Feeley v. Nhaocg, LLC
2012 Del. Ch. LEXIS 274
| Del. Ch. | 2012Background
- Oculus Capital Group LLC is a Delaware LLC with AK-Feel as managing member and NHA as a 50/50 member; Feeley (AK-Feel’s managing member) also serves as Oculus’s President/CEO under an arbitration-bound Employment Agreement.
- The dispute began as a control dispute; Oculus sought to block NHA from taking over management, and a stipulation largely resolved the control issues, leaving counterclaims for damages.
- NHA’s counterclaims allege Gatherings project failure and Feeley’s diverted opportunities and self-dealing, causing the relationship to deteriorate.
- The Gatherings deal failed in November 2011 due to Deposit shortfall and related consequences; NHA seeks damages for losses and to enforce a two-year termination right for Oculus.
- The Employment Agreement contains an arbitration clause, and the court must decide which counterclaims are arbitrable and which claims are independent of the contract.
- The court grants in part and denies in part the motion to dismiss, with several counts remaining subject to arbitration or continuation in court as described.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Arbitrability of Feeley’s claims under EA | Feeley’s claims arise under the Employment Agreement and should be arbitrated. | Only some claims touch the Employment Agreement; others are independent and not arbitrable. | Count III for Feeley stays pending arbitrators’ jurisdiction on substantive arbitrability. |
| Breach of contract (Count I) – AK-Feel duties under OA | AK-Feel breached OA by gross negligence/diversion of opportunities. | OA § 4.4 restricts AK-Feel’s activities; some alleged defaults are non contractual. | Count I dismissed except for subsection 1’s first item and paragraph 246(d). |
| Aiding and abetting breaches of OA (Count II) | Feeley aided AK-Feel’s contractual breaches. | Gotham Partners-based aiding and abetting applies only to contractual context; Feeley participated knowingly. | Count II survives; denial of motion to dismiss. |
| Default fiduciary duties and Feeley as actual manager (Count III) | AK-Feel owes default fiduciary duties; Feeley breached as Oculus’ manager. | OA did not eliminate default duties; dispute over scope and applicability. | Count III survives as to AK-Feel; Feeley stay pending arbitration; confirms default fiduciary duties apply. |
| Gross negligence claim (Count IV) against Feeley as AK-Feel controller | Feeley grossly negligent in Gatherings; should be liable personally as controller. | USACafes doctrine and piercing can limit suit; Feeley cannot be personally liable for AK-Feel’s duties under some theories. | Count IV dismissed as to Feeley; remains against AK-Feel? denied; in effect denied as to Feeley; AK-Feel not liable for this theory. |
| Declaratory judgment to cease business operations (Count V) | NHA may cause Oculus to cease operations and limit liability to severance. | No affirmative right to force cessation; OA does not provide such unilateral right. | Count V dismissed. |
Key Cases Cited
- Elf Atochem North America, Inc. v. Jajfari, 727 A.2d 286 (Del. 1999) (arbitration of fiduciary-duty breach claims linked to governing agreement)
- Parfi Holding AB v. Mirror Image Internet, Inc., 817 A.2d 149 (Del.2002) (independent claims may avoid arbitration if not touching contract rights)
- Gotham Partners, L.P. v. Hailwood Realty P’rs, L.P., 817 A.2d 160 (Del.2002) (aiding and abetting fiduciary breaches in contractual context recognized)
- Auriga Capital Corp. v. Gatz Properties, LLC, 40 A.3d 889 (Del. Ch. 2012) (default fiduciary duties owed by LLC managers; doctrine discussion)
- In re USACafes, L.P. Litigation, 600 A.2d 43 (Del. Ch. 1991) (control-based fiduciary duties extending to those in control of general partner)