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King v. DAG SPE Managing Member, Inc.

Court of Chancery of Delaware

December 23, 2013

ROBERT L. KING, Plaintiff,
v.
DAG SPE MANAGING MEMBER, INC., a Delaware corporation, Defendant.

Submitted: September 18, 2013

Elizabeth Wilburn Joyce, Esq., Joanne P. Pinckney, Esq., PINCKNEY, HARRIS & WEIDINGER, LLC, Wilmington, Delaware; Attorneys for Plaintiff.

Bernard G. Conaway, Esq., Wilmington, Delaware; Attorney for Defendant.

MEMORANDUM OPINION

PARSONS, Vice Chancellor.

This is a books and records action. The matter is before me on the defendant's motion to dismiss the complaint under Court of Chancery Rule 12(b)(6) for failure to state a claim. The plaintiff, a non-stockholder, former member of the defendant's board of directors, seeks to inspect the defendant's books and records, under 8 Del. C. § 220(d) and the common law, to investigate generally whether mismanagement or breaches of fiduciary duties occurred during the period of his directorship. The plaintiff asserts no other claims against the defendant.

This Memorandum Opinion reflects my ruling on the defendant's motion to dismiss. For the reasons that follow, I grant the motion.

I. BACKGROUND [1]

A. The Parties

Plaintiff, Robert L. King, is a resident of the District of Columbia ("D.C." or the "District"). King was named as an initial director of Defendant, DAG SPE Managing Member, Inc. ("DAG" or the "Company"). King never owned stock in the Company. He is a retired twenty-five-year D.C. government employee and now serves as an Advisory Neighborhood Commissioner for Advisory Neighborhood Commission ("ANC") 5A in the District.[2] In his capacity as an ANC Commissioner, King is the longest serving elected official in the District.

DAG is a Delaware corporation with its principal place of business located in Washington, D.C. DAG and its affiliates[3] own, operate, or supply over 200 Shell and Exxon branded retail gas stations, convenience stores, and car washes in D.C. and in the boroughs of Manhattan, Queens, and the Bronx, in New York. The Company's sole stockholders are Eyob Mamo, Tamrat Mamo, and Gerald Schaeffer. Those three individuals, along with King, were named as initial directors of DAG. Eyob Mamo is President and Tamrat Mamo is Vice President and Secretary of the Company.[4]

King and Eyob Mamo have been acquaintances for over twenty-five years. On at least one occasion, Eyob Mamo has sought King's assistance in King's capacity as an ANC Commissioner in seeking to construct a gas station in ANC 5A's jurisdiction.

B. Facts

1. The Certificate of Incorporation

On December 15, 2000, DAG was incorporated in the State of Delaware on filing a Certificate of Incorporation (the "Certificate") with the Delaware Secretary of State. The Certificate lists King as an initial director of DAG.

At its inception, DAG existed to: (1) serve as the independent and managing member of DAG Petroleum Suppliers, LLC ("DAG Petroleum-); (2) execute and deliver the limited liability company agreement of DAG Petroleum; (3) execute and deliver, on behalf of DAG Petroleum, certain loan and related documents that involved FFCA Acquisition Corporation ("FFCA") as lender (the "Loan Documents-); and (4) take such actions as necessary to permit DAG Petroleum to achieve its limited purpose of owning, leasing, refinancing, selling, conveying, financing, mortgaging, and otherwise disposing of certain real estate and equipment pursuant to the Loan Documents.[5] In addition, the Certificate required unanimous written consent of all the directors to take certain enumerated corporate actions so long as any indebtedness remained outstanding under the Loan Documents.[6] Relatedly, the Certificate required the Company to maintain at least two independent directors, and, if one of those directorships became vacant, to refrain from taking any action requiring unanimous director consent until a successor independent director was elected.[7]

Twice DAG has corrected or amended its Certificate. On December 21, 2000, DAG caused a Certificate of Correction to be filed with the Secretary of State. This document changed the entity for which DAG served as managing member and the entity subject to the Loan Documents to DAG Realty, LLC, reduced the required number of independent directors to one, and specifically named King as that independent director. Then, on December 18, 2003, DAG caused a Certificate of Amendment to be filed with the Secretary of State, which deleted the entire Original Purpose Section and replaced it with much broader language without enumerated purposes. DAG has not amended its Certificate to remove King's name as independent director.

DAG's charter also has lapsed twice for failure to file annual reports or for nonpayment of taxes payable to Delaware. On March 21, 2003, and on April 16, 2010, DAG caused Certificates of Renewal and Revival to be filed with the Secretary of State. Each document contains a provision indicating that it was filed by ...


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