSION
This court can exercise personal jurisdiction over Sass and the Sass Plan for the
purpose of the claims set forth in the Complaint. The Rule 12(b)(2) motions are denied.
42