Stephen B. Trusa v. Norman Nepo
12071-VCMR
| Del. Ch. | Apr 13, 2017Background
- Creditor Trusa loaned XION $200,000 in reliance on alleged pre‑existing misrepresentations and undisclosed conflicts of interest by XION’s managing members.
- Managing Members Nepo, Collins, and Mir allegedly used loan proceeds for insiders/affiliates and failed to provide secured collateral or monthly reports.
- XION later defaulted; creditors learned of conflicts and implausible use of funds; XION and insiders pursued other actions to salvage value.
- Trusa seeks declaratory relief, fiduciary duty claims, dissolution, and related relief; Nepo moves to dismiss for lack of standing and failure to state a claim.
- The court applies Delaware LLC Act standing rules (derivative standing limited to members/assignees) and assesses each claim for sufficiency.
- The court grants dismissal of all counts for lack of standing or failure to state a claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to pursue fiduciary duties | Trusa asserts derivative claims as creditor and via power of attorney. | Nepo contends only LLC members/assignees may sue derivatively; POA does not confer standing. | Derivative standing barred; creditor cannot sue derivatively. |
| Dissolution right | Creditor seeks statutory/equitable dissolution as solvent/collateral lost | Not a member/manager; no statutory or equitable basis shown | No standing or claim to dissolution. |
| Declaratory judgment duplicative | Count I seeks declarations overlapping other counts | Count I duplicative of relief sought in other counts | Duplicative; dismissed. |
| Fraud, fraudulent transfer, conspiracy, aiding | Misrepresentations/omissions and transfers harmed lender | Claims inadequately pled under Rule 9(b)/statutory standards | Dismissed for failure to plead with particularity or state claims. |
| Power of attorney scope | POA covers broader remedies including derivative claims | POA limited to remedies stated in Agreement | POA does not authorize derivative fiduciary claims. |
Key Cases Cited
- CML V, LLC v. Bax, 6 A.3d 238 (Del. Ch. 2010) (standing for creditors to sue derivatively denied under 18-1002; only members/assignees may sue)
- CML V, LLC v. Bax (Bax II), 28 A.3d 1037 (Del. 2011) (derivative standing reaffirmed; creditors cannot sue derivatively)
- In re Carlisle Etcetera LLC, 114 A.3d 592 (Del. Ch. 2015) (equitable relief and remedies; limits on creditors’ protections; guidance on covenants)
- Abry P’rs v. F&W Acquisition LLC, 891 A.2d 1032 (Del. Ch. 2006) (pledging and misrepresentation pleading standards; equity considerations)
- Fortis Advisors LLC v. Dialog Semiconductor PLC, 2015 WL 401371 (Del. Ch. 2015) (often cited for Rule 9(b) pleading and misrepresentation requirements (note: WL not official reporter))