Allergy Research Group, LLC v. Nutritional Therapeutics, Inc.
N21C-10-073 FJJ
| Del. Super. Ct. | Apr 25, 2022Background
- In 2014 ARG agreed to buy NTI in phased closings under a Stock Purchase Agreement (SPA); final closing required an independent business valuation.
- ARG became controlling, advanced $300,000 (2015) and $80,000 (2016) to NTI; those advances were later reflected as loans/notes.
- The Mentor Group valued NTI at $7,657,000, producing a final purchase price for remaining shares of about $2.986 million; ARG refused to close.
- Parties negotiated a buyback/termination in 2020; ARG required execution of a Second Amended Note, a personal guaranty, and an Agreement to Terminate SPA obligations.
- Defendants (NTI and Casey) allege ARG/Salomon falsely represented that prior notes existed and that Salomon was leaving, inducing Casey to sign while suffering serious medical issues; Defendants counterclaimed for fraudulent inducement, specific performance, declaratory relief, and breach of contract (unpaid invoices ~$108,488.52).
- Procedural posture: ARG moved to dismiss parts of the counterclaim and to stay discovery; Defendants moved for partial summary judgment on the breach claim (Count V).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction over Count IV (specific performance of SPA) | ARG: Superior Court lacks jurisdiction to grant specific performance. | Defs: Seek specific performance of SPA (asked for designation/transfer if needed). | Court: Dismissed Count IV without prejudice for lack of jurisdiction. |
| Sufficiency of Counts I–III (fraudulent inducement) | ARG: Counterclaim fails to plead fraud with particularity under Rule 9(b) and should be dismissed. | Defs: Pleaded time, place, contents, speaker, intent, and reliance—satisfies Rule 9(b) and 12(b)(6). | Court: Denied motion to dismiss; fraud claims pled with required particularity and survive. |
| Motion to stay discovery pending resolution of dismissal motion | ARG: Discovery should be stayed pending ruling on motion to dismiss. | Defs: Opposed; discovery should proceed if dismissal denied. | Court: Motion to stay is moot after denying dismissal; discovery may proceed. |
| Summary judgment on Count V (breach for unpaid invoices) | Defs: Submitted affidavit proving invoices unpaid; seek judgment for $108,488.52. | ARG: Summary judgment premature; needs discovery to test invoice accuracy (56(f) affidavit). | Court: Denied without prejudice under Rule 56(f); allowed targeted discovery; Defs may renew after discovery. |
Key Cases Cited
- Spence v. Funk, 396 A.2d 967 (Del. 1978) (standard for dismissal under Rule 12(b)(6)).
- Doe v. Cahill, 884 A.2d 451 (Del. 2005) (courts accept well-pleaded allegations as true on motion to dismiss).
- Trentwick Am. Litig. Trust v. Ernst & Young, 906 A.2d 168 (Del. Ch. 2006) (fraud claims must meet Rule 9(b) particularity).
- Nutt v. AC&S, Inc., 466 A.2d 18 (Del. Super. Ct. 1983) (identity of person making false statements for fraud pleading).
- Brzoska v. Olson, 668 A.2d 1355 (Del. 1995) (summary judgment burden and shifting of proof).
- Vinton v. Grayson, 189 A.3d 695 (Del. Super. 2018) (application of the Rule 12(b)(6) reasonable-conception standard).