936 F. Supp. 2d 376
S.D.N.Y.2013Background
- Transeo S.A.R.L. holds shares in NHI and Marteau is Transeo’s owner; Marteau served as NHI/Intego CEO.
- NHI is a Delaware corporation controlled by Bessemer Venture Partners, which acquired a majority interest in Intego via its funds.
- NHI’s Stockholders’ Agreement (SA) and governance provisions restricted directors to four seats at relevant times and outlined removal and redemption rights.
- In 2010–2011, Bessemer pursued an $8 million loan and a December 2010 promissory note dividend, actions opposed by Marteau and Gelblat.
- AVG offered to acquire NHI for $25 million in early 2011; Bessemer-affiliated directors opposed pursuing the offer, and Gelblat was removed from the NHI board with Erwin replacing him.
- Marteau was terminated as NHI/Intego officer and director around March–August 2011; Transeo sought books and records access, with ongoing governance friction and alleged relocation of Intego assets to the United States.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Direct vs. derivative breach of fiduciary duties | Bessemer’s actions harmed minority holders, creating independent direct injuries to Transeo/Gelblat. | Injuries are derivative to NHI; majority-benefit claims bar direct standing. | Direct claim dismissed; derivative claims proceed/are addressed separately as to others. |
| Demand futility and director independence | Half the NHI board was controlled by Bessemer, creating reasonable doubt as to independence and rendering demand futile. | No substantial showing of director independence issues; Aronson/Rales tests not satisfied for all challenged actions. | Derivative demand futility found plausible for some Director Defendants; demand excused as to those issues. |
| Breach of SA § 7.1 removal rights and quorum in BOD meetings | Bessemer-appointed directors removed Marteau in contravention of the SA’s removal provisions and conducted meetings without proper quorum. | Removal and meeting conduct fall within governance and potential Delaware-law gaps; ambiguity may exist; quorum and removal mechanisms debated. | Breach of contract claim regarding Marteau’s removal denied/denied for quorum issues; other contract claims survive. |
| Section 220 DGCL books/records claim | NHI blocked Transeo’s DGCL § 220 inspection rights; court should enforce access. | Section 220 claims fall under Delaware Court of Chancery exclusive jurisdiction; federal court lacks subject matter jurisdiction. | DGCL § 220(c) claim dismissed for lack of subject matter jurisdiction. |
| Implied covenant of good faith and fair dealing | Bessemer’s actions deprived Transeo of benefits under the SA and related opportunities. | Implied covenant claim duplicative of contract claim; no independent breach identified. | Implied covenant claim dismissed as duplicative. |
| Unjust enrichment and tort claims | Bessemer’s conduct unjustly enriched the majority and harmed Plaintiffs. | No cognizable unjust enrichment; dilution was tied to ownership and not directly to Plaintiffs’ separate benefits. | Unjust enrichment dismissed; prima facie tort and related tort claims dismissed. |
Key Cases Cited
- Aronson v. Lewis, 473 A.2d 805 (Del.1984) (two-prong Aronson test for demand futility; independence and business judgment)
- Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del.2004) (injury analysis for direct vs. derivative claims)
- Rales v. Blasband, 634 A.2d 927 (Del.1993) (focus on independence when board inaction; Aronson/Rales framework)
- Guttman v. Huang, 823 A.2d 492 (Del.Ch.2003) (loyalty and legality standards for fiduciaries; knowledge of law)
- Disney Derivative Litig., 906 A.2d 27 (Del.2006) (good faith and loyalty and director liability standards)
- Gentile v. Rossette, 906 A.2d 91 (Del.2006) (equity-dilution as derivative claim; controlling shareholder duties)
- Nemec v. Shrader, 991 A.2d 1120 (Del.2010) (contract-derived fiduciary claims and superfluous fiduciary theories)
- eBay Domestic Holdings, Inc. v. Newmark, 16 A.3d 1 (Del.Ch.2010) (standard for evaluating challenged board actions in derivatives context)
- Feldman v. Cutaia, 956 A.2d 644 (Del.Ch.2007) (direct vs. derivative equity dilution considerations in fiduciary context)