Verdantus Advisors, LLC v. Parker Infrastructure Partners, LLC
C.A. No. 2020-0194-KSJM
| Del. Ch. | Oct 8, 2020Background
- Parker Infrastructure Partners, LLC is a Delaware LLC managed by three Managers (Parker, Feinberg, Scott); Verdantus (through Phillips) held a 5% membership interest and provided consulting services under a cancellable Consultant Agreement with monthly retainer and reimbursable expenses.
- In 2019 members agreed Verdantus and others would defer portions of retainers/expenses until March 2020 with 20% interest; Verdantus repeatedly submitted and the Company (through Parker) approved deferrals.
- October 2019 budget removed payments to Verdantus and recharacterized deferred amounts as only $30,000; Verdantus claims it was owed ~$75,000 plus interest and the Company never paid those amounts.
- On November 14, 2019 the members voted to remove Phillips as a Manager and to terminate Verdantus’s Consultant Agreement (30-day notice); thereafter Verdantus alleges the Company paid other insiders/consultants and continued ordinary expenses but not Verdantus.
- Verdantus sued in March 2020 asserting (inter alia) DUFTA fraudulent-transfer claims (Count II) and fiduciary-duty/stockholder-oppression/good-faith claims (Counts III–V); the Court dismissed Counts II–V and left Count I (breach of the Consultant Agreement) intact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether transfers violated DUFTA by actual intent to hinder, delay, or defraud creditors (§1304(a)(1)) | Transfers were made with intent to defraud Verdantus because insiders diverted funds to insiders/bonuses while the Company was insolvent or nearly so | Payments were ordinary-course, disclosed, and made to keep the company operating; allegations show business judgment not intent to defraud | Dismissed — allegations show business decisions and disclosed payments, not actual intent to defraud creditors |
| Whether transfers lacked "reasonably equivalent value" (§1304(a)(2), §1305(a)) | Company received no fair value for payments because many were not contractually required to those recipients | Plaintiff pleads only conclusory allegations; no facts to show lack of arm’s-length dealing, bad faith, or price disparity | Dismissed — plaintiff failed to allege facts to infer lack of reasonably equivalent value |
| Whether defendants breached fiduciary duties / engaged in shareholder oppression by unequal treatment to force sale (Counts III–IV) | Defendants refused to pay amounts owed to pressure Verdantus into selling or accepting less for its interest | No buy-out was invoked; no plausible facts showing coercive buy-out pressure or squeeze-out conduct | Dismissed — claims lack factual predicate and Delaware provides no standalone oppression claim outside close-corporation context |
| Whether implied covenant requires court to imply mandatory buy-out protection to prevent bad-faith pressure (Count V) | Court should imply a mandatory buy-out term to prevent abuse of removed members and to remedy bad-faith conduct | LLC Agreement expressly provides an option, not an obligation, to buy out a removed member; covenant cannot be used to rewrite contract | Dismissed — LLC Agreement is not silent; court will not rewrite contract to supply a mandatory buy-out term |
Key Cases Cited
- Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531 (Del. 2011) (pleading standard: plausibility/conceivability framework for dismissal)
- Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002) (courts accept well-pleaded factual allegations and draw reasonable inferences for pleadings)
- Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892 (Del. 2009) (courts need not accept conclusory allegations)
- JPMorgan Chase Bank, N.A. v. Ballard, 213 A.3d 1211 (Del. Ch. 2019) (intent in fraudulent-transfer claims may be pled generally; factors in §1304(b) guide intent analysis)
- Quadrant Structured Prods. Co. v. Vertin, 151 A.3d 447 (Del. 2016) (creditors’ preferences do not alone establish intent to defraud; ordinary business decisions may be legitimate)
- In re Plassein Int’l Corp., 428 B.R. 64 (D. Del. 2010) (factors for assessing whether reasonably equivalent value was received)
- Oxbow Carbon & Mins. Hldgs. v. Crestview-Oxbow Acq., LLC, 202 A.3d 482 (Del. 2019) (limits on implied covenant; cannot be used to rewrite clear contract terms)
- Nemec v. Shrader, 991 A.2d 1120 (Del. 2010) (interpretation of implied covenant and its narrow application)
- Nixon v. Blackwell, 626 A.2d 1366 (Del. 1993) (no freestanding oppression remedy outside close-corporation framework)