529 B.R. 147
Bankr. W.D. Tex.2015Background
- Think3 Inc., a Delaware corporation with major operations in Italy, filed Chapter 11 in the W.D. Tex.; a litigation trust (Plaintiff) was created under the confirmed plan to pursue claims for creditors.
- Plaintiff sued five former directors/officers (Zuccarello, Costello, Kaufman, Perry, Giudici) alleging breaches of fiduciary duty, gross negligence, fraud on stockholders, preferential and fraudulent transfers, breach of contract, and remedies including disallowance/subordination and declaratory relief.
- Key factual allegations: long-term insolvency and mounting Italian tax liabilities (~$23M); unpaid or improperly documented ‘‘2009’’ and ‘‘2010’’ interested‑party loans; a 2010 merger with ESW that produced amended “New Notes,” a Mandatory Prepayment Agreement (MPA), secured interests, payments to certain defendants, and various releases.
- Procedural posture: defendants moved to dismiss (Rule 12(b)(6), Rule 9) and alternatively to transfer venue to Delaware; limited discovery and prior rulings dismissed two defendants for lack of personal jurisdiction; this opinion resolves remaining Rule 12(b)(6) issues and denies transfer.
- Court’s approach: applied Twombly/Iqbal plausibility standard (accepting well‑pleaded facts), declined to convert to summary judgment, took judicial notice of certain Delaware filings only, and refused to consider most extrinsic exhibits at the 12(b)(6) stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of fiduciary duty / gross negligence (duties of care, loyalty, good faith) | Directors/officers acted with gross negligence, self‑dealing, failure to monitor Italian tax risk and imprudent related transactions | Dismiss for failure to plead plausibly; invoke business judgment rule and DGCL §102(b)(7) exculpation; Bangor Punta; insufficient allegations against Giudici | Denied as to director defendants (Zuccarello, Costello, Kaufman, Perry) and as to loyalty claims against Giudici; granted as to care/good‑faith claims against Giudici (dismissed) |
| Fraud on stockholders (post‑merger disclosure claims, Count 3) | Misleading written consent and omissions in connection with 2010 Merger harmed pre‑merger stockholders | Plaintiff lacks standing to assert claims for direct injury to pre‑merger stockholders in bankruptcy estate | Dismissed Count 3 for lack of standing (without prejudice to overlapping Count 1 claims on behalf of debtor) |
| Preference & fraudulent transfer claims (Counts 4 & 5) | New Notes, MPA, security interests and payments (within 1 year / 2 years) are avoidable preferences and fraudulent transfers; insiders arranged transfers | Challenge insider status during gap period; argue "arranged transfer" is not actionable; attack pleading particularity for actual fraud | Denied: plausibly pleaded preferential and both actual and constructive fraudulent transfer claims; Court adopts "exact date" rule (insider status judged at transfer date) but finds sufficient allegations (including that Zuccarello remained de facto insider and that MPA/security interests were transfers on Sept 28, 2010) |
| Venue transfer request to Delaware | N/A (plaintiff opposes) | Move to transfer (28 U.S.C. §1412) because Think3 is Delaware corporation and Delaware law governs fiduciary issues | Denied: home‑court presumption, efficiency, location of parties/witnesses, costs, and lack of proof that Delaware confers material convenience outweighed Delaware law factor |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must be plausible)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (Iqbal plausibility framework for Rule 12(b)(6))
- In re Walt Disney Co. Deriv. Litig., 906 A.2d 27 (Del. 2006) (good‑faith/intentional dereliction/Caremark discussion)
- Stone v. Ritter, 911 A.2d 362 (Del. 2006) (duty of good faith as subset of loyalty; Caremark doctrine)
- Cede & Co. v. Technicolor, Inc., 634 A.2d 345 (Del. 1993) (duty of loyalty principles)
- Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983) (entire fairness standard for self‑dealing)
- Barnhill v. Johnson, 503 U.S. 393 (1992) (date of transfer for preference purposes is when the check is honored)