LVI Group Investments, LLC v. NCM Group Holdings, LLC
CA 12067-VCG
| Del. Ch. | Sep 7, 2017Background
- In April 2014 LVI and NCM combined to form NorthStar; LVI later sued NCM for fraud and NCM counterclaimed, asserting fraud and fiduciary-duty claims against several defendants including Paul Cutrone.
- Cutrone was LVI’s (and later NorthStar’s) CFO, worked from New York, never resided in Delaware, and allegedly was an owner of LVI.
- NCM’s Counterclaim asserted Counts I–V, including fraud (Counts I–II) and direct and derivative fiduciary-duty claims (Counts IV–V).
- Cutrone moved to dismiss for lack of personal jurisdiction under Court of Chancery Rule 12(b)(2); the Court reserved decision on that motion after denying other aspects of LVI’s motion.
- NCM advanced three bases for jurisdiction over Cutrone: (1) 6 Del. C. § 18-109 (LLC manager jurisdiction), (2) a conspiracy theory, and (3) Delaware’s long-arm statute, 10 Del. C. § 3104(c) (principally § 3104(c)(1)).
- The court concluded Cutrone had insufficient contacts with Delaware: fiduciary claims (Counts IV–V) were not adequately pleaded for § 18-109; a conspiracy theory failed because a corporation generally cannot conspire with its officers absent independent personal animus beyond salary motives; and § 3104(c)(1) jurisdiction failed because Cutrone’s signing of a pre-merger certificate (outside Delaware) lacked the required tight nexus to NCM’s fraud claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 18-109 supports jurisdiction over Cutrone | § 18-109 applies because Cutrone, as manager/CFO, breached duties to the LLC | Cutrone not subject because fiduciary-duty claims against him were not adequately alleged | Denied — § 18-109 inapplicable because Counts IV–V were not sustained |
| Whether conspiracy theory confers jurisdiction | Cutrone conspired with LVI officers/board to defraud NCM; conspirator may be haled into forum | Corporate-officer conspiracy with the corporation impermissible; asserted personal financial motive insufficient | Denied — conspiracy theory fails; corporate/officer unity and lack of independent personal animus |
| Whether § 3104(c)(3) (tortious injury by act/omission in Delaware) applies | Counterclaim alleged Cutrone caused tortious injury in Delaware (e.g., filings) | Cutrone committed no act or omission in Delaware | Denied — no act/omission in Delaware proven |
| Whether § 3104(c)(1) (transacting business in Delaware) applies | Cutrone transacted business by executing/causing filing of Delaware certificate of merger and by preparing false financials relied on by NCM | Signing a certificate (outside Delaware) and out-of-state officer acts without more do not constitute transacting business with requisite nexus | Denied — signing the antecedent certificate lacked sufficient in-state act and the necessary tight nexus to the fraud claims |
Key Cases Cited
- Istituto Bancario Italiano SpA v. Hunter Eng’g Co., 449 A.2d 210 (Del. 1982) (sets out Delaware conspiracy‑theory test for personal jurisdiction)
- Sample v. Morgan, 935 A.2d 1046 (Del. Ch. 2007) (acts facilitating Delaware filings can constitute transacting business where the filing is a direct source of the claim)
- Hercules Inc. v. Leu Tr. & Banking (Bahamas) Ltd., 611 A.2d 476 (Del. 1992) (Delaware long‑arm statute to be construed broadly up to due process limits)
- Johnston v. Baker, 445 F.2d 424 (3d Cir. 1971) (discusses exceptions to the rule that agents cannot conspire with their corporations)
- Nelson Radio & Supply Co. v. Motorola, 200 F.2d 911 (5th Cir. 1952) (authority quoted for the principle that a corporation generally cannot conspire with its officers)